Analysis
Topic: Seller Disclosure Statements
Sponsors: Rep. Birkholz (House Bill 4591), Rep. Middaugh (House Bill 5041)
Position: The Department of Consumer and Industry Services supports the bill. However, House Bill 4591 should be signed first.
Bill Content: The Seller Disclosure Act is a key document in the sales of residential property. Sellers of residential property are required to make disclosures about the property to prospective buyers. The form of this disclosure is mandated under the act.
The following additions would be made to the act under House Bill 4591:
Language is added to state that a buyer should obtain professional advice and inspections of property to more fully determine the condition of the property.
In addition, buyers would be advised that certain information compiled under the Sex Offenders Registration Act was available to the public and could be accessed by contacting the appropriate law enforcement agency or sheriff's department directly.
The purchaser may terminate a purchase agreement if he or she has not been provided with a signed disclosure statement.
Unless otherwise agreed upon, all household appliances would be sold in working order, except as noted in the disclosure statement, without warranty beyond the date of closing.
House Bill 5014 contains the language contained in House Bill 4591 and the following are added to the disclosure statement:
A statement would be added that all items listed under "Appliances/Systems/Services" would be included in the sale of the property only if provided for in the purchase agreement. "Washer" and "dryer" are added to the list of appliances. The word "furnace" is changed to "wall furnace".
A seller would be required to disclose whether or not he or she had flood insurance on the property.
A disclosure would have to be made regarding ownership of mineral rights.
Outstanding utility assessments or fees and municipal assessments or fees would have to be disclosed.
Pending litigation that might affect the property or the seller's right to convey the property would be required to be disclosed.
Buyers would be advised that they should not assume that the tax bill on the property would be the same as the seller's present tax bill because under Michigan law real property tax obligations can change significantly when property is transferred.
Under both bills, a form printed before the effective date of the bill could still be used and would be considered in compliance until 90 days after the bill's effective date.
Arguments:
For: The bill incorporates suggestions made by members of the real estate industry for additions to the seller disclosure statement. The additional information required to be disclosed may prevent buyers from being surprised by substantially higher taxes, defective appliances and other problems which might have affected their decision to buy if they had known.
When the Sex Offender's Registration Act was being deliberated in 1998 it was determined that it was more reasonable to place the responsibility for determining if a sex offender lived in the neighborhood on the prospective buyer. The Occupational Code was amended to clarify that action could not be taken against the real estate agent for failure to disclose information from the compilation provided or made available under the Act. The bill clarifies this further by including on the disclosure form general direction on how the prospective buyer can obtain information under the Sex Offender's Registration Act.
Against: Elimination of the most recent State Equalized Value from the disclosure form seems unnecessary. Although it can be argued that this figure is misleading under current law, prospective buyers will typically want to make some estimate of what the taxes on the house will be. Arguably, the seller disclosure form should help them do that. With the current SEV (which will no longer be disclosed) and the length of time the seller has lived in the residence (which continues to be disclosed) the buyer may be able to make a guess as to the tax bill.
Supporters/Opponents: The Michigan Association of Realtors supports the bill.
Fiscal Impact: The only anticipated cost to the Department of Consumer and Industry Services is printing the revised disclosure form for booklets containing the law and rules which are distributed to licensees. The cost to print booklet inserts for the new form will be approximately $200.
Administrative Rules Impact: No changes in administrative rules are anticipated.
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