What Should You
Disclose To Potential Buyers?
By Benny L. Kass
Question: We purchased our house
in 1961. The basement floor is entirely covered
with tile. A family friend who manages commercial
real estate told us that those nine-inch tiles
are asbestos. We were advised to either remove
these tiles or cover them with concrete. We plan
to sell the home shortly. What are our legal obligations
and what should we do?
Answer: You really have two
choices: remove (or cover) the asbestos tiles
or disclose their existence to potential purchasers.
In many parts of the country, sellers are required
to disclose certain conditions relating to the
property -- and asbestos is one area which obviously
must be disclosed. However, the experts in this
area agree unanimously that if the asbestos is
encapsulated (covered up) it is not a hazardous
substance. However, when you start to make repairs,
and start chipping away at those tiles, you are
going to spread the asbestos molecules around
your house.
First, I would find out what it will cost to
remove the tiles. You should understand that when
you deal with such hazardous materials, any contractor
that will remove them must be certified by the
Environmental Protection Agency (EPA) as an approved
asbestos abater. As such, there will be an additional
cost to you over and above the mere removal of
your basement tiles. The abater must secure the
area to make sure that asbestos particles will
not get into the air, nor land on other items
in your basement, thus defeating the removal purpose.
Then, determine the cost of adding concrete over
the tiles. This may be less expensive than removing
all of the tiles, but it may also cause your basement
to look unsightly or even shoddy.
Once you have determined these costs, you will
be in a better position to determine whether or
not you want to incur the expense.
Clearly, it is better to remove the asbestos.
Some potential purchasers -- especially those
with young children -- may get turned off when
they learn of this environmental problem.
On the other hand, you are not legally obligated
to clean out the asbestos. You certainly can sell
your house with all its infirmities -- including
asbestos -- but you must carefully disclose to
a potential purchaser that there is a problem.
Some purchasers will walk away. Others may use
this as a bargaining chip and try to get you to
reduce your asking price in light of the asbestos.
Here, again, you have a choice: if, for example,
it will cost you $7,500 to totally remove all
asbestos from your house, clearly you do not want
to give a potential purchaser a cash credit at
settlement for more than this amount.
Many potential purchasers plan to do major renovations
in their new home once they go to settlement.
While it might cost you $7,500 to hire the asbestos
abater, your purchaser may be able to get a better
price, since their contractor will already be
doing work in the house. And thus, the purchaser
may be willing just to receive a credit at settlement,
rather than forcing you to do the work before
the house is conveyed.
Thus, there is flexibility and negotiability
here. The potential purchaser will make you an
offer, and may lowball the price based on the
existence of the asbestos. Since you are now armed
with information as to the real cost of the abatement,
you are in the position to bargain with the purchaser.
You can offer a smaller credit, or you can agree
to have the asbestos removed prior to closing.
My experience, however, is that most buyers would
prefer to get the credit, rather than be forced
to rely on a contractor selected by the seller.
In any event, disclosure is the name of the game.
You can be sued if you do not disclose. But you
avoid litigation (and aggravation and legal fees)
by fully and completely disclosing -- in writing
-- the existence of your asbestos tiles. Most
insurance companies specifically decline to get
involved when there is a hazardous material claim.
The Realty Times
Published: December 22, 2003
www.RealtyTimes.com
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