What do home sellers need to disclose to buyers?


Q: Ms. Kelley, my name is Nelson Orth, and I live in Sun City Anthem.

In July of 2010, the Internal Revenue Service began an audit of our association. In January of 2011, the IRS ruled that our association owed the IRS $1.345 million for failing to comply with IRS ruling 70-604, which deals with the handling of surplus funds.

In May of 2011, the association appealed the decision of the IRS. Just a few weeks ago, the IRS denied our association's appeal.

There is now a debate within our community on whether or not the association must reveal this situation with potential homebuyers.

Primarily there are two questions:

1. Is there any law that dictates whether or not the association must reveal to potential homebuyers the fact that the association has been judged by the IRS to owe $1.345 million, and that the appeal has been denied?

2. If the association continues to not reveal this information, are sellers at risk for not disclosing this information, and hence the contract might be null and void?

Any help you might provide would be greatly appreciated.

-- Nelson Orth, Henderson

A: This is a legal issue. In real estate, anything that could monetarily affect the sale of a property, either by an increase in homeowners association dues or a special assessment, must be disclosed to potential homebuyers. When inquiring to a homeowners association about the status of a community, lenders always ask the litigation question and want to know the result or status of any pending or past litigation.

Deanne Rymarowicz, legal counsel for the Greater Las Vegas Association of Realtors, said Nevada law requires that an HOA issue a certificate as part of the required resale package that the seller provides to the buyer in a sales transaction. She said that certificate should include a statement of any "unsatisfied judgments or legal actions against the association," and the status of such actions.

So, if it were me, I would certainly err on the side of caution and disclose this information upfront so the seller or HOA is not sued sometime in the future over not disclosing this.

Always check with your own attorney in such cases, as there be mitigating factors that I am not aware of based on the information you've shared with me.

You may also want to contact the ombudsman office at the state Real Estate Division. The ombudsman helps Nevada homeowners in common-interest communities like yours to understand their rights and responsibilities under Nevada law, as well as the governing documents of their associations. The state ombudsman office can be reached at 486-4480, or toll-free 877-829-9907.

Thank you for your important question.

For more information about buying or selling homes and related issues, consult a qualified local Realtor or visit www.lasvegasrealtor.com.

Kolleen Kelley is the 2012 president of the Greater Las Vegas Association of Realtors and has worked in the real estate industry for more than 30 years. GLVAR has nearly 11,000 members. To ask her a question, email her at ask@glvar.org. For more information, visit www.lasvegasrealtor.com.

 

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