Real Estate Condition Report

| Real Estate Law

Real Estate Condition Report: A Much-Needed Remodel

When selling a home, barring a few exceptions, most Sellers will need complete and sign a Real Estate Condition Report (RECR).  This report is meant to disclose the condition of your home and whether you are aware of any particular issue or defect.  Prior modifications have left the RECR confusing and ambiguous, but the recent passage of 2017 Wis. Act 338 has given the RECR a much-needed remodel, creating a clearer and more organized list of questions for the Seller to answer.

What stays the same?

The new RECR, which applies to any transaction after July 1, 2018, continues to be a requirement for residential sellers in transactions where a realtor or attorney are involved, for sale by owner transactions, and in most transfers of property.  Furthermore, those situations that had been exempt from requiring completion of the RECR will continue to remain exempt.  This includes (1) real estate that has never been inhabited (i.e. new construction); (2) transfers traditionally exempt from the real estate transfer fee such as between spouses and probate transfers; and (3) sales by fiduciaries appointed by or supervised by the court, including trustees and personal representatives that have never occupied the property.

What changes?

 One of the most noticeable changes between the old RECR and new RECR is that the Seller is now prompted with a list of questions to answer instead of statements that need to be affirmed or denied.  This creates a better understanding of what is asked, and the new checkboxes better represent the Seller’s answers.  In addition to the questions being more understandable, most of the questions are now followed with examples to help the Seller answer as accurately and honestly as possible.

For example, the old RECR stated the following:

I am aware of defects in the roof.

The new RECR is much more illustrative and states:

Are you aware of defects in the roof? Roof defects may include items such as leakage or significant problems with gutters or eaves.

In addition to the remodeling of the questions themselves, there are a number of changes which help organize the document in a concise and easy to use manner for the Seller.  First, the questions are now organized into separate sections.  These sections include structural and mechanical, environmental, wells, septic systems, storage tanks, taxes, special assessments, permits, and land use.

Second, each section now has its own explanation area for any “yes” responses.  This allows the Seller to explain “yes” responses right away, as opposed to the old RECR in which all “yes” responses needed to be explained at the end of the form.  The new RECR eliminates the Seller’s need to go back through the form after completion to properly address the “yes” responses. This aids in filling out the form correctly the first time.

Third, the new RECR provides a notice to Sellers that real estate licensees are not allowed to give advice or help fill out the form.  Although real estate licensees have never been able to aid Sellers in prior versions of the RECR, the new RECR clearly states that “[r]eal estate licensees may not provide advice or opinions concerning whether or not an item is a defect for the purposes of this report or concerning the legal rights or obligations of parties to a transaction.”

Lastly, it is important for Sellers and real estate agents to recognize that several disclosures have been added to the new RECR.  The new disclosures address the following:

  • Rental items such as water softeners;
  • Water quality issues, including lead levels;
  • The manufacture of methamphetamine and other toxic substances;
  • The existence of conservation easements;
  • Restrictive covenants and deed restrictions;
  • Use value assessments and other relevant agreements and programs;
  • Burial sites;
  • Insurance claims within the last five (5) years;
  • Agreements that bind future owners (leases, electric cooperatives, etc.); and
  • The amount of time the owner has owned the property.

 

Overall, the changes to the RECR has accomplished a task most remodels strive for in today’s real estate market. It has knocked out the forest green walls and orange-hued kitchen cabinets of the 90’s from which the first disclosure reports were built, and created an open concept form that is easier for both the Seller and Buyer to understand.

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