Always Disclose Prior Inspection Reports

Prior inspection reports typically come up from a deal that didn’t go through.  A good report can bolster a property’s value, but a bad report can hurt. The question often asked,
“Do I have to provide a bad report to subsequent buyers?”
 
The bottom line answer is YES. Prior reports constitute material facts. A seller's duty to disclose his knowledge of defects does not end when he completes a written Seller Property Disclosure. A seller's knowledge includes prior inspection reports obtained by previous buyers. Sellers have an ongoing duty to disclose any defects revealed in those reports.
The Brokerage Relationships in Real Estate Transactions Act (“BRRETA”) is the Georgia consumer protection state statute that governs the relationship between real estate brokers and real estate consumers.  Regarding a Broker’s duties to other parties, BRETTA states the following:
A broker engaged by a seller must disclose all the following to all parties with whom the broker is working: All adverse material facts pertaining to the physical condition of the property and improvements located on such property including but not limited to material defects in the property, environmental contamination, and facts required by statute or regulation to be disclosed which are actually known by the broker which could not be discovered by a reasonably diligent inspection of the property by the buyer.
 
Seth Weissman, attorney at Weissman PC and general counsel for Georgia REALTORS®,
 in his Safe Real Estate Series, covers 4 Listing Agent scenarios:
 

1. The Listing Agent didn’t get the report, but knows what is in it:  You must disclose it, if you know what’s in it.
2. The Listing Agent got it, but disagrees with the report.  Doesn’t matter. You have to provide the report.
3. The Listing Agent got the report and it is probably right, but your seller disagrees and directs you not to provide the report to future buyers: Doesn’t matter. You have to provide the report.  (In this case, BRETTA gives you legal protection.)
4. The Listing Agent didn’t know about the defect, but the buyer’s agent e-mailed it to you and you never opened the email.  Seth’s advice is to open the email and deal with it. Avoid the consequences of using that position in front of a jury. 

 
So, now you know, you have to disclose the bad report.  Consider a few courses of action: Get a new report that neutralizes the bad report.  Or, if that is not a possibility, the seller should consider repairing the defects. Or, consider adjusting the price to reflect the defects.
 
Always weigh on the side of disclosure, regardless of how much it might hurt.  Prior inspection reports constitute material facts concerning the property which a purchaser is entitled to know in making the decision whether to buy the property.