Realtors who though understanding the mechanics of the Form 17 may not fully understand its rationale. This post seeks to do this and advise how Realtors can best help their listing clients to use this as a tool to strike the proper value between increasing value and reducing risk. [1]

First, we need to step back and think of what a Statutory Warranty Deed actually does. To do this we need to focus in on the middle word – Warranty. When you use a Statutory Warranty Deed per RCW 64.04.030, you get the following:

Every deed in substance in the above form, when otherwise duly executed, shall be deemed and held a conveyance in fee simple to the grantee, his or her heirs and assigns, with covenants on the part of the grantor: (1) That at the time of the making and delivery of such deed he or she was lawfully seized of an indefeasible estate in fee simple, in and to the premises therein described, and had good right and full power to convey the same; (2) that the same were then free from all encumbrances; and (3) that he or she warrants to the grantee, his or her heirs and assigns, the quiet and peaceable possession of such premises, and will defend the title thereto against all persons who may lawfully claim the same, and such covenants shall be obligatory upon any grantor, his or her heirs and personal representatives, as fully and with like effect as if written at full length in such deed. Emphasis Added.

Now why the heck would anyone want to sign on for that? Rather curious that Washington REALTORS has not lobbied for some more favorable language than that right? … Wrong!

This is great language. What it does to the best possible legal effect is to afford legal protection – a proxy for trust – in a situation where there is an “asymmetry of information.” The asymmetry of information specifically here is that the seller has more information about the property than the buyer. 

The result without something akin to a Statutory Warranty Deed is that the value of the house falls to an average just like used cars are priced in the “Blue Book” at an average (i.e. middle value) between cars retained in peak condition and those that are pure lemons.

To make matters of home sales more complex, again recall that in the main most houses are different from others and so can not be compared on nearly as similar a scale as makes and models of car. So, the Statutory Warranty Deed helps bring up value.

BUT, what happens in those situations where the seller doesn’t want to have future liability? That’s where Disclosure Form 17 comes into play.

By acknowledging issues on the Form 17, the seller essentially disclaims future responsibility because the buyer purchases knowing of the issue and as such is deemed to have incorporated its cost into the final sales price.

Some lawyers suggest that people should default in all cases and simply state: “I don’t know.” I don’t quite agree. First, if someone does know of an issue, they do have a responsibility for disclosing it. [Though, obviously there is a significant difference between a person knowing and someone else later proving that knowledge.] On the other hand though, if you know that there is no problem, it might be worthwhile to have some checks throughout the form indicating positive knowledge that no issue exists.

Why would this be? Beyond the fact that it might negligibly allow an increase in price, it serves as a means of demonstrating someone is thoughtful and thus more likely honest in their transaction.

And it is this, the creation of trust which increases value. And of course, in an overcrowded industry do you want to be the one who just barely clears the bar just once or twice or do you want to be receiving referrals from those who can tell you are an honest and hard-working broker for your clients so you can make multiple bar clears like Dick Fosbury did in the 1968 Olympics. [2]

As any successful business person knows, attempting to build a business based on one-off sales is pretty difficult. So, those businesses like real estate where people often stay put for several years at a time, need to do an exceptional job in order to create what authors Ken Blanchard and Sheldon Bowles call Raving Fans.[3]

Realtors, good luck this Memorial Day Weekend. It should be a great opportunity to create some new neighbors (i.e. do some business). Cheers!gray-small.png

[1] See my past blog post dated 2015.05.20 comparing the quantification and qualification of risk [HERE].

[2] See my past blog post dated 2015.05.18 spuring recent law graduates to consider attempting to clear their bar in a manner most appropriate to them just as Dick Fosburry created a new way of clearing the Olympic Bar in 1968 [HERE].

[2] Take a “Look inside” this book by clicking to it directly at Amazon [HERE].