GlarStar Blog

Information provided by the Minnesota Association of REALTORS

Minnesota requires sellers of single-family residential property to provide

buyers with numerous disclosures including a material fact disclosure made to the best of the seller’s knowledge. With the increase in foreclosures, there has been confusion as to whether a lender/bank, that has taken title to property by foreclosure, is required to provide these disclosures when they sell the foreclosed property.

The confusion provision seems to be under MN Stat. 513.54 (5) which provides an exemption for transfers by foreclosure or deed in lieu of foreclosure. This provision provides an exception to the material fact disclosure requirement only when the property is being transferred from the borrower to the lender/bank by foreclosure. Once the property title is transferred to the bank, and the bank subsequently proceeds to sell the property, the bank must provide a material fact disclosure in compliance with MN Stat. 513.55 and any other disclosures required under state and federal laws.

Material Fact Disclosure:
MN Stat. 513.52-513.60 requires sellers of existing single-family residential property to make a written disclosure to a prospective buyer before signing a purchase agreement. The disclosure must be made in good faith and based upon the best of the seller’s knowledge at the time of the disclosure.

The disclosure must include all material facts of which the seller is aware, that could adversely and significantly affect:

1. an ordinary buyer’s use and enjoyment of the property; or
2. any intended use of the property of which the seller is aware.

Sellers may utilize the MNAR approved Seller’s Property Disclosure Statement to meet this requirement.

Other Disclosure Requirements:
Numerous other state and federal disclosure requirements must also be provided in the transfer of lender/bank-owned property, including but not limited to:

• Private Sewer System Disclosure as required by MN Stat. 155.55, Subd. 6.
• Private Well Disclosure as required by MN Stat. 103I.235. MDH information for bank sales.
• Valuation Exclusion Disclosure as required by MN Stat. 273.11, Subd. 16.
• Preferential Property Tax Treatments that end on transfer.
• Methamphetamine Production Disclosure as required under MN Stat. 152.0275, Subd. 2 (m).
• Notice regarding Airport Zoning Regulations see MN Stat. 513.56, Subd. 3.
• Notice regarding Predatory Offenders see MN Stat. 513.56, Subd. 2.
• Lead-Based Paint Disclosure as required under the Federal Lead-Based Paint Reduction Act: Title X.
• Local Truth-in Housing Disclosures, if applicable.

Seller Disclosure Alternatives
The Seller Disclosure law does allow the seller to provide a written inspection report prepared by an independent third party in place of providing their own material fact disclosure. See the MNAR Seller’s Disclosure Alternatives option 1.

Additionally, a buyer may agree to a waiver of the seller disclosure requirements under MN Stat. 513.52-513.60. However, the buyer must agree to a waiver of the seller’s material fact disclosure requirement, in writing, prior to entering into the Purchase Agreement.

NOTE: Waiver of this disclosure does not waive, limit or abridge any obligation for seller disclosure created by any other law such as those listed above.

NOTE: There is no like waiver for real estate licensees. Utilizing the waiver provision is essentially a reversion back to no seller disclosure requirements. Real estate licensees are required under MN Stat. 82.22, Subd. 8, to disclose all material facts of which they are aware. MNAR successfully pursued the legislation requiring seller’s to disclose material facts since, to a large degree, REALTORS^® must rely on sellers to know material facts regarding the property. All real estate licensees must disclose ALL material facts of which they are aware that could adversely and significantly affect an ordinary purchaser’s use or enjoyment of the property or any intended use of the property of which they are aware.

In conclusion, REALTORS^® involved in the sale of a lender/bank-owned residential property, must make certain proper disclosures by the lender/bank, and yourself as a licensee, are being provided to prospective buyers, or alternatives provided, prior to the buyer and seller entering into a Purchase Agreement.