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Wisconsin Real Estate Condition Reports – A Brief Overview for Buyers and Sellers

May 26, 2021

Generally when selling a home, Wisconsin homeowners are required under Wis. Stat. § 709.02. to provide buyers with a Real Estate Condition Report (“Report”). The purpose of this Report is to disclose any known defects in the property and to avoid any misunderstandings between buyers and sellers with respect to the home’s condition. This article offers buyers and sellers insight into Wisconsin law with respect to their rights and responsibilities regarding the Report. While this is not meant as an exhaustive exploration of the law, it provides general guidance.  

What Sellers Need to Know: 

The purpose of the Report is to disclose any known defects in the home to prospective buyers. The Report must substantially conform to and include the information set forth in Wis. Stat. § 709.03. Among other things, the Report must disclose whether the Sellers are aware of certain defects in the property. To be “aware” of defects means to have notice or knowledge of them. A “defect” is defined as a condition: 

  1. “that would have a significant adverse effect on the value of the property;” 

  2. “that would significantly impair the health or safety of future occupants of the property;” 

  3. “or that if not repaired, removed or replaced would significantly shorten or adversely affect the expected normal life of the premises.” 

With few exceptions, sellers must provide prospective buyers with a Report within 10 days of accepting a contract of sale or offer to purchase. Although prospective buyers are routinely encouraged to secure their own inspection of the home, sellers may not provide an incomplete Report believing a buyer’s inspection will disclose all defects in the home.   

Buyers are entitled to rescind offers to purchase, within certain time periods, if a Report discloses a defect. Buyers and sellers often renegotiate the terms of the offer to purchase if defects are disclosed. Litigation may arise if a buyer later discovers issues with the home that were not disclosed in the Report.   

Under Wisconsin law, buyers have several causes of action they may assert against sellers, including misrepresentation and statutory claims. While misrepresentation claims can be difficult to prove, for certain claims, the law affords successful buyers the right to recover their attorney fees and punitive damages. Sellers have a variety of defenses, however, to claims asserted by buyers. Sellers should seek legal advice immediately if they are sued for providing an allegedly false Report to ensure their rights are protected. 

What Buyers Need to Know: 

As noted earlier, under Wisconsin law sellers must provide a completed Report within 10 days of accepting a contract for sale or offer to purchase. Within two (2) days of receiving the Report, buyers may rescind their offer and receive their earnest money back if the Report discloses a defect.   

Buyers may also rescind an offer to purchase within two (2) business days if a Report is not provided by the sellers within the 10-day period or if the Report is incomplete. Buyers may not, however, rescind an offer to purchase if they are aware or had written notice of the nature and extent of a defect not disclosed in a Report at the time the offer to purchase was submitted to the sellers.   

If defects are disclosed, buyers oftentimes renegotiate the terms of the contract of sale and require sellers to fix the defects at the seller’s expense, although sellers are not required to renegotiate a rescinded offer.   

Difficulties often arise when buyers discover issues with the home that were not disclosed in the seller’s Report. Such discoveries may give rise to several causes of action against the seller. For example, buyers sometimes assert misrepresentation claims against sellers for concealing known defects and failing to report them. Misrepresentation and fraud claims, however, often require higher evidentiary burdens in order to prevail at trial. In other words, misrepresentation claims require plaintiffs to prove their case with a higher degree of certainty than that required of other claims.   

Though it may make their offer less attractive to sellers, especially in a seller’s market, prudent buyers should still obtain their own independent inspection of the property. This right may be reserved in the offer to purchase and addenda. If a buyer obtains his or her own inspection report disclosing defects that were not disclosed in the seller’s Report, this knowledge may preclude claims against the seller. For most misrepresentation claims, a buyer cannot rely upon information the buyer knows is untrue or inaccurate. In addition, Wisconsin courts have become more critical of buyers who fail to get an inspection before closing on the purchase of a home who later bring misrepresentation claims against the seller for undisclosed defects. Based upon both legal and economic principles, Wisconsin law urges parties in an arm’s length transactions to take reasonable measures to protect themselves. 


 

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