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Q. My husband and I have had bed bugs this past year in our NYC co-op, and he may be transferred to Chicago for his job. We are interested in selling our co-op, but are concerned that bed bug disclosure will be a deal breaker.
We reported our issue to our management company, and extermination was done and we've been given a "green light" that we're bed bug free. I've also hired a bed bug dog to ensure that we truly have eradicated the problem, which we have. We believe them to be dealing with it responsibly. However, since we are moving to Chicago, we would like to place our home on the market.
We've done significant remodeling, and we would hate if the bed bugs reduce the value of our home, and we can't afford to maintain two homes. What would you suggest we do? Is bed bug disclosure relevant to co-ops?
A. Whether you tell them or not, your buyers will find out, say our experts.
Under a state law that was intended to apply only to landlords but interpreted to apply more broadly to co-ops,any bed bug infestation in your building that occurred within the past year must be disclosed, says co-op and condo attorney Dean Roberts of Norris McLaughlin & Marcus.
Technically, the law requires your co-op, not you, to make the disclosure, says real estate broker and attorney Mike Akerly of Akerly Real Estate.
Disclosure forms are typically sent to the buyer with the contract of sale, but chances are your buyers will learn about your problem even before then: Many savvy closing attorneys these days require sellers to represent in writing that there have been no infestations for the past two to three years, notes real estate attorney Jeffrey Reich of Wolf Haldenstein Adler Freeman & Herz.
Moreover, since you reported the issue to your management company, it will likely turn up in a due diligence review of the board minutes by the buyer's lawyer and potentially the management questionnaire presented to the managing agent.
Your best course of action is to tell your buyers before they find out for themselves.
"It's more of a deal-killer if it looks as if you were trying to hide the bed bug history, rather than being upfront about it," explains real estate broker Gordon Roberts of Warburg Realty.
That said, there is a right way and a wrong way to do it.
"It should not be done the first thing when someone walks through the door, nor should it be in the literature the broker hands out," says real estate broker Deanna Kory of Corcoran. "It should be done only with highly-interested, ready-to-bid buyers sometime in the pre-negotiating or post-negotiating stage."
Make sure your agent thoroughly understands and can discuss--in neutral, non-defensive tones--your bed bug history and the measures you took to stop it, says Kory. "Offer to let them bring through a bed bug sniffing dog."
Roberts suggests getting another inspection just before putting the apartment on the market so that your documentation is current.
Additionally, says Roberts, "I'd make sure the apartment is squeaky-clean and possibly hire a stager to ensure that it's presented in a highly professional manner."
The good news: Despite the "yuck" factor and stigma still attached to bed bugs, sellers tend to emerge relatively unscathed by the revelation, say our experts.
"The vast majority of times the deal goes through with the only adjustment being that the owner pays for any extra extermination," says asset manager Roberta Axelrod of Time Equities.
Doug Heddings, president of The Heddings Property Group had a positive outcome even after one of his clients discovered bed bugs while their apartment was on the market.
"We took it off the market for 45 days for three treatments," he says. "Once we had the green light that all bed bugs were gone we put it back on. We not only disclosed a recent bed bug issue but provided all documentation from remediation, and the seller signed a one-year guaranty that on the slight chance the bed bugs returned, he would remediate up to one year from the closing day. There was no discount to the sale price. The property has sold and closed and two years have passed without bed bugs."
For her part, Kory says she has done a few deals similar to yours without mishap, but emphasizes that it's critical to tell your agent about your bed bug situation.
"In my very recent experience, I had two bed bug infestations sales," she says. "In the first one, the sellers did not disclose to us the problem thinking it a non-issue. Well, as all these are, it was in the board minutes. The fact that we did not disclose up front caused the bueyrs to feel we were hiding it and they walked away. In the second case, we made sure to let the buyers know just as soon as appropriate and while they did bring through a dog, all was well and the deal went through."
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