How do I sell a house with damage in Montgomery County?

Direct Answer

Selling a house with fire damage in Montgomery County, Maryland, requires you to either repair the property to meet local building codes or sell it in its current condition using an 'as-is' disclosure. Under Maryland law, you must inform potential buyers about the fire history and any known structural issues, even if you are selling the property as a 'fixer-upper.' Your path to a successful sale involves working closely with the Montgomery County Department of Permitting Services and ensuring all legal disclosure forms are completed accurately to avoid future lawsuits.

Key Details

Selling a fire-damaged home is more complicated than a standard home sale because fire affects more than just the surface of the walls. It can weaken the wooden frame of the house, damage electrical systems, and leave behind toxic soot or lingering smoke smells.

Assessing the Damage

Before listing the home, you must determine the extent of the damage. There are generally three categories:

1. Cosmetic Damage: Smoke stains and minor charring that can be cleaned or painted over.
2. Structural Damage: Fire has weakened the floor joists, wall studs, or roof rafters. This usually requires an inspection by a structural engineer.
3. Total Loss: The damage is so severe that the cost of repair exceeds the value of the home. In this case, the property is often sold for land value.

Selling Options

In Montgomery County, you have two main routes for selling:

• Repair and List: You use insurance money to hire contractors, pull permits from the county, and restore the home to its original state. This allows you to sell at a 'market rate' to traditional buyers using a mortgage.
• Sell As-Is: You sell the house in its damaged state, usually to a real estate investor or cash buyer. These buyers do not require the home to be in livable condition and can close the sale quickly, but you will receive a lower price.

Insurance Considerations

If you have a mortgage, your lender is likely listed on your insurance policy. They will often hold the insurance payout in an escrow account and release it in stages as repairs are made. If you choose to sell the house without repairing it, you must coordinate with your mortgage company to ensure the loan is paid off during the sale.

MD-Specific Laws

Maryland has strict rules regarding what a seller must tell a buyer. These are governed primarily by the Maryland Residential Property Disclosure and Disclaimer Act.

The Disclosure Statement (Real Property Article § 10-702)

In Maryland, most sellers of residential property with four or fewer units must provide the buyer with a 'Residential Property Disclosure and Disclaimer Statement.'

• Disclosure: This is a list of known defects. You must check 'Yes' for fire damage and explain the extent of the fire and what was done to fix it.
• Disclaimer: This allows you to sell the property 'as-is,' meaning you make no promises about the condition. However, even with a disclaimer, Maryland law requires you to disclose latent defects.

Latent Defects

A latent defect is a problem that a buyer could not see during a normal inspection but which poses a threat to health or safety. Fire-damaged wiring hidden behind new drywall or a weakened foundation caused by extreme heat are examples of latent defects. Failing to disclose these can lead to a lawsuit for fraud long after the sale is over.

The 5-Day Rescission Period

If you do not provide the disclosure or disclaimer statement to the buyer before or at the time they sign the contract, the buyer has the right to cancel the contract within five days of finally receiving the statement. This is a critical timeline to manage to ensure the sale does not fall through at the last minute.

Montgomery County Local Context

Montgomery County has specific local agencies and ordinances that govern fire-damaged properties.

Department of Permitting Services (DPS)

The Montgomery County DPS oversees all building repairs. If the fire was significant, the fire department likely reported the incident to DPS.

• Permits: You cannot repair fire damage in Montgomery County without a building permit. This includes electrical, plumbing, and structural work.
• Notice of Violation: If the house is unsafe, the county may post a 'Notice of Violation' or 'Order to Vacate' on the door. You cannot sell the house as a 'habitable' residence until the county clears these violations.

Fire Marshal and Inspections

The Montgomery County Fire and Rescue Service (MCFRS) investigates the cause of the fire. Their report is a public record and can be requested by potential buyers or their insurance companies. A buyer’s lender will likely require a 'Certificate of Occupancy' or a final inspection from the county before they will fund a loan on the property.

Local Courts and Mediation

If a dispute arises during the sale, it is typically handled in the Circuit Court for Montgomery County in Rockville. Maryland also encourages mediation for real estate disputes through the Maryland REALTORS® program, which can save time and money compared to a full court trial.

What You Can Do Right Now

1. Secure the Property: Board up broken windows and cover roof holes with tarps. Montgomery County can fine you if a damaged property is left open and becomes a 'public nuisance.'
2. Request the Fire Report: Contact the Montgomery County Fire and Rescue Service to get a copy of the official fire report. You will need this for your records and for disclosure purposes.
3. Call Your Insurance Agent: Get a full 'Proof of Loss' statement. Understand how much they are willing to pay for repairs versus a total payout.
4. Hire a Structural Engineer: If you plan to repair the home or sell it for a high price, spend the money (usually $500–$1,000) for a professional report on the home's safety.
5. Gather Disclosure Forms: Download the latest 'Maryland Residential Property Disclosure and Disclaimer Statement.' Start filling it out honestly, noting the date and cause of the fire.
6. Decide on a Sale Method: Contact a local real estate agent who specializes in 'fixer-uppers' to get a valuation of the home in its current state versus its repaired state.