Temporal Dynamics of Disclosure: The Example of Residential Real Estate Conveyancing

Abstract

Traditional legal approaches to consumer disclosure focus on content, comprehensibility, or compliance, with little attention to the timing and delivery of disclosure. Psychological research indicates that latecoming information has a significantly reduced impact on price negotiation and decision making. Individuals tend to persist in decisions once they have made an overt commitment to a course of action, and expenditures of time, effort, or money exacerbate this tendency. This Article uses the example of residential real estate defect disclosure to examine the effects of disclosure statutes that allow information to be provided midstream or late in a transaction. The majority of state laws require residential real estate defect disclosure following the buyer's offer or prior to the closing. Buyers are more likely to negotiate suboptimal discounts in response to latecoming defect information and to persist in transactions. This Article considers options for modifying state statutes to ensure early disclosure, such as requiring disclosure prior to the offer or at the outset of the buyer's search process.

Keywords: Law and psychology, psychological effect of disclosure, real estate defect disclosure, residential real estate defects, timing of disclosures