Phoenix made national headlines last week as a homebuyer takes his new home’s seller to court over a really obnoxious next-door neighbor.

Here’s the gist, from Good Morning America’s segment on the story last Wednesday:

Glenn Melton purchased a modest home in Phoenix in 2005 for his college-aged daughter.  She had already been renting a home on what seemed to be a quiet, peaceful street.

Then she met the neighbor.

According to the Arizona Republic, Melton said that the neighbor “screams and yells at people that are passing by.”  “When my daughter’s in the backyard,” he said, “the neighbor's yelling at her and making verbal threats.”

Just days before the Melton and the seller – Nathan Thinnes – closed the deal, Thinnes had to call the police because the neighbor had pelted him and his dog with potatoes.  The neighbor was arrested for disorderly conduct.

The issue – as far as the Maricopa County Superior Court is concerned, at least – is whether the home seller should have disclosed the nasty neighbor.  Here’s where the law stands today:

“Sellers are obligated by law to disclose all known material (important) facts about the property to the buyer.  Arizona law requires that you disclose material facts about the property whether or not you are asked by the buyer or a real estate agent, or when asked to complete a disclosure form.”

The Seller’s Property Disclosure Statement is divided into six sections, covering:

1.  Ownership and Property

2.  Building and Safety Information

3.  Utilities

4.  Environmental Information

5.  Sewer/Wastewater Treatment

6.  Other Conditions and Factors

Is Melton’s nasty neighbor the kind of material fact that a seller is required to disclose?  That’s for the court to decide.

Civil rights experts question whether disclosing a neighbor’s purported mental state would constitute discrimination and open, as one suggested, a “Pandora’s box.”  Others argue that the neighbor’s mental status isn’t the question, but rather her behavior.

The case itself has some of the drama of a Law and Order episode mixed with the bizarre humor of a Simpson’s half-hour.  But there are important lessons that both buyers and sellers can learn.

Buyers’ lessons

1.  Buyer beware.  Even when the law requires the seller to disclose a material fact, it’s in your best interest as a buyer to do a little investigating of your own.

2.  Do your due diligence.  Even while sellers are required to disclose material facts about the house, there will always be grey areas.  So do your own due diligence. 

3.  Ask around the neighborhood about what it’s like to live there.  Don’t be afraid to knock on doors.

4.  If the neighborhood has an HOA, find out what kind of legal recourse you would have if a neighbor is a nuisance, doesn’t keep a tidy yard, etc.

5.  If it seems like disorderly conduct might be a problem, go to the local police station and check out police reports on properties in the neighborhood.

6.  Visit at different times and on different days.  A quiet, peaceful neighborhood on Tuesday morning may turn into a 24-hour block party on the weekends. 

Sellers’ lessons

1.  When in doubt, disclose.  Sellers have to walk a fine line between making their property appealing – which is critical – and hiding material facts – which is illegal.  An experienced, knowledgeable real estate agent with a solid reputation for honesty and integrity can help you decide what constitutes a material fact and what doesn’t.  If you’re not comfortable with your agent’s advice, or you want to be extra cautious, hire a real estate attorney. 

The fact is that buying and selling a home is a huge legal and financial transaction.  Make sure you’re protected on all sides by enlisting the help of a real estate agent, and even, perhaps, a real estate attorney.  Because no matter what the court decides in this case, no one really wins.