Whether you’re buying or selling a home, you should understand what seller disclosures are and how they apply to your transaction. Taking a 20-minute walkthrough and reading the listing of a property won’t tell you everything there is to know about a home. Even if you perform extensive research on a home you’re interested in buying, there’s always a possibility that you’ll miss something.
Most states require homeowners to disclose information that might be missed during a routine inspection or walkthrough. A Seller’s Disclosure usually details the condition of the home to ensure the buyer has all the information they need before making a purchase.
Keep in mind that seller disclosure requirements can vary by state and county. If you don’t meet these requirements, you could face serious legal repercussions. Even if you sell a property in “as-is” condition, you may not be exempt from disclosures. The following guide provides a comprehensive overview of seller disclosures and what they mean for real estate transactions.
What Is a Seller Disclosure?
A Seller Disclosure is a type of legal document that requires sellers to provide undisclosed details about their property’s condition. If a buyer doesn’t know about a detail that they might find unfavorable, it must be disclosed before the transaction is complete.
This document allows the buyer to gain a better understanding of the property and its history. As a seller, it can protect you from a situation where the buyer files a lawsuit after the sale closes.
Legal Requirements for Seller Disclosure
The types of disclosure provisions you need to make depend on local and state law. Brush up on these laws before you buy or sell a home. If you don’t comply with disclosure laws when selling your home, there are several consequences you might encounter.
For example, the buyer could discover the undisclosed detail and choose to cancel the sale. If this occurs, you’ll be charged a fee. The buyer may also decide to take legal action if the sale goes through and they discover an issue that wasn’t disclosed.
If you’re selling a home in “as-is” condition, the same rule may apply. However, some states have adopted the caveat emptor rule, which means that the buyer is responsible for learning more about the property and the things that might impact its value.
A buyer who lives in a state with this rule will need to do their due diligence to determine what types of disclosures need to be made by the owner. A home inspection is usually comprehensive enough to find most of these issues.
Common Real Estate Seller Disclosures
From neighborhood nuisances to recent repairs, sellers must make numerous disclosures during real estate transactions.
Death in the Home
While it might not affect the value of the home, a buyer may want to know if someone has died in the property they’re about to purchase. However, every state has different requirements for this type of disclosure. In Texas, any death from suicide, natural causes, or reasons unrelated to the home don’t need to be disclosed.
On the other hand, sellers need to disclose deaths if they relate to violent crimes or the condition of the property. For example, let’s say that a previous occupant drowned in the backyard swimming pool because a safety fence wasn’t installed. The seller must disclose information about how the death occurred. However, they can also inform the buyer that the issue has been fixed.
Some states have limited “death in the home” disclosure requirements. In Georgia, a seller doesn’t need to disclose a suicide or homicide unless they are asked directly. Even if you live in a place that doesn’t require a disclosure, it’s highly recommended that you inform the buyer to avoid the possibility of litigation.
Neighborhood Nuisances
Many states require sellers to disclose information about any neighborhood nuisances, which can involve an odor or noise from an area outside the property. For example, Michigan tasks sellers with disclosing airports, shooting ranges, farms, and landfills in the vicinity. North Carolina requires property owners to disclose smoke, odors, and loud noises that might be coming from military, commercial, or industrial sources.
Hazards
If your home is at a higher risk of being damaged by a natural disaster or has the potential to be contaminated by an environmental pollutant, you may need to disclose this info. In Texas, sellers must state the presence of radon gas, urea-formaldehyde, toxic waste, asbestos, and lead-based paint.
Missouri and Texas also require disclosure if a home had a meth lab in it. In California, the Natural Hazards Disclosure Act tasks sellers with disclosing if the property is located in a seismic hazard zone.
Homeowners’ Association (HOA) Information
If you live in a neighborhood that’s governed by an HOA, you’ll need to disclose this information. Since HOAs levy monthly fees, potential buyers should know how much these costs will add to their monthly mortgage payments. A potential buyer may also dislike the limitations that an HOA has placed on how they can use the property.
Repairs
The repair history of a home is important for prospective buyers. It informs them of areas around the property that they’ll need to pay attention to in the future. In Texas, you must disclose roof repairs, defects in walls, foundation issues, and any problem that impacts the structural integrity of the home.
Water Damage
If water seeps into your home, it can damage the structure and cause mold growth. You’ll need to disclose any water damage or leaks that have occurred in your home over the years. There are numerous risks associated with undisclosed water damage. Let’s say that your basement routinely leaks when it rains or snows. If your home is inspected during a dry spell, this issue might not be identified.
Missing Items
Buyers often expect certain items to be in the homes they purchase when they move in. These items can include lighting fixtures, a microwave, or a refrigerator. If you don’t discuss these items with the buyer, they might not be satisfied after the sale closes. In states like Michigan and Texas, sellers are required to disclose the items that will be kept in the property.
Other Possible Disclosures
There are several other possible disclosures that might be required depending on where you live. If you live in a special historic district, it may be more difficult for the buyer to source materials to make repairs and renovations, which is why this info must be disclosed.
Texas also tasks sellers with mentioning the presence of active termites or previous termite damage. In North Carolina and Michigan, all past infestations need to be disclosed. Some states require homeowners to disclose issues with boundary disputes, easements, drainage, or zoning.
Since local and state laws differ in disclosure provisions, it’s a good idea to check the requirements in your area to properly navigate these laws. Keep in mind that some of these laws have loopholes. In New York, the law requires that issues with a home be disclosed to the buyer in a written statement unless the seller chooses to pay a credit of $500 to the buyer.
In this scenario, it may be wise to pay this credit instead of disclosing problems that might cause the buyer to back out. You can obtain a copy of local disclosure laws from your county’s planning department. Consider speaking with a real estate attorney as well.
Best Practices for Sellers
Even if it’s not legally required, you should disclose any information that you believe could affect the value of your home. If you know of an issue that might cause the buyer to back out of the deal or reconsider the price, disclose it. Disclosing information when it’s not required allows you to protect against potential lawsuits. It also helps you maintain a good reputation, which is crucial if you become involved in any future real estate transactions.
How to Disclose
Depending on where you live, you may be required to use a special disclosure form. If your real estate agent doesn’t provide a form, you may be able to obtain one from your state department or the local realtor’s association.
Before you finalize the disclosures, review the document to ensure you’ve adhered to state law. If the form itself isn’t comprehensive, include a separate document that lists the items you want to disclose. All disclosures must be placed in writing. The buyer and seller need to date and sign the document.
What Happens if You Lie on a Seller’s Disclosure?
If you end up lying on a disclosure document, you may receive a substantial fine or have a lawsuit filed against you. Lying in this manner is illegal. An undisclosed hazard could cause serious injury to the buyer or damage to the home, which is why buyers and sellers need to be honest during this process.
Conclusion
During a real estate transaction, seller disclosures are necessary to ensure the buyer has all the information they need to make a sound financial decision. If the state requires you to make certain disclosures, you’ll need to follow the instructions closely to ensure the buyer doesn’t file a lawsuit against you after the sale goes through. If you’re preparing to list your home on the market, seek professional advice for compliance and peace of mind.