What is a Seller’s Disclosure?CASAPLORERTrusted & Transparent
The seller’s disclosure is a document provided by the seller that includes all aspects of a home’s condition that might negatively affect its value for the buyer. Sellers are usually required to provide buyers with the seller’s disclosure even in cases where the home is listed “As-is”.
What You Should Know
- Seller’s disclosure is a document where the seller lists all of the aspects related to the home’s condition and history that may affect the buyer’s decision on purchasing the house
- The disclosure requirements vary by state, so every seller and buyer should check for their respective state’s form of seller’s disclosure
- A seller is typically required to fill out a seller’s disclosure even if the house is listed “as-is”
- In order to avoid future problems after the sale is closed, it is a good idea for the seller to provide all the information available to the buyer
What is a Seller's Disclosure?
A seller’s disclosure is a legal document where the seller of the house reveals all the aspects of the house, its condition and history, that any buyer would like to know in advance prior to purchasing the house as it may affect their decision. Seller’s disclosure is important as it allows the buyer to get a full picture of the house and its defects and then make the ultimate purchase decision. The seller’s disclosure also protects the seller of the house so that they are not sued later, after the sale is closed for items already listed on the disclosure document. For example, if the buyer becomes aware of a defect in the house after they purchase it and they believe that the seller knowingly did not include this in the disclosure, they can sue the seller.
Seller’s Disclosure in different states
While a seller’s disclosure is a requirement for most of the states, what should be included in the disclosure may differ. Therefore, the seller should search for the disclosure form or requirements for their specific location.
The form of the seller’s disclosure will vary by state. However, in most of them you will have to fill out general information, such as:
- How long have you owned the property
- How long have you occupied the property
- The age of the structure
- Owners of the property
After the general information, there will be a section on property condition disclosure, which will typically contain questions on the following:
- Environmental Issues
- House Systems
- Foundation/ Structure/ Basement/ Exterior Finish
- Termites, fungi, etc.
- Water and sewer system
The seller does not need to order a home inspection in order to answer questions on the seller’s disclosure. The information disclosed should be to the best of their knowledge and what they know about the property from previous owners and their experience.
How are Disclosure Requirements determined?
Whether an issue will be a requirement or not depends on whether it is considered material. Material issues can impact a buyer’s decision on whether they want to purchase the house. It is information that, if known by the buyer, can change the ultimate decision of wanting to live in a house. That is why material facts should be included in the seller’s disclosure agreement. On the other hand, nonmaterial information typically does not have that big of an influence on the decision. Moreover, different states have different views on what they consider a material fact.
Types of Seller Disclosures
In the previous section, some of the issues that you may find on a seller’s disclosure were listed. Now we will take a deeper look into the types of disclosures that may be required by the seller.
- Death in the Home
While deaths in the home from natural causes are not typically required to be disclosed in most states, there are certain scenarios that some states may require sellers to disclose to the buyer. For example, in some states, you may be required to disclose if there was a death by suicide or murder in the house. Other states impose the duty of disclosure when the death in the house came as a result of a safety issue related to the property. Some deaths are only required to be disclosed if they happened within a particular time frame. For example, in California, sellers have to disclose deaths that happened within the last 3 years.
As a buyer, the best approach would be to ask the seller directly on any issues that you are concerned about related to the deaths in the home. This is because sometimes the seller may not be obligated to disclose certain cases unless asked by the buyer.
A nuisance is something that causes annoyance or inconvenience to someone. A nuisance is typically a noise or odor within or outside the house that affects the enjoyment of the people living there. Noises in the neighborhood can include a farm, an airport, train tracks or shooting ranges. The seller is required to disclose such nuisances to the buyer prior to closing.
- HOA Governance
When a property is a part of a homeowners’ association, the owners are obligated to follow certain rules set by the board of the HOA, as well as pay periodic fees. The HOA fees help to fund the association’s expenses in maintaining the neighborhood and facilities. The rules on the other hand help to maintain peace and order in the neighborhood and maintain property values. A buyer may or may not agree to abide by the rules set and pay the fees charged. Therefore, a seller must disclose whether the home is part of a homeowners’ association.
Moreover, the seller must also disclose with the buyer the financial health of the association. These can include meeting notes. The buyer needs to be aware of the saved funds of the association, whether they plan to take on any major projects and how they plan to fund them. Imagine if you moved into your new house and found out that you would have to pay thousands of dollars to fund a special assessment in the neighborhood.
- Repairs on the property
The seller will need to disclose what repairs have been conducted in the house and why they were needed. The type of repairs may include structural repairs, infestations, cracks in foundation, damaged systems, such as electrical and plumbing, etc. The buyer needs to know of these repairs beforehand, in order to make sure to pay special attention to them during the home inspection.
This can sometimes also be advantageous for the seller, as the buyer may be more comfortable knowing that something has been repaired recently and they do not have to worry about it while staying in the house.
The buyer would want to know if the property is located in an area that is frequently hit by natural disasters or is surrounded by a contaminated environment. These aspects may pose a threat to the health and well-being of the individuals living in the house. For example, in Hawaii, sellers are required to disclose if the area where the property is located is a geothermal, volcanic or tsunami hazard zone.
- Damage from Water
This is one of the main categories of damages because water leakages can have negative consequences on the home’s structure as well as cause mold to grow in the walls, which can be expensive to remove. As a buyer, you should make sure to keep a close eye on the roof of the home as well as the basement to check for any signs of flooding.
- Items included
The seller needs to let the buyer know which items will stay in the house after the seller moves out and which ones will be removed. This helps clear any misunderstanding on what will be included with the house. For example, when the buyer sees the house in the beginning, they may assume that appliances, such as a refrigerator, microwave or light fixture will remain in the home.
- Liens on the property
Liens on the property may give an ownership right to other parties such as lenders or contractors who have not been paid by the seller and now demand compensation for their work. A home with liens on it can cause a lot of problems for the buyer who would have to deal with lawsuits if in the future they are sued by these parties that claim ownership. This is why it is wise for the seller to disclose any information regarding possible liens on the property to the buyer beforehand.
- Property Line Disputes
Property line disputes are disagreements between neighbors regarding the boundary lines of each other’s properties. Dealing with such neighbors can be annoying, and most buyers would want to be aware of such disputes before making a decision.
Reviewing a Disclosure Document
In order to be fully aware of the issues of the house and get the most out of your seller’s disclosure, make sure to follow the tips below:
Have a professional review the disclosure document
It is important that you are fully aware of the issues in the house, in order to make a well-thought decision on whether you would like to live there. Since some of the terms used in the document may be hard to grasp, your real estate agent or real estate attorney can help you in better understanding the seller’s disclosure document. These professionals come with knowledge and experience, and they can warn you if anything in the disclosure document seems to present any issues, as well as determine what price you would have to pay in the future. Moreover, they can ask the seller questions on the areas not covered in the document.
Double-check the facts
Certain items on the seller’s disclosure document can be easily proven by public records. For example, in order to check if there are any liens on the property, you can go to the local office and check county records. Another way of checking for liens is to work with a title agent. Even though double-checking the facts can sometimes be a hassle, it is less of a headache then finding out issues with the seller’s disclosure after you have fully closed on the sale and purchased the home.
Evaluate the costs
Once you are provided the seller’s disclosure document, make sure to go through each item carefully and see what future costs these items represent if you were to purchase the house. Is repairing certain issues worth the effort?
Inspect the house with the help of professionals
While the seller may say one thing on the seller’s disclosure, it is a good idea to always have your own home inspection conducted, so that you have some peace of mind that what the seller is saying is true. You can order a home inspection in order to get a second opinion on the condition of the house, the damages, how they can be fixed and what it will cost you to fix them. A home inspector may also be able to answer questions that the home seller may not. The seller is only required to inform you of the condition of the property to the best of their knowledge, while a home inspector can provide you with a full picture of the problems in place.
FAQ - Seller’s Disclosure
What is the Caveat Emptor Rule?
Some states operate under the caveat emptor rule, instead of requiring the seller to provide a seller’s disclosure to the buyer. The caveat emptor rule places responsibility on the buyer to find out about the property and ask questions of concern in order to uncover any issues that the house may have. It is up to them to then decide whether they are satisfied with the information received from the seller and whether they would like to go through with the purchase of the house.
What happens if the seller fails to disclose certain items?
If the seller knowingly fails to disclose certain material facts of the house and these facts are later found out by the buyer, the buyer can cancel the sale of the house and the seller would have to pay a fee. However, this is the best case scenario. In other occasions, the buyer may sue the seller for failing to disclose these material facts.
How to disclose?
The seller typically has to fill out a form with general information of the house and required disclosures depending on where they live. Some states have their own specific disclosure forms. In places that don’t, the seller may ask their real estate agent or attorney to provide them with a standard recommended disclosure form.