Imagine buying a home only to have the basement flood the first time it rains. You go to investigate the root cause of the water intrusion and discover something worse than wet carpet: evidence that the seller likely knew about the issue and told you nothing (nada! zilch!) about it.
This is the exact type of unfair scenario that seller disclosures are supposed to protect you from as a homebuyer. Generally, seller disclosures provide the buyer with information on any known material defects with the property that could impact its value or inhabitability. These disclosures usually must be made upfront and in writing. Think: a history of water damage, foundation issues, or an ancient roof on its last legs.
However, seller disclosure forms aren’t a crystal ball, and some states don’t even require that the forms be thorough. We’ll break down seven key factors every home buyer needs to know about seller disclosures, including what problems disclosure forms often cover, how the seller disclosure protects you (and how it doesn’t), and what recourse you have if your seller didn’t disclose everything.
1. Seller disclosure laws are unique to each individual state.
Don’t get confused by conflicting information about seller disclosure forms you’ve found online: advice on this varies because every state has their own seller disclosure laws. These requirements not only vary between states; they can vary on the county and city level.
Regardless of where you live, there are three general categories that your area’s seller disclosure requirements will fall into: full seller disclosure forms, disclosure-disclaimer forms, and caveat emptor.
Some states have what are referred to as full disclosure laws. These seller disclosure forms require a very thorough accounting of both the home’s current condition and its recent repair history.
Full disclosure forms are typically several pages long and ask in-depth, multi-part questions on topics like roof age, repair history, and homeowners’ association fees.
For example, California has some of the nation’s strictest seller disclosure requirements. In the Golden State, sellers must obtain a separate natural hazard disclosure report in addition to filling out the state’s lengthy Transfer Disclosure Statement.
Some states use a disclosure-disclaimer form, which gives sellers a choice between completing a full disclosure form, or simply providing a disclaimer.
“In the Baltimore-metro area we use what’s called disclosure-disclaimer form. This gives the seller the ability to either fill out the three-page disclosure, answering a number of questions regarding things like the electrical, H-VAC, and any water damage,” explains Greg Cullison, a top performing real estate agent in Baltimore.
“Or the seller can opt to simply answer the disclaimer, which is one question which asks if the house has any latent defects known to the seller. That’s going to be a simple ‘no’ 99% of the time.”
Instead of seller disclosure requirements, some states apply the rule of “caveat emptor,” which is Latin for “buyer beware.” This puts the onus for discovering flaws and repair issues on the home buyer.
Caveat emptor laws are designed to protect sellers from litigation should their buyer experience buyer’s remorse after discovering a flaw they should’ve discovered before closing on the property.
While these states expect the buyer to do their due diligence, that doesn’t mean the seller is off the hook. Most caveat emptor states also have disclosure laws that prevent the seller from deceiving or misleading their buyer about the condition of the house.
For example, both Ohio and Indiana are caveat emptor states that also require sellers to truthfully complete a seller’s disclosure form. Whereas Alabama’s caveat emptor disclosure rules only allow exceptions for litigation for three reasons: 1) if the buyer and seller have a financial relationship, 2) if the seller is aware of an issue that poses a health risk, or 3) if the buyer asks direct questions about a specific flaw.
Not sure what your area requires as far as seller disclosures go? Find your state’s disclosure form with our guide to the mandated disclosures in all 50 states. In addition, work with a top tier real estate agent to make sure you have accurate information on how disclosures work in your county and city.
2. Condition-of-the-home disclosures typically cover the home’s existing condition, known defects, and repair history.
The primary function of a seller disclosure form is to let the buyer know if the house has any existing defects. The forms also provide the buyer with important information about the repair history of the home’s structure and systems.
These disclosures cover issues that would impact the safety, livability, or value of the home, including:
- Existing defects and repair history of the roof, foundation, and other structural components
- Known environmental hazards, including mold, asbestos, and lead-based paint
- Property damage and repair history, including water and fire
- Existing defects, repair history, and age of the HVAC, water, sewer and electrical systems
The disclosure form may also include vital information about your home’s systems that have nothing to do with damage or repairs:
“The disclosure form will also note if the property is on public water and sewer, or if it’s on a well and septic system,” explains Cullison. “If it’s on a well, the disclosure should include well yield information, and the date of the last pumping if it’s on a septic system.”
3. Many disclosure forms will specify legal issues and pertinent details about your home sale — pay attention here!
Disclosures aren’t just about health, safety, and home value; many states have disclosure forms provide a deeper look at your home’s history and other pertinent details, including:
- Illegal, or illicit activity that occurred within the house (such as natural deaths, murder, drug busts, or cult activity)
- Legal issues connected to the property (including property disputes, or neighborhood nuisances)
- Homeowners association information (including required fees and regulations)
- Which appliances will stay or go with the home
4. Real estate disclosures are legally binding — so hang onto that form.
The disclosure form isn’t just something that’s nice to have, it’s a legally binding document that the seller is required by law to answer honestly.
If information provided by the seller via the disclosure form turns out to be untrue, you may be able to take legal action against them, but only if you have your copy of that form handy.
And make sure that the answers are detailed and complete before closing on the home.
For example, let’s say the seller disclosure form says that all the kitchen and laundry appliances will be staying with the house.
When you did your walk-through, they were all newer, luxury model, stainless steel appliances worth around $7,000. However, when you move in, you discover that the seller has swapped out the luxury models for new, basic model appliances.
If the seller disclosure form only lists the type of appliances without the model information, you might be stuck with the basic models unless you’re willing to take legal action (see Fact #7).
5. Remember: sellers can’t be expected to disclose issues they don’t know about.
Yes, sellers are required by law to answer the seller disclosure questions honestly. However, the seller is not required to disclose any flaws or defects that they genuinely don’t know about — or that they suspect might exist — especially if there are no obvious signs of damage or defects.
Sometimes sellers do unintentionally omit information they know (or should know) from their disclosure forms.
“Sellers do make mistakes, especially if you’re dealing with an elderly seller. They may state something that they believe to be fact when in reality it is not accurate. That could open them up to potential litigation,” explains Cullison.
“For example, one question asks if the air conditioning system supplies all finished rooms. A seller may believe that is 100% the case, when in reality there was an addition put on at one time and there is not a vent to that room.”
There are also scenarios where the seller may actually be exempt from completing disclosure forms — even if state law requires that sellers complete a full disclosure form.
Typical exemptions include foreclosure homes or estate sales that are being sold as-is. This exemption is allowed because neither the bank nor the heirs have lived in the house; they cannot be expected to have knowledge of any issues or defects.
6. Seller disclosures *do not* replace the need for an inspection.
Even though you’ll be getting a full and honest disclosure from your seller, don’t assume that’s all you need to know about your future home’s current health and condition.
You need to get a home inspection done by a reputable home inspector — no matter how thorough the seller is on the disclosure form.
“I would never rely on a disclosure filled out by a seller. It’s imperative that the buyer get a home inspection done, especially if the seller opts to simply provide a disclaimer rather than a disclosure form,” advises Cullison.
“You certainly want a quality, licensed home inspector who’s not going to rush through the process. A good home inspector will get on the roof, get in the attic, get in a crawl space to give the house a thorough examination and test all the systems.”
Remember, the last time the house has had a throughout checkup was likely years ago when the current owners had their own home inspection performed. Chances are that time and age have caused fresh defects that the owner cannot be expected to know about unless there are obvious problems or visible damage.
Let’s say the roof is nearing its expiration date, but the seller isn’t aware of any leaking issues because no water damage is visible inside the house. A good home inspector will get into the attic to spot any beginnings of water damage that the seller is understandably unaware of.
Turning to California again, the state may have some of the strictest disclosure laws for sellers, but buyers have a duty to inspect as well. Failure to do so could hurt your case should you discover an undisclosed issue that your seller was legally obligated to disclose.
7. If a seller outright lies on a disclosure, you may be able to recover damages … but you’ll have to prove a few things first.
Sometimes it’s clear that the seller deliberately hid defects, omitted damage, or flat-out lied on the disclosure form.
However, it’s never easy to prove what another person knows or doesn’t know> — so don’t go ahead unless you have the evidence to prove your case, or you’ll end up spending more to litigate the case than you’ll collect in damages.
Finding evidence of deliberate deception is where things get tricky.
Let’s say the water heater rusts out and floods your home a few months after you move in. While the seller is responsible to disclose the water heater’s age and any leaks or repairs done to the unit, they cannot be held responsible if there was no visible evidence of rust that they should’ve disclosed.
However, let’s say you notice that the water heater had a patch-job, and you find the plumber who did the work. If he provides expert witness testimony that the seller was informed that the patch wouldn’t hold and that the water heater needed replacing, then you may just have a case.
Buyer beware — even if you get a full seller disclosure
It’s easy to get lulled into a false sense of security and confidence about the condition of your new home after you receive the seller’s disclosure form. However, you cannot expect your seller to be all-knowing about the house’s hidden issues or clairvoyant about potential problems that could happen in the near future.
Whether your state requires a full disclosure or simply a brief disclaimer, it’s in your best interest to act as if you’re living under caveat emptor rules.
Get that thorough home inspection from a reputable inspector so that you can rest assured that you’re a buyer who’s fully aware of your new home’s true and unvarnished condition.
Disclaimer: Information in this blog post is meant to be used as a helpful guide, not legal advice. If you need assistance interpreting a seller’s disclosure form or understanding the laws for your city, county, or state, please consult a skilled real estate attorney.
Header Image Source: (Olivier Le Queinec / Shutterstock)