That three-bedroom house around the corner with the fenced-in pool just went from “For Sale” to “Sold,” and you’re curious: What did they get for it? But if you live in a non-disclosure state, you might search the web only to find inaccurate information — if there’s any listed at all.
Disclosure in general is important in real estate. State and federal laws require that sellers disclose any lead paint, radon, asbestos, and other potential hazards on their property so that buyers are aware of any trouble spots. This differs from a non-disclosure state, however. In this context, “non-disclosure” doesn’t mean that you keep quiet about any roofing, termite, or other maintenance issues but that public records keep mum about your selling price.
If you live in a non-disclosure state, it means that sale prices in a real estate transaction are not disclosed or recorded as public record. If you want to know a sale price of a home, you’d have to ask the seller directly or work with a real estate professional who has access to the Multiple Listing Service (MLS). Otherwise, you’re in the dark.
How does this affect you when you sell your home? Let’s explore more about non-disclosure states in real estate.
What does ‘non-disclosure’ mean?
Non-disclosure as far as purchase price is a consumer protection, says Eric Martinez, a top real estate agent of more than a decade serving Killeen, Texas, one of about a dozen non-disclosure states around the country. It offers privacy for buyers and sellers.
“Nobody wants to disclose what they paid for [a house or other property],” he says.
Texas Realtors (formerly the Texas Association of Realtors) notes that it’s a common misconception that being a non-disclosure state means that a listing broker doesn’t have to disclose their data to the MLS.
“That is not true,” the association says on its website, adding that not reporting such information would violate the broker or agent’s legal obligations. “Rather, it means that the state government, including local appraisal districts, cannot force anyone to provide the sales price.”
The National Association of Realtors (NAR) also says that non-disclosure states “cannot withhold sold data from MLS data feeds.” The restrictions on disclosing this data relate “only to public display of that information,” NAR explains on its website. “Participants can use sold data, in the same fashion that other data provided by the MLS is used, to develop estimates of value.”
Martinez says that potential sellers in a non-disclosure state shouldn’t worry that they won’t know what their house is worth, or that their agent won’t be able to find details about the sales of comparable properties. The sellers can undergo a home appraisal. Plus, their agent can provide them with the relevant sale information.
“Disclosure is made public in the real estate community as we move forward with buyers and sellers when we’re doing market analysis or buyer presentations to ensure that a price is not absolutely ridiculous,” Martinez says. Nondisclosure is “more relevant in terms of property taxes,” when a municipality wants to assess a home’s value.
Why do some states practice non-disclosure?
If you live in a state such as Florida, where you can look up any address through your county’s property appraiser to see what a home is worth, the non-disclosure that Martinez describes may seem puzzling.
But as Daniel Gonzalez, director of legislative affairs for Texas Realtors, told The Wall Street Journal: “A private transaction between myself and you should be kept private. … We should not have to give the government any indication of what we’re doing in our private lives.”
In addition to individual privacy concerns, another reason not to disclose is to maintain the “proprietary information” that the MLS collects, according to a document from the Montana Department of Revenue. Some argue that disclosing sales information publicly reduces the value of the MLS and real estate professionals.
Proponents of disclosure say this creates “an artificial legislatively sanctioned monopoly on this information.” Keeping such information private also leads to tax inequities, says Dick Lavine, senior fiscal analyst with the social justice organization Every Texan (formerly known as the Center for Public Policy Priorities). “This is like making a store clerk guess the correct sales tax on an item, while you cover up the bar code and hide the price,” Lavine writes.
The idea is that knowing sale prices makes real estate markets more efficient and equitable, with people less likely to pay prices that are wildly out of range.
States that to this date are non-disclosure
There are 12 states where the public does not readily have access to real estate sale prices:
- Missouri (*varies by county)
- New Mexico
- North Dakota
However, keep in mind that breaking down states into “disclosure” vs. “nondisclosure” groups doesn’t necessarily show the full picture. Public disclosure of real estate sales prices varies, even in states where there aren’t restrictions. In some places, the sales price is printed in local media or on the deed while in others, only the government has full access to this information for the purpose of valuing property taxes.
What non-disclosure means for you
There are some drawbacks to living in a non-disclosure state that you might notice before you’re ready to put your home on the market. They include:
Inaccurate property assessments
Municipalities use assessed property values to establish the property tax basis. But without easy access to such valuation, some homeowners can’t track their property appreciation and might have “sticker shock” during a reappraisal.
What’s more, some analysts say that the lack of disclosure causes “systematic and dramatic” tax inequities, with lower-priced homes contributing a higher share of property taxes. One 2004 study found such “property tax assessment inequities” and “administrative inefficiencies.”
Even today, high-end homes and commercial properties that are difficult to assess “tend to be undervalued,” resulting in these property owners paying “less than their fair share in taxes that support public services, which then shifts the financial burden onto less well-off homeowners,” writes Lavine of Every Texan. “In the world after COVID-19, we will need the most accurate and equitable way to allocate the responsibility for paying property taxes.”
Hard-to-find neighborhood home values
This may not seem significant initially — it’s part of the argument to keep nosy neighbors from knowing the price. However, if you’re scoping out an area before working with a real estate agent who can provide information on comparative sales, you’ll have a tough time gauging prices in a non-disclosure state.
Inaccurate home values online
Automated valuation models have a tough time calculating home values with limited data and information, one reason that real estate agents such as Martinez say that the MLS is better. “The most deemed reliable data is the MLS. We get those calls every day: ‘Why does it show my house sold for that much?’ It didn’t,” Martinez says. In addition to dealing with limited data in certain states, these models also can make mistakes, he says.
Such websites also don’t provide information about a sale that a seller or buyer might find valuable, such as whether one party paid $10,000 in closing costs or what type of loan the buyers used, Martinez says.
How to get a home value estimate in a non-disclosure state or county
While checking out a neighbor’s sale price is off-limits in a non-disclosure state, you still can come up with a competitive asking price. Here’s how:
Try an online estimator as a first pass
A lack of sales price data certainly makes it more difficult for an algorithm to estimate a home’s value. But remember that data like a home’s list price, any price reductions, square footage, beds and baths, and property taxes may all still be available to pull. Even if you live in a non-disclosure state, a tool like HomeLight’s Home Value Estimator can be a great starting point. You’ll need to follow it up with a CMA from an agent for a spot-on pricing strategy, but if you’re doing a quick home value check up, it doesn’t hurt to have a ballpark figure in mind.
Estimate your property’s worth based on its price history, condition, and any upgrades
While it’s not foolproof, the Federal Housing Financing Agency’s house price index (HPI) calculator can provide you an average worth of your home today if it “appreciated at the average appreciation rate of all homes in the area.”
Enter your state, original purchase price, and purchase quarter to get started. The tool uses the “repeat sales method,” estimating how home values fluctuate in a given market based on data from mortgage transactions dating back to the 1970s, says FHFA senior economist Will Doerner. That at least gives you a ballpark idea, albeit without any current market conditions or home improvements.
Then compile a spreadsheet or make a list of any repairs and upgrades that you’ve made, along with relevant receipts. When did someone last service the HVAC? Is the roof in good shape? Did you revamp the kitchen cabinets or bathroom fixtures? Appraisers and real estate agents appreciate having this information regardless, so if you collect it now, you can get a sense of how your home might stack up to others like it.
Get a home appraisal
A buyer typically pays for a home appraisal after you accept their offer and undergo a home inspection. It’s one way a lender verifies that the home is worth your asking price and investment. But if you have no idea what your home might be worth, hiring an appraiser before you list is one way to go on the market with confidence. Obtaining an appraisal can help generate ideas about upgrades that can add value. While the cost of an appraisal varies depending on your property and where you live, they tend to average around $400-$600.
Contact a local real estate agent with MLS access
Agents who work in non-disclosure states say that clients shouldn’t worry about researching what other homes sold for in your area because they can assess that, along with other data to advise you on a fair asking price. “They’re going to be conveyed during our presentation what the numbers truly are based on the accurate data that the MLS derives for us,” Martinez says.
Agents also can research the particulars behind any comparable sales to ensure that your home isn’t undervalued, for instance, if one of those properties sold to a relative at a lower cost.
Living in a non-disclosure state might seem to have a few more challenges for the average consumer to learn about the housing market. But if you work with a great real estate agent, there’s no need to worry about being out of the loop.
Header Image Source: (CHUTTERSNAP / Unsplash)