Filling out the seller’s disclosure can be murky for homeowners. Sometimes it’s unclear what you need to include. Other times, people become so nervous that if they list every little flaw and fix from over the years, a buyer will say, “No thanks.”
How much do you really have to say about that time our foot went through the upstairs drywall in what your family calls “The Treadmill Incident”? Or when the hose sprung loose from the washer, and the basement floor got washed like it never has?
Top-selling real estate agent Vendela Bonner understands that hesitation, but she encourages her clients to be honest. “A buyer will buy a property if you’ve had a roof leak. The more important thing is whether or not it was fixed,” says Bonner, who has served the Philadelphia, Pennsylvania, area for more than a decade. “Do you have a warranty after you’ve fixed it? That’s a yes or no answer.”
With the help of experts including a real estate attorney, we’ve sorted through major points of confusion around the seller’s disclosure so you can help prepare your disclosure packet for buyers with a lot less stress.
1. Use common sense
In technical terms, your seller’s disclosure should highlight “material facts” or defects. These are issues that could cause someone to change their mind about buying the property — or valuing it for at least 20% less than what you’re asking, says Brett Wasserman, an associate attorney who handles real estate law at the legal offices of Marc Bronstein in Santa Monica, California.
“If it’s something that you think might change someone’s opinion about whether they might want to buy the property as a whole — not just the value — that’s where the line would be,” he says.
So, yes, fess up about that washing machine mishap so you can address how you handled it, just in case the moisture led to any mold.
Small repairs such as patching drywall, as well as little fixes you haven’t done like tighten loose hinges are “immaterial facts.” In other words, they’re unlikely to affect the buyer’s opinion, Wasserman says.
Plus, a buyer can easily notice them on a walkthrough, so you’re not hiding anything. “Generally, those things you want to disclose are the things that you can’t see upon a visual inspection,” he adds.
2. Look to your state for guidance
Because seller’s disclosure laws are meant to protect both sides of a home-purchase transaction, almost all states have a standard form with questions addressing certain facts, such as the property’s age, the source of its water supply, and the nature of its sanitary sewer system.
Disclosure forms also tend to include information about the previous or current presence of any wood-destroying organisms, such as termites; structural defects, such as a shifting or cracked foundation; and problems with mechanical systems, such as the electrical system, heating or air conditioning.
Federal and state laws may require additional disclosures on separate paperwork. (We’ve gathered the disclosure laws for all 50 states so you can see what your state requires.) For instance, federal law — the Residential Lead-Based Paint Hazard Reduction Act passed in 1992 — requires the disclosure of any lead-based paint or chipped paint in any housing built before 1978.
Other states require noting the presence of asbestos, radon, or other chemical substances. Illinois, for example, requires that sellers disclose whether anyone on the property manufactured methamphetamines. The drug is made of a variety of volatile chemicals that can permeate carpeting, ceilings, walls, and air ducts.
Still other disclosures address events on the property that don’t affect the physical condition but could apply a stigma or “psychological impact.” In California, if a death happened on the property within the past three years — regardless of the cause — it needs to be disclosed, Wasserman says. “Beyond that, it has to be disclosed only if the buyer asks.”
3. Be ready to share your remodeling history
You already may want to boast about the new backsplash in the kitchen or carpeting in the den. But unless you needed those repairs to rectify a major problem such as mold or fire damage, you don’t have to disclose the details of every cosmetic upgrade. Just focus on the ones that involve structural changes, such as improving the roof’s ventilation or redoing the electrical outlets or plumbing fixtures.
A property’s zoning is also important to disclose, Bonner says. If you’ve converted a building into a duplex or built an addition, you’ll need to provide proof that you applied for the proper permits or zoning variance. If you didn’t, the buyer might inherit trouble from the zoning authority or bad feelings from your neighbors.
4. Expect a lot of yes/no checkboxes but elaborate when necessary
Many seller’s disclosure forms include straightforward yes or no questions, such as:
- Are you the owner? If not, you need to explain your connection to the property.
- Does the property have a sump pump?
- Does it have central air?
- Does it have a fireplace?
But other questions involve more than a checkbox, our experts say:
- What kinds of changes have you made to the property?
- Are you aware of any flooding, draining, or water infiltration issues?
- Are there any federal, state or local regulations that affect the property?
Phrasing such as “are you aware” does stop some sellers in their tracks (we’ll get to that in a moment). But others simply say “yes” without providing additional information that a buyer reasonably wants to know.
“With some of the disclosures I’ve seen, the questions that are answered ‘yes’ are not explained properly,” Bonner says. “There was one particular disclosure that said that the buyer was going through some kind of a lawsuit. [But] that was never explained.”
If you think that by answering, “Yes,” a buyer will want more details, supply them, however minor they might be. That makes the circumstances clearer for the buyer and saves your agent the additional step of relaying the answer.
5. You can’t disclose what you genuinely don’t know
You’re not expected to check out your home and note every flaw the way a home inspector would. (At this point in the sale process, the home inspection is yet to come.) You’re just apprising your agent and potential buyers of what you already know from memory or based on documents such as receipts and warranties.
Some sellers honestly don’t think they should disclose something because they’ve solved the problem. Top-selling Chicago real estate agent Santiago Valdez recalled how one homeowner didn’t think to explain that their insurance company had paid to remodel the basement after a sewer line mishap had flooded it two years earlier. The homeowner considered this a one-time incident that had been remedied, but once Valdez asked about it, buyers appreciated the full story.
“There’s another little wrinkle in there: You can genuinely not know something, but you have a duty to make yourself aware of that circumstance,” Wasserman says. That means you can’t maintain willful ignorance about an obvious issue, such as a leaky roof, then claim you don’t know anything to disclose.
Some states also require you to be upfront about the requirements of any homeowners’ or condominium associations. If you’re not, the buyer doesn’t have to follow through with the contract, says Paul Fonseca, a real estate agent for 25 years in the Fort Myers and Naples areas.
Even an as-is sale doesn’t let you off the hook from the seller’s disclosure. You may not have to provide a detailed report of the property’s condition, but you’re still expected not to actively conceal anything, which would be fraudulent.
As Wasserman notes,
”You would want to disclose more than less. You don’t want to give the buyer any reason to turn around and say, ‘You didn’t tell me about this… I want X amount back.’”
6. If you haven’t lived in the house, the rules change slightly
If you’re selling property that you’ve inherited or that’s out-of-state, then say that so buyers understand the circumstances and don’t presume you have something to hide.
If you’re a landlord, however, you still have a duty to your tenants to know certain things, Wasserman says. You can’t simply say that you don’t know certain details about the property because you’ve never lived there.
Bonner agrees. “I believe all sellers know something. You may not know every detail if a tenant’s been in the property, and you really haven’t been in there personally. But you’re going to get a contractor to fix something at some point, and they’re going to have to tell you what they fixed. So to flat out say you don’t know anything, that’s a lie.”
7. Lying is not advised — and illegal
If you think revealing something might tank the sale, or that the buyer will be upset if they discover it later, consider your “disclosure sense” activated. “The safest thing is, if you have a known material fact, you should 100% disclose it,” Wasserman says. If you don’t, or if you lie about it, “that’s the equivalent of fraud.”
Your real estate agent can lose their license for willfully misrepresenting the facts, Bonner says.
You could be sued as well. A buyer can claim breach of contract and intentional misrepresentation, then take you to court to break the contract or seek the costs to repair the defect, plus additional damages, according to The Milwaukee Business Journal. In Milwaukee, Wisconsin, if a trial proves that you’re hiding the defect was “theft by fraud,” you could face paying triple financial damages plus attorneys’ fees.
8. Set aside time to prepare disclosure documents, and have your agent or an attorney review them
Don’t rush while filling out your seller’s disclosure documents — and ask for help if you need it. In some states, such as California, your real estate agent is not legally allowed to help you fill out a disclosure form. The agent will provide you with the necessary forms, though, then relay those to the buyer.
If you have questions that your agent can’t answer, you can consult with a real estate attorney. “Having an attorney involved for an hour or two of review work might save you some stress in the end,” Wasserman says.
Seller’s disclosures are a necessary part of a real estate transaction. Remember, you’re presenting your property to buyers in good faith so that everyone can get through negotiations and reach the closing table.
“Things can be fixed if someone is upfront about it,” Bonner says. “Once you have an agreement that the buyer is okay with purchasing the property for a particular price, it’s really what it is. But don’t lie because you think a buyer will not buy the property for a certain amount of money. That’s not good at all.”
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