As a seller, you usually try to focus on the things that are great about your home when showing it off to potential buyers. After all, you want to highlight the things that might push a buyer to place an offer.
However, every home has some quirks, defects and other issues that could potentially lower its value or create headaches for its future owners. As a seller, you have a duty to ensure that your buyer is aware of any problems before the sale is final. This is where real estate disclosures come in.
A real estate disclosure is a statement the seller makes regarding any issues with the property that could affect its value. Real estate disclosures provide a layer of protection for buyers by requiring sellers to sign off on what they know about the state of the home and its components.
Real estate disclosures let buyers know of issues that might not be immediately obvious during a walkthrough.
For example, say the home you’re selling has a leaky roof. Even if potential buyers don’t notice it when they tour your home, if you live in a state that requires disclosures, you’ll still have to disclose the fact to your buyer that you have a leaky roof.
The laws on disclosures vary by state. Some states have a lot of specific requirements for what must be disclosed in a real estate transaction, while a few states, known as “caveat emptor” or “buyer beware” states, don’t require any disclosures.
However, even in “buyer beware” states, sellers aren’t permitted to lie outright about the state of the home if a buyer or agent asks them questions about it.
If you’re selling without an agent, it’s important to familiarize yourself with your state’s laws surrounding real estate disclosures to protect yourself legally and financially.
The property disclosure statement is the document on which you’ll make your disclosures. The form itself is typically fairly straightforward; it’ll go over different aspects of your home, its components and the area around it, asking about known issues or if repairs have been made.
Since you aren’t working with a real estate agent who can provide you one, you’ll want to make sure to get your hands on your state’s residential disclosure statement in addition to all the other documentation you’ll need to sell on your own.
Depending on the state you’re in, you may be required to provide the buyer with a property disclosure statement within a certain number of days of accepting their offer.
Here are some items a standard disclosure form will ask about:
Typically, you’ll be given a space next to each of these items to check “yes,” “no,” or “don’t know.” You should answer to the best of your knowledge, and you should never lie on your disclosure form.
The exact questions you’ll see on your disclosure form will depend on where you live, as each state or locality may have unique required disclosures. For example, some states require a disclosure if a death occurred in the home.
No matter what state you’re in, you’ll have to disclose if your home contains lead-based paint.
Under federal law, sellers of homes where lead-based paint may be present have to follow certain disclosure rules. If your home was built before 1978, you have a legal responsibility to provide your buyer with a lead-based paint disclosure as well as a pamphlet developed by the EPA called “Protect Your Family From Lead In Your Home.”
If while filling out your property disclosure statement you are asked about something you know is an issue, do not simply pretend that you aren’t aware of the problem, as that can come back to hurt you later on.
If a buyer finds out before closing that there is an issue with the home that you didn’t disclose, they may choose to back out of the sale, often without penalty.
If a buyer finds out after closing that there is an issue with the home and they can prove you were aware of it and lied on the disclosure statement, they may be able to sue you for damages.
When you’re preparing the property disclosure statement for your buyer, err on the side of over-disclosing rather than under-disclosing. Disclose everything, even if you think it’s inconsequential.
While you might be afraid that drawing attention to your home’s defects will hurt your chances of closing the sale, being honest and upfront will help you out in the long run.To get started with your own home sale, check out our packages for sellers.
