In most states, sellers are required by law to document any known defects for the potential home buyers – this is included in what’s called the disclosure statement. As a home buyer, however, you may encounter sellers who are trying to hold information back or are otherwise making the process less than smooth.
Today we want to arm you with some key information so you’ll know what to expect and what you’re entitled to know when it comes to seller disclosures.
What Is a Disclosure?
Disclosure statements are your opportunity as a prospective homebuyer to learn as much as possible about the home and the seller’s experience with it. It’s the seller’s chance to reveal anything that could negatively impact the value, usefulness or enjoyment of the property.
These seller disclosures can span from a leaky window to a major construction or development project around the corner. (We’ll get into the specifics of the seller disclosures below!)
Seller disclosures keep you in-the-know as a buyer and also protect the sellers from potential legal action down the road. Typically, it’s a set of forms where the seller have answered a detailed set of yes-or-no questions.
As a buyer, you should double-check any seller disclosures with the city building permit and zoning reports. Work that was completed without a permit, for example, may not have been approved by the municipality or been performed to code, and this could result in a serious health hazard.
Seller Disclosures vs. Inspection
Seller disclosures are given to the prospective buyer and document the seller’s knowledge of the property. This is different from the inspection that’s performed by a third party, which could reveal defects that the seller wasn’t even aware of.
In the interest of full disclosure, the seller will often hire a property inspector before placing the property on the market, then hand that written report over to the buyer.
Still, as a buyer you should always do a thorough property inspection of your own.
When Does The Buyer Receive Disclosure Statements?
Seller disclosures are passed along to the buyers once the seller has accepted the offer. Then, you’ll have an opportunity to review the seller disclosures and rescind your offer if you discover negative information through disclosure. It’s extremely important to review seller disclosures carefully and ask any questions that come up.
Smart and considerate sellers let buyers know about anything that could pose a problem from the very beginning. It saves everyone time, money, and effort by preventing deals from falling apart further down the line.
Federal and State Disclosure Rules
Most seller disclosure issues are handled by state regulations, with one key exception: lead paint. If you’re looking to purchase a home that was built before 1978, it may contain lead paint. In that case, it should be checked for lead paint and the seller should complete a disclosure form.
Each state has its own regulations that change often. It’s important to use your real estate agent as a resource for up-to-date disclosure requirements for your area. Some examples of common seller disclosure requirements include:
Water Damage or Mold: Sellers should let buyers know about a leaky basement, damaged roof or any signs of dampness in the home. It’s even better if the seller disclosures include relevant receipts and insurance claim information.
Hazardous Conditions: Whether it’s wildfires, earthquakes or floods, some states require sellers to alert buyers to the potential dangers in the area.
Termite Damage: Seller disclosures should include information about past issues with termites, or even pay for an additional termite inspection.
Repairs & Insurance Claims: If sellers know about repairs that have been made to the home (even by previous owners), they should disclose them.
Pests: Most states require sellers to disclose any sort of pest infestation or issue, including snakes, mice, bats, and more.
Drainage Issues: Whether it’s a basement prone to floods, drain problems or standing water in the backyard, most states will require seller disclosures to detail these drainage issues. It’s even better for sellers to take it one step further and disclose any major issues they believe have been resolved.
Boundary Disputes/Issues: The fact that a seller’s fence is one foot inside the neighbor’s property line might seem like a personal, neighborly spat, but it could become a major issue in the future for you as a buyer. It’s wise for sellers to disclose any boundary issues upfront.
Her in Colorado, the seller disclosures must include:
- That the property may be in a special taxing district, and where the buyer can go to find out whether the property is within one of these districts.
- If it applies, that the property has been used as a methamphetamine lab (unless the effects have been completely resolved).
- The home’s source of drinkable water.
- Any transportation projects in the works that may affect the property.
- And more.
Most sellers and their agents are more than willing to be upfront with prospective buyers about any defects in the home. If there’s an ongoing problem you’ll need to handle as a buyer, it’s far better to be informed enough to negotiate about who should pay for any repairs.
Like all the stages of the home buying process, the more you know, the more comfortable you’ll feel. Now you and your agent will be able to assess any seller disclosures with confidence.
Disclaimer: Citywide Home Loans does not offer home inspection services.