What Is a Seller's Disclosure and Why You Should Get One

Written by Posted On Thursday, 06 June 2019 10:20
Sellers Disclosure Statements and Real Estate Transactions Sellers Disclosure Statements and Real Estate Transactions Jerry Marcona

When buying or selling a home one of the most critical documents in the entire process is the Seller's Disclosure. So now you're probably asking, what is a seller's disclosure and why is it so important?

Real Estate laws are different in most if not all states, but the common thread is all require sellers to reveal to buyers any known issues with the property. Some of these issues might include needed repairs, past problems, current problems, renovations performed, or even neighborhood problems and annoyances such as noise or close proximity to construction. Any buyer of course wants to know if modifications to the home and/or property were done correctly and if the necessary permits were acquired. A sellers disclosure statement serves to protect buyers from totally unseen or slightly hidden problems that would of course reduce their enjoyment or intended use of the house. Sellers disclosures are legally binding agreements, so sellers who don't disclose known issues to buyers in these documents are considered to be financially liable long after the house or property is sold. This is a very important reason you should retain an experienced real estate attorney when buying or selling a home or other property. The disclosure statement serves as legal protection from future legal actions from buyers.

Be aware. Even with a seller's disclosure, if you were to buy a home and then discover a problem, how can you really know whether the previous owner knew about the problem? Even in cases where you're sure the previous owner knew about a problem and neglected to report it on the disclosure, could you actually prove this in a court of law? Furthermore, if you believe your case is strong and you could prove your claim, are you truly willing to file a lawsuit? Do you have the money required to do so and win? The truth here is while a disclosure agreement gives you more protection than you'd have otherwise, don't miscalculate thinking it provides you with a 100% guarantee against undisclosed property problems.

Just remember, a disclosure statement is not ironclad and is not a replacement for an inspection by an experienced real estate inspector. A real estate inspector will examine the house or property thoroughly and give the buyer a complete list of problems or potential problems in the structure/property. The inspector would also report any code violations that may need to be fixed. Because the seller is in no way required to report unknown issues, an inspection makes all the more sense.

It is standard practice in the real estate industry to put a fresh coat of paint on a house before it's listed on the market. Perhaps 9 out of 10 times, the seller intends to show the property at its best, but just remember, every so often a disingenuous seller paints the house in hopes of covering up problems.

Some examples of Seller Disclosure issues can include:

Structural issues
Electrical issues
Drainage problems
Lead paint
Plumbing issues
Radon
Asbestos
Toxic mold
Pests, termites, or wood-destroying insects
Flood damage
Wildfire danger
Toxins in the soil or water
Water rights (in dry or desert climates)

On the plus side, if there are repairs the seller doesn't want to tackle, the buyer may manage to negotiate a better deal or price, or even move on to purchase a better property.

When Does the Buyer Receive Disclosure Statements?
In the majority of areas, disclosure documents are dispersed to buyers once the seller has accepted a purchase offer. Along with home inspections or loan contingency, buyers can review seller's disclosures before closing. If the buyer sees negative aspects about the property through disclosure, she/he can back out of the deal in most cases.

In some regions or states, sellers furnish disclosures before offers are made. This in theory shows buyers know everything they need to know about the property up front. It serves to save everyone time, hassle, and money by preventing shaky deals from crumbling once they are in escrow.

Buyers are required to sign off on all disclosure reports. It is critical to review the documents meticulously and ask the necessary questions. Because of this providing full detailed disclosure from the get go can often help sellers. By showing all of their cards, sellers provide buyers with peace of mind, making the deal comfortable to the potential buyer and their home more desirable than a competing property.

After reading this and seeing all of the serious benefits a disclosure document provides, we hope reader's understand how very smart it is to consult with a good lawyer in real estate transactions. This can save a lot of grief in the long run and is one time it's probably worth spending a bit more for expertise that heads off problems in the future.

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