Understanding Disclosure – It’s the law

Wherever your home is located, the chances are that laws exist about what must be disclosed when selling a home. Typically, these laws require that any major defect is disclosed to the buyer before you complete your transaction. Laws can vary from state to state, so you need to ask your Realtor or find out for yourself what the laws are in your particular area.

You may have to write it down

Most of the time a verbal disclosure may be enough to meet your legal requirements, but in some states – like California – you have to draft a disclosure form that lists a wide variety of defects.

Your Realtor should know whether or not you need to give a disclosure form to buyers before you finalize your sale.

A pre-sale inspection could simplify things in the long run

Many sellers are choosing to get a pre-sale home inspection before they put their home on the market. While it may seem like an unnecessary step – since the buyers will be doing their own inspection – getting your own inspection as a seller can make things easier on your end. The inspector may turn up some issues you were unaware of.

This can be frustrating, but it also ensures that you can make repairs as necessary and that you can disclose all significant problems. If you communicate, you should be protected from lawsuits should the buyer discover a problem after closing.

Getting ready for the buyer’s home inspection is just a smart thing to do anyway. With the home inspection being one of the biggest hurdles to clear in a real estate transaction it is just prudent to do so. More home sales fall apart due to a home inspection than any other reason.

Disclosure can relieve stress and simplify the sale

If you are working with a reputable Realtor, he or she will emphasize the importance of disclosure. Being honest about what you are selling not only protects you legally, it encourages trust on the part of buyers. No home is without problems, so a buyer’s agent will be naturally suspicious if you try to pass your house off as trouble-free. Clearing the air about any big problems lets the buyer make an informed decision. If the buyer wants the house with the existing issues, you can feel confident he or she wants the home.

Focus on significant issues

Buyers need to know about major problems, not every single imperfection in your home. You may have noticed that a tile in the bathroom was crooked, or that one cabinet is not quite square. Don’t confuse buyers with these minor items. If, however, you think the item is something the buyer will ask to be fixed after the home inspection takes place then list it. It is much harder for a buyer to ask for repairs or a seller concession after a home inspection when it’s disclosed up-front.

Things to disclose

The ground rules for disclosure are that you notify the buyer of any significant physical issues with the home. Anything that will be expensive to replace, make the home dangerous or unlivable should indeed be disclosed. Disclosure laws also apply to things in proximity to the property as well.

Haunted homes

Some states require disclosure of haunted homes or paranormal activity and others do not. Finding out whether disclosure of mysterious things happening in and around your home is something that needs to be disclosed is paramount. Some buyers don’t believe in ghosts or other types of demonic entities. On the other hand, there are buyers who would not come near a haunted home if their life depended on it.

Murder & deaths on the property

Some areas require you to disclose any deaths that occurred on the property in a certain number of years. You may not have to disclose this information depending on where your home is located, so make sure to check the laws. Buying a home where a death took place recently is something that makes quite a few buyers uncomfortable.

In California: you are required to disclose the “death of an occupant of the property upon the property” within the last 3 years.

Roof leaks, or it needs to be replaced

Replacing a roof is expensive, and a bad roof can quickly make a home uninhabitable. Most buyers will want to know the age of the roof. 

In California one of the disclosures asks the approximate age of the roof.

Most of the time it is not hard to tell if a roof needs replacement, especially if you have a home inspection done.

Foundation cracks, sinking, and other issues

It takes a lot of effort and expense to repair a foundation with major structural problems. If the foundation is in bad enough shape, it can make the home unsafe to live in. Everything else is resting on top of the foundation, so it is understandable that buyers want a home with a foundation in good repair.

Lead-based paint

Federal law requires that anyone who is selling a home that was built before 1978 disclose all information about lead-based paint in the home. This law is referred to as the Residential Lead-Based Paint Hazard Reduction Act of 1992 (U.S. Code § 4852d) which is also known as Title X. There are multiple requirements under the law, including:

• Disclosing all known lead-based paint and hazards in the home.
• Real Estate agents must give buyers a pamphlet prepared by the U.S. Environmental Protection Agency (EPA) called “Protect Your Family from Lead in Your Home”.
• You must include certain warning language about lead paint in the contract as well as signed statements from all parties verifying that all requirements were completed. This disclosure is executed by the seller, buyer and respective real estate agents.
• The lead paint acknowledgment must accompany the offer to purchase real estate.
• You must give buyers a ten-day opportunity to test the house for lead.
• You must keep signed acknowledgments for a minimum of three years as proof of compliance.

Lead paint disclosure is a mandatory disclosure in all states. If you fail to comply with lead paint disclosure requirements, the buyer can sue you for triple the amount of damages suffered. Accuracy on lead paint is one of the most important disclosures for any seller.

Known toxic materials in the home

There are some things that can be considered hazardous to one’s health found in a home. If a seller is aware of one of these issues, they should be disclosed to a buyer.

Radon – Radon is a toxic gas that comes from the ground and is suspected to cause cancer over years of exposure.

Asbestos – Asbestos is a toxic material that when found in the air can be extremely dangerous. Asbestos is often found in older homes as insulation of pipes or air ducting. It is also found in vinyl flooring and tiles.

Formaldehyde – Formaldehyde was used as an insulating product many years ago, so it can be found in older homes. It has been determined that the toxicity of this product dissipates over the years, so it is probably not a health hazard anymore. If, however, you know it exists it would be recommended to disclose it.

Mold – selling a home with mold is at the forefront of the real estate industry right now. There is a lot of misinformation out there when it comes to mold. One thing that most people don’t realize is that every home has mold. There are, however, various type of mold. Some molds are toxic and hazardous to one’s health. Common household mold is not. If you know of toxic black mold in your home known as Stachybotrys, it would be highly recommended to disclosure it. Even if you have done remediation of mold in your home, it should be disclosed.

Water damage

Water damage is common in homes. It is also one of the problems that homeowners try to conceal more than any other issue. Don’t do it! When water comes into a home, it can easily lead to mold in the future. You should make certain when selling your home to disclose any water problems whether it is a flooding crawl space, basement or anything else. If water has entered the home, disclose it!

Off-site hazards

If any off-site conditions, such as waste, toxicity, or other contaminants are present, it’s possible they could have an impact on the property value. Issues that affect the value of marketability of a property should be disclosed.

Natural hazards

In some states, it is required to disclose if the home is located within an earthquake zone, flood zone, or if the surrounding area is susceptible to wildfires. California, for example, is one such state. Consult with your Realtor to find out if your area features any of these conditions and if disclosure is required. In California we use a “Natural Hazards Disclosure” form that is normally obtained through a 3rd party company on behalf of the seller and provided to the buyer.

Square Footage

One of the most contentious areas of disclosure in real estate is the actual size of a home. The square footage of a home is typically published in the MLS (multiple listing service) for the properties that are listed for sale. Unfortunately, sometimes the square footage published is incorrect. This is an area where real estate agents often rely on the seller having accurate information.

Quite often sellers are lax on making sure the size of the home is correct. The square footage of a home is not something that should be taken lightly. Buyers often place a lot of stock in the square footage as it pertains to the home value. Homeowners should take the time necessary to validate the size of a home as to avoid being sued.

Repairs or improvements made to the home

Anytime you make repairs to a home it is wise to disclose them. Why? Let’s say a problem resurfaces a few years after the buyer purchases the home and the issue comes back – it will be impossible for the buyer to say they did not know about it if you originally disclosed it.

Sellers should disclose anything that was done to the property that required a permit but was done without a permit. These are usually significant items that should be disclosed. Examples include: heating system, air conditioning, roof, or anything related to the plumbing or electrical systems.

Legal issues

When selling a property, it is important to disclose any kind of legal issue that could cloud the title. For example: if the home is a short sale and needs third party approval – this is something that must be disclosed. Another example would be an estate sale. If the home sale is subject to approval by the estate or probate, buyers should be made aware of this fact.

Another example would be there if there was a cloud on the title or a mechanics lien on the property. A cloud on the title will most likely need to be cleared before selling, so make sure you have it taken care of as soon as possible. By not taking care of such issues right away, it is very possible that the closing of the sale transaction could be delayed or not happen at all.

Terrible neighbors

Depending on where you live there is probably some gray area when it comes to what constitutes a lousy neighbor. If, however, you have constantly been fighting with neighbors because they blast loud music at all hours of the night or have a vicious barking dog – play it safe and disclose this.

Sex offenders

Whether you have to disclosure a sex offender, it is not something you should take lightly. The laws on disclosing sex offenders vary from state to state. Check with a local real estate agent or visit the police department. Either one of these sources should be able to give you an accurate answer. In California, we have a disclosure called “MEGAN'S LAW DATA BASE DISCLOSURE” which contains a reference to a website maintained by the Department of Justice.

Noise pollution

If you live in proximity to an airport, it would be smart to disclose to potential buyers there could be points in time where things get noisy. Any loud noises that could influence a buyer from purchasing a home should be disclosed.

Homeowners Associations and Covenants

Disclosing whether there is a Homeowner’s Association is something that should be disclosed up front. There are lots of people who do not want to be governed by various rules. Having an HOA could influence whether a buyer wants to purchase in a certain neighborhood or not.

The same can be said of any restrictive covenants placed on a neighborhood. Buyers should have this information up-front, so they can make decide on whether to move forward with the purchase or not. For example, if the neighborhood does not allow you to change the color of your home or let you raise livestock, this should be pointed out before the buyer signs a contract.

Most people associate a Homeowner’s Association with a condominium or townhouse community which is commonly the case. However, it could also pertain to a single-family residence (free-standing home). There are single family homes in communities that are governed by a Homeowner’s Association, so unless you were made aware of this up-front you would not know this.

Other miscellaneous home-related issues

Siding problems – If the siding has been peeling away from the house, or if there are leaks caused by siding issues, you should let the buyer know about it.

Window leaks or malfunctions – Windows can wear out like anything else in the home. If there are any major leaks or other known issues with the windows, they should be disclosed.

Plumbing – Leaks, clogs, old plumbing not up to code – there are a lot of things that can go wrong in the plumbing.

Electrical – Electrical systems are complex and can be dangerous if they malfunction. Repair and replacement is a major problem, which means you should certainly say something if you have noticed issues.

HVAC – Buyers should ask about the age of the heating and air conditioning units, but even if they don’t, you should certainly disclose major problems that you are aware of.