Mandatory Real Estate Disclosure - How Much Do Sellers Have to Tell?

Real estate disclosure laws are changing constantly, and even the experts don't always agree on what a seller of residential property must tell a prospective buyer. Up until about 50 years ago, there was little, if any, legislation requiring sellers to disclose a property's defects. If there was a problem and the buyer didn't find out before closing, he was typically out of luck.

We live in a different world today. With the advent of the consumer protection movement in the late 1960s, we have seen thousands of state and federal regulations as well as court decisions that affect the seller's responsibilities for disclosure in real estate transactions.

There are two primary reasons for understanding disclosure laws: One is so you do the right thing when you are selling; the other is so you know what to ask when you are buying. Laws vary widely by state, which is why you need to consult with an attorney or other expert knowledgeable in this area to make sure you are in compliance with laws that apply to you. Here are some general issues to keep in mind when it comes to disclosure:

Disclose all known serious defects. If you know of dangerous wiring, a leaky roof, flooding basement, termites, rotting wood, malfunctioning heating or air conditioning units, or any other defect that could lead to extensive and expensive property damage, personal injury, or death, disclose it. Disclose environmental hazards such as mold, mildew, lead paint, asbestos, radon, and so on. If you're not sure if a particular defect rises to the level of "serious," disclose it anyway. Failing to do so could leave you open to charges of attempting to intentionally mislead a buyer.

Disclose other material facts. Material facts are anything, including defects, that could affect the buyer's decision to purchase or the price and terms of the deal. For example, if the home had been a crime scene or if a death (even a death from natural causes) occurred on the property, you should disclose that. One caveat when it comes to this: if the death was due to AIDS, check with a real estate lawyer before making the disclosure because in some states, AIDS falls into a protected class and the disclosure could subject you to discrimination claims.

If you know of any previous activity in the house that could affect future residents, disclose it. For example, a Colorado law that became effective in 2007 requires sellers of houses, condos, apartment buildings, and hotels to certify that the property has never been used to manufacture methamphetamine or, if it has, that the property has been cleaned up according to state standards. Many states require that purchase agreements and leases contain a notice that a database with information about registered sex offenders may be accessed by buyers and tenants.

Disclose external issues. Tell buyers about any external issue that may affect the property, such as natural hazards, flood zones, earthquakes, noise, various types of pollution, and any other nearby hazard. If you are aware of potential zoning changes of either the property you are selling or of adjacent properties, or of developments such as roadways or other construction that might impact the property, disclose that. Disclose the presence of easements, encroachments, or boundary disputes. It might seem absurd to suggest that a California property owner make a disclosure about earthquakes or that a seller of a home on a golf course warn about possible damage from errant golf balls, but in our litigious society, it's better to disclose and be safe (though you might feel silly) than to fail to disclose and risk being sued.

Of course, you can't disclose something you don't know, but don't count on ignorance as a defense. Some states require owners to perform certain investigations, so be sure you know what your legal obligations are.

Avoid puffing. "Puffing" is making statements that sound good but contain no facts. While statements such as "great neighborhood," "quiet streets," or even "super deal" are common in advertisements, they should not be offered or accepted as disclosure.

A real estate broker, an attorney, or your state department of real estate can provide you with a complete list of the disclosures required in your state. If you disclose all material facts upfront, the buyer should address them in the purchase offer and will have no contractual right to negotiate them later.

Perhaps the best rule for sellers to follow is this: If you would want to know about the issue before you purchased the property, tell the buyer before you finalize the negotiations.

Hi, My name is James Thomas. I have studied the Real Estate Business for years. I am an author of four highest selling books of Real Estate. I writes sometimes for ZipBrands. I have also discovered great shortcuts that can help investors make better decisions when it comes to buying and selling. My work across multiple disciplines broadly addresses narratives of human experience. You can follow us on Facebook also.

Last updated:6/22/2019 12:01:14 PM


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