What Should a Home Seller Disclose?


Reader question: We are preparing to sell our home and want to know what a home seller should disclose and what we are not required to disclose. What does the seller’s condition report cover and where does an owner’s liability for disclosure end?

Monty’s response: Most states have laws and requirements for a home seller to provide a state report. Many states have a pre-approved form that a seller must complete and provide to the buyer before preparing a purchase contract. The requirements that a seller must adhere to vary by state. Fairness is the underlying principle behind these demands. Typically, all of the flaws that affect a home’s value are disclosures that the law requires a seller to report.

Prelude to a seller’s condition form:

“In this form, ‘am aware’ means to have advice or knowledge. In this form, “default” means a condition that would have a material adverse effect on the value of the property; that would seriously affect the health or safety of future occupants of the property; or that if it was not repaired, removed or replaced, it would significantly reduce or adversely affect the normal expected life of the premises.

The owner discloses the following information knowing that while it is not a guarantee, potential buyers can rely on this information in deciding whether and under what conditions to purchase the property. The Owner hereby authorizes any agent representing a Principal in this transaction to provide a copy of the Declaration and to disclose any information contained in the Declaration to any person in connection with any actual or intended sale of the Property.

The word “significant”

In the language above, “significantly” or “significantly” is sometimes a matter of opinion. If a house is worth $ 500,000, is a $ 1,000 repair important? Consider disclosing more, as opposed to less, to avoid future conversations about the word. Better yet, do the repair, so it’s no longer a disclosure issue. If you can’t afford the repair, give the buyer credit to do the repair in your quote. You can often eliminate condition issues with a professional inspection before you put it on the market.

Locating the Status Report in Your State

Use your computer’s search bar and enter “(your state) seller’s condition report.” If these words do not produce satisfactory results, enter “seller’s property disclosure (of your state)”.

Choose the first search result that indicates it is a PDF file. When you click on the link, you will see the actual seller status report. The form is where you will learn what you need to disclose. If the search terms above don’t produce the report, you may need to dig a bit to find it.

Find the law that dictates the intent of the status report. Using your search bar again, type in “(your state) state of real estate report”. The links produced by the search bar should bring you to the written law.

Between these two sources of information, what the seller is supposed to disclose should now be clear. The status report is different in each state.

The realities of the seller’s condition report

While the report states that the buyer can trust the seller, the protection it offers may not be adequate. Many sellers are very conscientious while other sellers are not forthright in their disclosures, are unaware of the shortcomings, knew at one point but forgot over time, and some try to hide the flaws. This fact is one of the reasons home inspections have become such an integral part of the industry over the past 30 years.

Other disclosure requirements

The term “material adverse events” also applies to real estate transactions. A material adverse event may be different from a “default”. These facts are more often than not a piece of physical equipment, such as a faulty oven. A haunted house is an example of a significant adverse event. A house seller once revealed that his house contained a ghost. A buyer has surfaced and made a “subject to verification” offer. They imported a company that spent a week looking for evidence and couldn’t verify the ghost’s presence. They didn’t buy the house. The ultimate buyer was someone who didn’t believe in ghosts.

Ask your agent the impact of material adverse events in your condition. You might be surprised.

Richard Montgomery offers real estate advice to readers. He is a real estate industry veteran who has championed industry reform for over a quarter of a century. Ask him about CherMonty.com.


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