Do You Understand Seller Disclosure Rules?
If you have recently decided to put your home on the market, you may be hesitant about revealing all of the problems – even minor ones – your home has because you don’t want to discourage potential buyers. However, not revealing them via your seller disclosure could result in lawsuits against you.
So how much do you need to disclose and how detailed do you need to be? Unfortunately, there is no concrete answer because disclosure laws vary by state and even by city.
Below, check out some basic rules governing seller disclosure and how and when you should disclose problems with your home.
When in Doubt, Disclose
Generally, sellers should disclose any known facts regarding the physical condition of the property, the existence of dangerous materials or conditions, lawsuits or pending matter that could affect property value and any other factors that might influence a buyer’s decision.
But how are you supposed to know what might impact a buyer’s decision? What if a window leaks just a tiny bit when it rains or the basement accumulates a little water every now and then? Are these things you really need to disclose? If you’ve learned to live with these problems, you may assume the buyer should just deal with them as well, but you’d be wrong.
Most sellers think it is in their best interest to disclose as little as possible, but this is not always the best strategy. In the vast majority of cases, disclosing the additional information (especially if it is something that was previously repaired), will not cause a buyer to back out or ask for a price reduction.
Why is it important to disclose recently repaired issue? If they buyer later discovers that a repair job was botched, you could end up liable for additional repairs.
Always Disclose Inspection Reports
In many areas, you don’t have to provide copies of inspection reports, but doing so can save you a significant amount of trouble. Why? Sellers have a duty to disclose any “material defects,” and while buyers and sellers may not agree on what constitutes a material defect, one of the best ways to avoid a legal battle is to give the buyer any and all copies of past inspection reports, no matter how old they may be. That way, a buyer won’t be able to say that they weren’t informed of a problem.
In other words, it is recommended that sellers should disclose anything and everything they can think of. Ironically, the more disclosures you make, the less important they might become to the buyer. Think of prescription medication commercials. When was the last time someone decided not to use a new medication because of the laundry list of side effects rattled off at the end of the TV commercial?
What You Don’t Know Can’t Hurt You
While the threat of a lawsuit is scary, there’s one thing you won’t have to worry about – courts won’t hold you accountable for failing to disclose any issues you are unaware of. For instance, perhaps your house is infested with termites but you’ve never seen one, or they were missed by an inspection. You cannot be held responsible for not disclosing this problem if it was discovered by the buyer a few months after closing. In fact, at a certain point, the burden falls upon buyers to make sure they do their due diligence to find any problems.
If You Don’t Know, Don’t Guess
Buyers ask for a lot of information about a home, including things that you haven’t even thought about. One of the most common problem areas in seller disclosure relates to measurements of the home. Even if you have had an appraiser check your home out, you might not have any idea how many square feet it truly is because there is no single agreed-upon way to measure a home. Really.
Three different appraisers can come up with three different measurements. In a situation like this, it’s tempting to just guess or come up with an average. Resist the temptation because buyers can come back later and say that you lied or misled them about a material issue.
If you aren’t sure of the answer to a questions the buyer asks, be honest and say you don’t know and put it on them to find out the answer. If they push you for exact figures on something like square footage, make sure you reveal where those numbers came from.
It is even recommended to consider including a clause in the purchase contract that the square foot measurement is an approximation, and if this presents a problem for the buyers, it’s their responsibility to investigate further.