A real estate disclosure statement is the seller’s opportunity to reveal anything that can negatively affect the value, usefulness or enjoyment of his property, thus giving the buyer advance notice of any repairs that may need to be made.
The disclosure document not only serves to inform buyers, but it can also protect the seller from future legal action. Whether you are listing your home for sale or in the market to purchase, here are a few things to keep in mind about real estate disclosures.
1. Types of flaws that must be disclosed.
- Sellers are required to complete a variety of disclosure documents, which are often in the form of a government-issued checklist where they mark whether their home has or once had a variety of problems such as the following:
- Faulty foundation or leaky roof
- Problems with appliances or home systems (i.e. the HVAC)
- Pest or mold infestations
- Renovations completed without a permit
- Windows that do not close or doors that stick
- Environmental hazards in the area (e.g., floods and wildfires)
2. What to do if a disclosure reveals something bad?
- If you spot something on a disclosure statement that you don’t understand or that raises concerns, have your real estate agent bring it up with the sellers or their listing agent. In some instances, they might have an explanation that puts you at ease (i.e. a termite infestation that was treated by a professional exterminator and the property has been problem free ever since).
- If it an issue which makes you seriously question whether or not you want to move forward with the transaction, this could be an opportunity renegotiate the sales price to compensate for the added risk you’re taking on buying this home.
- If you find a problem that should have been disclosed but wasn’t, that’s all the more reason to consider carefully whether you want to move forward. If the seller covered one thing up, what else could he/she be hiding?
3. Disclosure is not the same as an Inspection.
The Seller’s Disclosure is given to the buyer by the seller documenting their knowledge of the property. It is not the same thing as an independent inspection by a third party. An examination may reveal defects that the seller may not have been aware of.
As a buyer, you should always do a full property inspection, before moving forward with the purchase. The inspector checks all systems and components from the roof to the basement. Often, in the interest of the ultimate in full disclosure, a seller hires a property inspector before going on the market and supplies the written report to the buyer.
Bottom Line: Buyers – Be as proactive as possible at the beginning of your purchase and you’ll avoid unwelcome surprises, repairs or major problems associated with your new house. Sellers – Honestly complete your disclosure statement to prevent your deal from falling apart.