Guide to Understanding Seller’s Disclosures

Common Real Estate Disclosures

Below is a list of common disclosures that are made about a property, bearing in mind varying state and local requirements.

Death and Crimes

Most states do not require a death in the home to be disclosed if it was from natural causes or an accident that didn't physically affect the property. However, some states do impose a duty to report what is known as a stigmatized home, a property that has been affected by murder, suicide, alleged hauntings, or an infamous previous owner.

In general, a seller may want to err on the side of caution and inform a buyer about any death or violent crimes on the property. It's likely that a buyer will eventually find this information out from the community, so disclosing incidents, regardless of the cause, shows transparency and may even build more trust with the buyer.

Encumbrance

An encumbrance is a term for any claim that may exist against a property. Types of encumbrances a property may have include:

• Easements: An easement is a legal right to enter or use the property by a non-owner, usually for road access or utility and sewer lines.
• HOA rules and fees: If the property is part of a homeowners or condo association, the seller should disclose the HOA fees and rules. These are known as restrictive covenants.
• Leases: If a property has tenants, their lease is not invalidated by the sale. If the lease agreement extends beyond the sale closing date, the new owner may be bound by its terms.
• Liens: Liens are financial claims against a property for unpaid debt. Sellers typically pay these with the proceeds from selling the property, but they may be passed on to the buyer if the seller doesn’t repay them.

In some cases, the buyer may be able to remove the easement. But, when they can’t, the buyer must weigh any encumbrances when deciding to go through with a home purchase.

Hazards and Damage

Hazards and damage are arguably the most important for a seller to disclose from a legal perspective. It's also highly recommended that a buyer get a home inspection for an expert opinion on the home’s condition. While hazard disclosures vary by state or county, here are some common hazards that are typically required to be disclosed:

Many of these hazards may not be apparent from a real estate listing or from a walkthrough. However, these are important considerations for potential buyers, as they may require extra investment in the property or put the new homeowner at risk of injury.

Historic Districts

If a house is in a historic district, a defined area with a concentration of structures and sites with historical, architectural or cultural significance, a buyer may face restrictions on renovations, exterior alterations, or property use. In these cases, a homeowner may need approval from local committees to make any changes.

Items Not Included in Sale

Some states require sellers to disclose whether certain items are not included in the sale of the property, such as kitchen appliances, central air conditioning and heating, light fixtures, rain gutters, and water heaters. These are all things that a buyer would likely assume are included in their potential new home.

Nuisances

A legal nuisance is defined as a substantial and unreasonable interference with a person's ability to enjoy their property. Common nuisances include excessive noise, odors, or disruptions that cross property boundaries.

To qualify as a nuisance, these interferences must be prolonged and clearly affect the owner's daily life. For example, a seller may state in their disclosure statement that their property is near a railroad track.

Repair History

Buyers need to know a home's repair history, such as electrical or plumbing work, so their home inspectors can pay special attention to these areas. A poorly done repair can lead to recurring, expensive problems for the new owner and even create a domino effect of new issues.

Are Seller Disclosures Required?

Most states legally require sellers to provide disclosures in real estate transactions. While the central premise of most states' disclosure statements is similar, it's important to understand the different requirements in each state. For example, some states require a seller to disclose problems with the land, while others just require information on the housing structure itself.

"Buyer Beware" States

Additionally, a few states have no regulations on a written disclosure statement, employing the caveat emptor rule (caveat emptor is a Latin phrase that translates to "let the buyer beware”). In these cases, a real estate agent is typically only liable to disclose things that may be hazardous to the buyer’s health and safety. Look into the requirements of your particular state during the homebuying process so you know what to expect.

What if a Seller Is Dishonest on a Disclosure Statement?

While a seller can sell their home "as is,” there are legal repercussions, such as being fined, sued in court, or even face criminal liability, for a seller who lies or fails to make proper disclosures about their property. Ultimately, the purpose of a disclosure statement is to reduce the seller’s liability while helping the buyer make an informed purchasing decision.

Seller’s Disclosures FAQs

Below are answers to a few common questions that buyers and sellers may have about property disclosure statements.

Can You Get Help with a Seller’s Disclosure?

While most states allow a seller's real estate agent to help them fill out a disclosure statement, certain states, such as California and Hawaii, don’t legally allow a real estate agent to help. Instead, a seller must complete it themselves and consult a real estate attorney.

When Is a Seller Not Liable for Something Missing from a Seller’s Disclosure?

A seller may not be liable for unknown property defects. Hidden issues, such as water damage behind a wall or a budding pest infestation, don’t have to be disclosed if the seller never saw evidence of the defect. For this reason, buyers may want to opt for a home inspection to look for any undisclosed defects.

How Should a Buyer Look at a Seller’s Disclosure?

Buyers should read the full property disclosure, even if they receive a summary from a real estate agent. They may also want to review the document with a real estate attorney to ensure the disclosure is accurate and that the buyer understands any risks associated with the property. They may also want to verify what’s been disclosed in the document by having an inspection done.

Final Thoughts: What to Know About Seller’s Disclosures

While required property disclosures vary by state or county, it's important for sellers to make honest, complete disclosures to ensure a fair sale. Likewise, buyers should be well-informed so they can make confident decisions when purchasing their next home. If you’re ready for a mortgage or looking to sell your home, we’re here to help you on your journey.