Picture this: You’ve settled into bed in your new home, only to be woken up at 2:00 a.m. by the persistent drip of water on your forehead. After investigating, you discover that the roof has major, long-standing defects that will cost a lot of money to fix.
A Seller’s Disclosure – sometimes referred to as a real estate Seller Disclosure or Seller Disclosure statement – is made to protect home buyers from situations just like this. It’s supposed to alert buyers to anything the seller knows that can negatively impact the value of the home or affect the ability to live in it.
Whether you’re looking to buy a home or sell one, it’s important to know everything you can about Seller Disclosures and understand how they work.
We’ll help you navigate common disclosures, discuss what can happen if a seller fails to make disclosures and offer best practices on filling out and reviewing a disclosure form.
What Is a Seller’s Disclosure?
A Seller’s Disclosure is a written statement from the seller on the condition of the home. The disclosure alerts the buyer to any known issues with the property. It also protects the seller from getting sued after they sell their home if any issues arise that should have been covered in their disclosure.
Seller Disclosures typically contain information about known hazards, issues or problems with the home. What’s required to be disclosed can vary based on the state, city or county the property is in.
The Seller’s Disclosure form also varies by state. Some states have a checklist that covers everything from detailing the home’s sewer system to homeowners associations (HOAs) to any pending legal action. Other states want you to include the age of the home or the location of cracks in the foundation walls.
The Seller’s Disclosure is a great resource for home buyers, but it’s not a substitute for a home inspection.
The Seller’s Disclosure statement must disclose known problems with the property. Sellers are not required to poke around and uncover new problems they know nothing about.
Seller Disclosures can cover just about any property defect, such as mold, electrical problems, prior flooding or structural damage.
Here are some of the most common property disclosures:
Disclosure of the existence of lead paint is extremely important. In fact, it’s mandated in every state by federal law.
The lead paint real estate disclosure is stringent for good reason. Exposure to lead paint can cause lead poisoning. It can result in permanent brain damage and other organ damage. It’s particularly dangerous for babies, infants and children.
After Congress passed the Residential Lead-Based Paint Hazard Reduction Act (aka Title X) in 1992, anyone selling a home that was built before 1978 had to:
- Disclose the existence of lead paint anywhere on the property
- Give buyers the Environmental Protection Agency’s pamphlet on lead paint hazards in the home
- Allow buyers 10 days to inspect the home for lead
- Have signed statements from the seller and buyer that lead disclosures were made
- Keep a copy of the disclosures for at least 3 years
Noncompliance can be costly. Failure to disclose the known existence of lead paint can carry a penalty of more than $18,000 for each violation. That said, the seller isn’t required to remove the lead paint.
Many homes built before 1980 contain asbestos, a widely used insulator and fire retardant. Common places in the home where asbestos may be found can include:
- Tiles used in floors and ceilings
- Roof shingles
- Wall or ceiling insulation
- Around wood-burning stoves
Asbestos exposure generally occurs when it’s disturbed or damaged. When this happens, tiny asbestos fibers or dust get released into the air. Exposure to asbestos increases the likelihood of diseases like asbestosis, lung cancer and mesothelioma.
Contrary to popular belief, there is no federal mandate to disclose the existence of asbestos. However, most states require disclosure.
Environmental and natural hazards
If you found out that your yard was once a dumping ground for nuclear waste, you probably wouldn’t be too happy about that.
While that’s an extreme example, the seller must disclose all conditions that can affect the health and safety of anyone living in the home.
For example, flooding might be a recurring problem in the home. Maybe the home sits in an earthquake zone. Or excessive radon, which has been found to increase the risk of lung cancer, has been detected in the past.
These are all hazardous conditions that, even if they’re currently mitigated, need to be disclosed as part of the Seller’s Disclosure.
Deaths on the property
It can happen. And when it does, you’d best disclose it, although not all states require this.
Some people are put off by the thought of living in a house where someone died. They might even worry about the property being haunted.
Disclosing a death on the property could be beneficial. It may uncover an overlooked hazard, like slippery front steps or a wobbly banister.
It’s not fun to think about, but if you know there was a death on your property, it needs to be disclosed.
Faulty or missing appliances and systems
Is the water heater on the fritz? Did you rip out the microwave and never replace it? Is the shower drain stopped up? You’ll want to point out scenarios like these on your Seller’s Disclosure.
What Happens if a Problem Isn’t Disclosed?
Remember, the Seller’s Disclosure statement discloses known issues. Let’s say the seller went through a lengthy period of line drying clothes in their yard and had no idea that mice were scurrying around in the dryer vent. Or scenario #2: After the sale of the house, a big tree falls on the roof.
In cases like these, there’s not much the buyer can do. After all, the seller isn’t required to go looking for problems and can’t predict what might happen in the future.
But what if the buyer discovers a defect the seller couldn’t have possibly overlooked after the closing? It can get complicated figuring out who, if anyone, is responsible and what liability a seller, or the seller’s real estate agent, may have.
And, to add another complicating layer to the situation, real estate disclosure laws vary by state.
In general, the buyer can do something about it if:
- The seller hid, lied about or neglected to mention a material defect, like big foundation cracks, that the seller patched and repatched.
- The seller overstated the condition of something – like declaring that the septic tank is new, only to discover later on that it’s decades old.
Of course, what a seller knew and didn’t know can get murky. And proving what they knew can be difficult, too.
If you can prove that the seller knew about a problem, in some cases, the seller can be liable for misrepresentation and might have to pay to remedy the situation. There are even cases when the home sale can be reversed.
Cases that prove significant neglect by the seller, especially if the seller is a repeat offender, can result in jail time for the seller.
But here’s the plot twist: Some states have a caveat emptor rule. The rule can complicate what recourse home buyers have.
What Is Caveat Emptor?
Most states require Seller Disclosures for real estate transactions. But some states, like Alabama, North Dakota and Vermont, are caveat emptor states.
Caveat emptor is a Latin phrase that means “let the buyer beware.” In real estate, it’s a declaration that the buyer takes responsibility for checking the condition of the property. Essentially, it leaves the buyer unprotected if a problem is uncovered after a home’s sale.
So, what does this mean for buyers?
Aside from any federally mandated disclosures, a seller in a caveat emptor state is not required to provide any formal disclosure paperwork. However, it’s still expected that sellers disclose known defects as a matter of ethics.
It’s best to check with a licensed real estate professional for questions about a state’s caveat emptor practices regarding Seller Disclosures.
Best Practices for Reviewing a Seller’s Disclosure
For property buyers, here are some general rules of thumb when reviewing home disclosure statement forms:
- Read the form before inspections: Given what you already know, you can have the inspector do a thorough check on anything that looks like a red flag.
- Read the entire form: Read the form. And for good measure, read it again. Make sure you understand everything that’s in there.
- Ask questions: If there’s something on the form you don’t understand, have your real estate agent or real estate attorney explain it.
- Ask questions (Part II): Is there something you want to know about the property that isn’t on the form? Be sure to ask questions sooner rather than later.
To Disclose or Not to Disclose?
If you’re a seller and are wondering about whether to disclose something, we strongly suggest disclosure.
Besides the questionable ethics of neglecting, hiding or lying about problems, failure to disclose known issues can get the seller into serious legal trouble – possibly even jail time.
Plus, you want the buyer to have confidence in you as an honest seller. Be upfront – even about the small defects. Filling out a disclosure form completely and accurately benefits all parties.
It also helps to partner with a reputable real estate agent and property attorney to help ensure a smooth, issue-free transaction. The buyer can concentrate on buying and enjoying their new home, and the seller can rest easy.
Environmental Protection Agency. “Fact Sheet.” Retrieved November 2021 from https://www.epa.gov/sites/default/files/documents/fs-discl.pdf
U.S. Department of Housing and Urban Development. “The Lead Disclosure Rule.” Retrieved November 2021 from https://www.hud.gov/program_offices/healthy_homes/enforcement/disclosure
Legal Information Institute. “24 CFR § 30.65 – Failure to disclose lead-based paint hazards.” Retrieved November 2021 from https://www.law.cornell.edu/cfr/text/24/30.65