Real Estate ProTip Series: Top 5 Facts for Seller's Disclosure Statement
Updated: Oct 23, 2022
Seller’s Disclosure Statements are an important part of the home buying & selling process. These legal documents help protect the buyer from serious flaws & the seller from potential lawsuits. Although Disclosure Statements vary by state & local laws, some disclosures are federally required for home purchases. So, what is a Seller’s Disclosure Statement & how do they impact the sale of a home?
Check out these Top 5 Facts for Seller’s Disclosure Statements.
What is a Seller’s Disclosure Statement?
Seller’s Disclosures are legal documents that are completed by the current homeowner. Although the disclosures vary by state, they are required for both agent listings & for sale by owners. These documents list any known issues with the property & any renovations the seller made while they owned the home. Buyers should review these documents along with the inspection report to ensure there are no issues.
Examples of Seller Disclosures issues include:
Structural defects such as foundation or roof
Electrical, HVAC, or plumbing issues
Lead paint, radon, asbestos, or toxic mold
Pests or wood-destroying insects
Flood or wildfire damage
Toxins in the local soil or water
Homeowners Associations (HOA) or Party Wall Agreements
How does a Seller make a Disclosure?
Seller’s Disclosure forms are usually boilerplate documents (text templates that are easily filled) that are put together by the local or state Real Estate Association. These documents typically are a series of yes/no questions about the home & the seller’s experience owning the property. Sellers must also document any communications about a substantial defect that could harm the value of the home. Depending on state & local laws, sellers may be liable for certain disclosures (or lack of) for up to 10 years. Sellers can contact their Real Estate Agent for the most up-to-date Seller’s Disclosure forms.
Seller’s Disclosure vs. Inspection
Seller’s Disclosures are different than home inspections, however, most states require both & the requirements also vary by state. Disclosures are documenting the seller’s best knowledge while inspections will examine the property for defects the seller may not be aware of. Buyers should always do a full property inspection to ensure all potential defects are considered in their offers. Although inspections are not always required, Seller’s Disclosure forms are legally required & vary by state & local laws.
When does the Buyer receive the Disclosure Statements?
Sellers who choose to provide Disclosure Statements in the listing description benefit from knowing that buyers who make an offer are willing to move forward in the purchase process. With knowing the defects, these potential buyers will reflect the cost of repairs in their initial offer. Depending on where you live, there is typically a set period of time for the seller to submit the Disclosure Statements after accepting the offer. This time period will typically reflect the required final inspection. Depending on the inspection results & disclosure statements, the buyer can back out of the purchase & receive their earnest money back during this period.
Outcomes of Disclosure Statements
The purpose of a Seller’s Disclosure is to protect the seller from potential legal ramifications & the buyer from purchasing a home with serious flaws. If a seller fails to disclose known flaws to the property, they can be sued by the buyer for nondisclosure. These lawsuits can lead to the seller paying for repairs or paying for damages suffered, including medical bills if there was a serious health hazard. The seller may even consider a pre-inspection before listing so they can make the repairs ahead of time. Providing the receipts for any repairs that you made is one of the best ways to document issues that were remedied & prevent disclosure issues. Talking with a Real Estate Agent & ensuring that you disclose even minor issues will dramatically reduce the risk of being sued for nondisclosure.
Questions about Seller's Disclosure Statements?
Seller’s Disclosure Statements are one of the most important legal documents in the home buying & selling process. Although there are federal requirements for disclosing potential issues with a property, the exact details of a Disclosure Statement will vary by state & local Real Estate laws. These checklist disclosures are created by the local Real Estate Associations, and your licensed Agent can provide them to you prior to listing. We hope this article was insightful for buyers & sellers alike!
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Seller's Disclosure Information Sources:
Zillow.com: Real Estate Disclosures
Zillow.com: What Does Disclosures Mean
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