A seller’s property disclosure helps to protect many of the major players in a real estate transaction – the seller, buyer and real estate agents.
A seller’s property disclosure helps to protect many of the major players in a real estate transaction – the seller, buyer and real estate agents. State law varies, but most require the disclosure of latent defects that affect the material value of a home. Some states allow the disclosure to be verbal, while others insist on a written form. The individual state Realtor associations develop forms that are available for agents to download.
The penalties for non-disclosure vary, but can include treble damages, payment of court costs, fraud charges and the forced rescission of the sale with the money returned to the buyer. Every state has a statute of limitations for real estate contracts and this timeframe can expire years after the transaction closed. The potential for lawsuits exists as long as the statute of limitations is in effect.
Suppose a home in the Northeast sells in June and in January, the roof leaks from the weight of the snow. The buyer discusses the matter with the neighbors who tell him that the previous owner had roof problems for years. The damage to the roof was not apparent in the summer and the seller failed to disclose the problem. There are probably grounds for a lawsuit in this scenario.
If a home inspection for one prospect reveals problems with the home that aren’t obvious as a buyer walks through the property, from that point forward – if state law mandates disclosure –the seller and the seller’s real estate agent are required to disclose these defects to future prospects.
Play it safe and use a form, even if it’s not required by law. The form may contain such questions as the source of drinking water, septic or municipal sewer, known property liens, any past or present roofing, plumbing or electrical problems and perhaps hazardous waste questions. In some locations, the seller may be asked to disclose water rights. Follow the form and when in doubt, disclose.