What You Must Disclose: Part 2

Last week we took at look at some of the rules of disclosure. What you think you must and really don't have to on a home might surprise you. In our last blog we talked about Deaths in the Residence, Neighborhood Nuisances, and Environmental and Natural Hazards. Today we sum up our disclosure recommendations with Association Information, Lists of Repairs and Items, and the one everyone loves, Water Damage.

Association Information

If the home or neighborhood is governed by a home owners' association (HOA) you probably should disclose that fact. You also need to know about the HOA’s financial health and provide this information to the buyer so that he or she can make an informed purchasing decision. Or if the home is part of a historic association, buyers will need to know if the home is in a special historic district because it will affect their ability to make repairs and alterations, and it might also increase the cost of those activities.


Repairs and Lists of Items

Buyers need to know the home’s repair history so they can have their home inspector pay extra attention to problem areas and be aware of probable future issues. Texas law, for example, requires sellers to disclose previous structural or roof repairs; landfill, settling, soil movement or fault lines; and defects or malfunctions in walls, the roof, fences, the foundation, floors, sidewalks and any other current or previous problems affecting the home’s structural integrity. You may also need to disclose electrical or plumbing repairs and any other problems you would want to know about if you were going to buy the home and live in it.

Some states, like Texas and Michigan, will require sellers to disclose whether the property comes with a long list of items, including kitchen appliances, central air conditioning and heating, rain gutters, exhaust fans and water heaters.

Water Damage

When water gets in where it shouldn't, it can cause real damage--undermine the home’s structure or even create a health hazard if it encourages mold growth. Mold is not always a bad thing though; it is usually an easy fix and will turn off other potential investors. Sellers should disclose past or present leaks or water damage. Michigan, for example, requires sellers to disclose evidence of water in a basement or crawl space, roof leaks, major damage from floods, the type of plumbing system (e.g., galvanized, copper, other) and any known plumbing problems. It can be difficult to know about water problems (and many other types of problems) if you’re flipping the home and only own it for a month or two.

Just always keep in mind that there are many risks for flippers or investors when closing on a rehabbed property. Some things might not have been obvious on your initial walk-through when you were filling out your Property Repair Estimate Sheet, particularly if it was in winter or during a dry spell. Situations can always be concealed. Check to see how much protection your state’s laws offer from disclosing information you would have had no way of knowing.

To learn more about Part-Time REI visit us at http://part-timerei.com/

Or connect with us