Disclosures in Real Estate

Selling and buying a house are major life events that need to be treated with the utmost care. It takes between 30 and 50 days for a sale to close, and lenders grant their approval within 30 days, or even more for first-time homebuyers and short sales. According to Fannie Mae, overall, today it takes longer to sell a house. Moreover, if real estate agents used to sign only a one-page document when selling a house years ago, nowadays, real estate agents and lawyers handle huge piles of papers that need to be signed multiple times by sellers and buyers, some of these having to do with seller disclosure.

Real estate agents representing a family member are also required to disclose this situation and if they happen to know the buyer, they must specify this, too, before any offer is made. There could be a conflict of interest. Disclosure in real estate is supposed to provide peace of mind for both the seller and the buyer and prevent future lawsuits, that’s why real estate agents usually encourage sellers to over-disclose. But what are the seller and the seller’s agent expected to disclose when selling a home?

The property disclosure form

Sellers have to fill out two kinds of disclosures - the Transfer Disclosure Statement and the Seller Property Questionnaire. Every state might have a different approach to disclosure in real estate, and some sellers might have to sign a Natural Hazards Disclosure Statement, the Market Condition Advisories or Megan’s Law Disclosure.

Visible defects don’t have to be disclosed by the seller, in most cases. For example, a broken window, a stain on the wall, or a wooden floor that had lost its luster and is hidden under a carpet - these are things that can be seen with the naked eye if you move things around a little bit. Unfortunately, buyers don’t inspect the home properly and are afraid of moving anything from its place. Some sellers rely on picture-perfect staging for selling their homes, but some of the props they use might very well hide some defects.

Sellers must disclose everything they know about the property. It is true that they might encounter questions about its structure, its foundation, or building techniques in the forms provided by their real estate agent - for all these questions, the seller might say “I don’t know”. However, the buyer has the obligation to do his/her own home inspection, too - it’s a contingency. A home inspection will bring to the surface the things that the buyers shouldn’t put up with. If not done in due time, the seller may refuse to go on and could relist the property.

In short, the seller must inform buyers of any latent or hidden defects that even a home inspector may not see during a home inspection, and the buyer could remain unaware of, leaving room for a legal dispute. So, sellers must openly admit if there has been any water damage in the roof or down in the basement, mold behind the walls, fire or smoke damages (for example, if the house has been threatened by a wildfire), as well as foundation problems. Nevertheless, buyers are free to conduct an insurance search against the property and see the history of insurance claims made by the previous owner(s).

Depending on their age and interest, whether they’re first time home buyers or house flippers, psychological stigmas could tip the balance in buyer’s favor. Although sellers are not required to disclose these, homebuyers can still find online the history and genealogy behind a certain property on websites like housecreep[dot]com or diedinhouse[dot]com. In some cases, though, sellers might be required to specify if someone died in the home during the past three years. But murders or suicides on the property or on the adjoining properties can be ignored. Can this information lead to low offers? Yes, probably. But it could also narrow the pool of buyers, which means that the property will linger on the Multiple Listing Service (MLS) far longer than expected. Death does take its toll on real estate. For example, living near a cemetery could mean lower home prices for the residents, while home buyers who haven’t watched too many zombie movies from Hollywood can get a larger house for their money in a very quiet neighborhood.

The seller disclosure form is easy to fill in and it is best for home sellers to read it and check the appropriate boxes together with the listing agent. In this way, he/she can identify the weak and strong points and could come up with innovative ways to sell the house. After all, the goal of disclosure in real estate is to get the seller as much money as possible for his property.

Seller disclosure in California

If you sell a house in California, disclosure in real estate involves quite a few documents - you will feel as if the agent is nitpicking. But everything is crystal clear and you can’t be wrong unless you really want to. So, in the second section of the Real Estate Transfer Disclosure Statement, the seller must describe the house for sale as detailed as possible. There are more than two dozen checkboxes such as oven, microwave, smoke detectors, central heating, sprinklers, garage, pool with child-resistant barrier and so on. Then you have to specify where the exhaust fans are located, where the fireplace is as well as the type of roof and its age. 

A few pages later, you have a list with 16 points related to various aspects such as easements, room additions without permits, soil problems, flooding problems, neighborhood noise problems, and lawsuits involving the real property (divorce, foreclosure, heirship proceedings). The statements of the seller should match the Agent Visual Inspection Disclosure (AVID), as much as possible. This document is not meant to replace the job of a home inspector, thus the agent won’t have to climb onto a roof or into an attic, won’t take the pictures down the wall, and won’t measure the gross living area (which is the job of the appraiser) and won’t locate the boundaries of the property (which is the job of a land surveyor).

Seller disclosure in Texas

Home sellers in the Lone Star State are also required to fill in a Seller’s Disclosure Notice that is very similar to the one mentioned above. There is even a draft that can be copied from the Texas Property Code Section § 5.008 or from the Texas Association of Realtors®, although it is very likely that each broker has their own branded form. Again, this document can be later used by the new owners to sue the seller for any damage that should have been reported but was not.

Something that home buyers will find extremely useful on the seller disclosure form is section 4 where the seller must disclose if he/she is aware of a termite invasion. Termites love the warm regions of the South, Southeast, and Southwest and in Texas, the most common are the subterranean termites. Although small, termites are invasive pests that feed on wood, destroying or weakening wooden structures. If you’re unaware of their presence, better schedule a termite inspection. The cost of a termite inspection varies between $75 and $150, but at least you will provide an accurate answer on the Seller’s Disclosure Notice. Alaska is the only state where termites are nonexistent, but real estate agents from Dallas, TX, Fort Worth, TX, and Houston, TX will urge you to inspect any house for termites.

Seller disclosure in Florida

The Seller’s Property Disclosure Form in Florida has 11 points, covering everything from structures, systems, and appliances, to pools, hot tubs, and spas. It is very similar to seller disclosure forms from California and Texas.

Besides termites, another major problem in Florida are sinkholes, most prone regions being the counties of Pasco and Hernando also known as the Sinkhole Alley. Home sellers should conduct a soil survey to find out whether the foundation of their house is built on limestone or not, but this inspection costs more than $5,000. Real estate agents from Florida would recommend that buyers looked for properties located on the East coast rather than the West coast, which is more dotted with sinkholes. Nevertheless, Florida’s real estate market is booming and the Sunshine State’s population is growing at a fast pace, fueled by low taxes and a good job market.

Disclosure in real estate counts on seller’s honesty. The key to a successful real estate transaction is sincerity and communication. Hiding and lying might get you a few extra dollars, but you might lose it down the road if the buyers decide to hold you accountable for their damages and losses. If you have further questions regarding disclosure in real estate, feel free to leave your questions in a comment below and an expert from RealEstateAgent.com will answer you.