A seller’s disclosure is a document that provides information about the condition of a property that’s been put up for sale. It’s typically provided to buyers in a real estate transaction and is intended to help them make an informed decision about whether to purchase the property.

The seller’s disclosure usually includes information about any known defects or problems with the home, such as water damage, termite infestation, or foundation problems. It may also include information about the property’s history, such as whether it was the scene of a crime, as well as noise nuisances caused by nearby businesses, construction sites, or neighbors.

Why Are Seller Disclosures Important?

Seller disclosures are important because they provide buyers with information that could impact the value of the property. For example, if a seller discloses that there is water damage in the basement, the buyer may be able to negotiate a lower price for the home or request that the seller make repairs before closing the deal.

In some cases, withheld information about the condition of a property can lead to legal action. For instance, if a seller knowingly withholds information about a serious problem with the home’s foundation and the buyer later discovers the issue, the buyer could sue the seller for fraud. The buyer’s case can be made even stronger if they can somehow prove the seller was aware of the problem but chose not to disclose it, such as through emails, HOA minutes, or other communications.

Are Seller Disclosures Required in Every Transaction?

Sellers are not always legally obligated to provide buyers with a disclosure form, especially if the property is being sold “as is” or through a foreclosure auction.

Additionally, some states have laws that exempt sellers from having to provide a disclosure document if the property is being sold to a family member or close friend. In these cases, the buyer is typically assumed to be aware of the property’s condition and is therefore not entitled to the same level of protection as someone who is buying a property from a stranger.

What Should Be Included in a Seller’s Disclosure?

A seller’s disclosure should include all information that could potentially impact the value of the property or the buyer’s decision to purchase it. This includes information about the property’s condition, history, and any known nuisances.

Standard disclosures include the known presence of, or problems with, the following items:

• Hazards: Asbestos, radon, lead paint, or toxic mold.
• Water and sewage: Problems with the property’s water or sewer lines, such as leaks, backups, or flooding.
• Electrical: Faulty wiring or outdated circuitry.
• Heating and cooling: Issues with the property’s heating or cooling systems, such as a leaking furnace or an inefficient air conditioner.
• Foundation: Any problems with the property’s foundation, such as cracks or settling.
• Roof: Leaks or missing shingles.
• Pests: Termites, rodents, bed bugs, or other pests.
• Neighbors: Noisy neighbors, businesses, or construction sites.
• Death: If the property was the scene of death, suicide, or a violent crime.

The seller’s disclosure may also include any information about the property that would be considered material facts, such as its proximity to a busy highway or a nuclear power plant.

The Caveat

It’s important to note that the seller’s disclosure is not a guarantee of the property’s condition. Sellers may only be required to disclose information that they’re aware of, so hidden problems can still exist. For this reason, it’s always a good idea to have the property inspected by a professional once there’s an approved offer and sales contract in place.

In addition, buyers should familiarize themselves with their state’s laws regarding seller disclosures to ensure they’re getting the most comprehensive information possible about the property. For example, New York State’s Property Condition Disclosure Act applies to “real property” only, which is defined as “the sum of the tangible and intangible qualities of land and improvements (on and to).”

After a co-op transaction, buyers receive a stock certificate and a proprietary lease to what is essentially personal property. Therefore, co-ops may not be subject to the same disclosure requirements as other real property in the city or state of New York.

The Bottom Line

While seller disclosures are not a guarantee of the property’s working condition, they can help make an informed decision about whether or not to purchase a particular piece of real estate.

Buyers should always consult with their real estate agent or attorney to determine what, if any, disclosures are required in their state. They should also have the property inspected by a professional before moving forward with the purchase, except for in “as is” sales, foreclosure auctions, or other special circumstances.

For more information about seller disclosures and other important facets of the home buying journey, reach out to an Elegran advisor today.