Selling your Home:
Disclosure by Home Sellers

The seller's disclosure of material facts is an extremely important part of a real estate transaction.  And not only is it important; disclosure is required by most states in the United States.  Therefore you should know what should be disclosed and what impact disclosure has on the transaction whether you are a home buyer or seller.

What to Disclose
Although what is specifically required to be disclosed varies from one state to the next, most states require that sellers disclose "material facts" known about the property whether they are apparent or not.  Material facts are details that influence a buyer's decision about buying the property and the price they will pay.  These facts include information about property condition as well as legal status.  Examples of material facts include:

  • Leaky roof or flooding basement
  • Problems with major systems like heating, cooling, plumbing
  • Age of property components and systems
  • Square footage of the home
  • Defective components such as those which are/have been the subject of class-action lawsuits
  • Environmental hazards like mold, mildew, lead paint, asbestos, radon, etc.
  • Information about developments that might impact the property such as planned roadways, etc.
  • Past or current presence of termites or other wood-destroying insects
  • Presence of easements, encroachments, or boundary disputes

As a seller, you are required to adhere to the disclosure statutes where your property is for sale.  You should also seriously consider disclosing other details that are not required by law but that are questionable concerns.  The reason?  What you don't disclose just might create future problems for you.

What Disclosure Impacts
Disclosure has a direct effect on the home inspection and negotiation following it. If a seller discloses all known material facts upfront, then the buyer should address them in the purchase offer.  If not, they have no contractual right to negotiate these items later, for instance after an inspector points them out.  However, if the seller fails to disclose something they know and it is uncovered during the inspection, then that item can be included in negotiations.  The buyer could insist that the defect be remedied, demand price concessions, or terminate the purchase offer if that option is available.

What happens if the deal is already closed, and the buyer discovers a defect?  The buyer can try asking the seller to resolve the issue.  Whether this is successful depends on the seller.  If the buyer discovers and can prove that the seller knew about but didn't disclose a defect, he/she might have a case for litigation.  Buyers in this situation should consult with a real estate attorney about if/how they should proceed. 

Good Rules of Thumb
If you are debating whether or not to disclose something as a seller, you should probably do so.  What you don't want is to be the defendant in a lawsuit brought by buyers who claim you intentionally concealed material facts.  But if you have serious doubts about what to disclose, consult with a real estate attorney or your real estate agent.

As a buyer, make sure you get required disclosure forms before you make your offer.  Ask as many questions as necessary about the home.  Get those answers in writing from the sellers.  And don't discount the importance of having a professional home inspection done which should uncover any unknown defects in addition to the known ones already disclosed.

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.