How to Review Seller Real Estate Disclosures
The seller’s disclosure report is one of the most important documents in the homebuying process.
Most—but not all—states require sellers to give prospective buyers a disclosure report. (Even the states that do require disclosures often carve out exceptions, such as for properties in probate where the original owner has died.) Here’s why it’s so important that you review and understand seller disclosures–and follow up as necessary when you do your home inspection.
What’s in a Typical Disclosure Report
Most state-required real estate disclosures are made using a standard form, on which the seller checks off features of the property and rates or describes their condition. The typical disclosure form is a few pages long and describes features like:
- the roof, foundation, and other structural components
- electrical, water, sewer, heating, and other mechanical systems
- trees and natural hazards (earthquakes, flooding, hurricanes)
- environmental hazards, such as lead, asbestos, mold, radon, or contamination by use as a meth lab, and
Some disclosure forms also cover legal issues, such as ownership problems, legal disputes concerning the property, and community association fees. The forms might even require information about suicides, murders, and other deaths on the property; nearby criminal activity; or factors, such as excessive neighborhood noise or other things that affect a house’s desirability or value.
Generally, sellers are responsible for disclosing only information within their personal knowledge—that is, they don’t necessarily need to hire inspectors to turn up problems.
If you’re buying a new house that hasn’t yet been built, the developer obviously won’t have much to disclose—but may still need to tell you about things like the type of soil; previous uses of the property; possible future uses of surrounding land; and the developer’s intentions regarding existing trees, streams, and natural areas.
Understanding Your State’s Disclosure Requirements
Disclosure requirements vary among states, from the detailed to the bare-bones. See "State-by-State Seller and Broker Disclosure Requirements" for examples. The key question is how much does your state law require the seller to disclose to buyers? If the standard form doesn’t mention past flooding, the seller doesn’t have to, either (but shouldn’t lie if asked). You might want to read your state’s law, or at least the form, to look for holes.
The majority of states require sellers to either fill out a disclosure form or disclose material facts about the property. To find your state’s law, talk to your real estate agent or state regulatory agency.
You can find your state real estate agency at the Association of Real Estate License Law Officials website. Or you can search online for “real estate disclosure,” “disclosure form,” or “disclosure statement” and the name of your state. Disclosure requirements for specific states (among them, California, Florida, Illinois, and Texas) are also included in Nolo's "State-by-State Guide to Interpreting Seller Disclosure Statements."
But even in nondisclosure states, buyers can negotiate to make seller disclosures a part of their purchase—or may get them without asking. Law or no law, your state Realtors association has probably created a standard disclosure form for sellers to use; if you can’t find yours, the National Association of Realtors website has a list of associations by state.
Federal Lead Disclosure Requirements
If you are buying a house built pre-1978, federal law requires the seller to give buyers a form disclosing whether there might be lead-based paint in the home and a pamphlet called “Protect Your Family From Lead in Your Home.” For more on the subject, see the Nolo article Seller Responsibility to Disclose Lead-Based Paint Hazards.
When to Expect the Disclosure Report—And How to Deal With Problems
Exactly when you’re given the seller’s disclosures varies by state. In a few states, such as Alaska, Kentucky, and New Hampshire, sellers must give you disclosures before you’ve made an offer. But most states don’t require the seller to do this until after you’ve made an offer, often just before the two of you sign the purchase agreement.
What you read in the seller’s disclosure report may affect your decision whether to make an offer. To find out more about a topic mentioned in the form, ask for it in writing. Be sure that your contractor checks out some of these items in more detail as part of the home inspection that most buyers arrange.
If you receive the disclosure form after making an offer, you can cancel the sale if you don’t like what you read.
Even after the sale has closed, if a problem pops up that you believe the seller knew about and didn’t disclose, you can sue the seller on that basis. See the Nolo article Home Defects: Sue the Seller for details.
Penalties for Seller Failure to Disclose
Most states put some teeth into their disclosure laws, by allowing buyers to cancel the sale if the seller doesn’t provide the disclosure form or doesn’t fill it out completely and honestly. Some states also charge monetary penalties to sellers who violate the law, or punish sellers’ real estate agents for failing to disclose problems that they observed or were told of by the sellers.
But remember that in most states, sellers aren’t required to poke around for problems—just to tell you what they already know. A house’s owners can remain blissfully unaware of many serious problems—a cracked foundation, termites deep in the walls, or a roof on the verge of leaking—and won’t be held responsible.
That’s why getting a professional home inspection is highly recommended. See the Nolo article Getting a Home Inspection for more on the subject. And be sure to do a careful review of any inspections the seller provides such as pest reports (common in California).
Resource for Homebuyers
For more on real estate disclosures, home inspections, and other ways to check out a house, see Nolo’s Essential Guide to Buying Your First Home, by Ilona Bray, Alayna Schroeder, and Marcia Stewart.