After searching for and finally finding your dream house in Michigan, you can breathe a sigh of relief. But watch out for getting overwhelmed by the amount of paperwork that you must review and, most importantly, understand as part of the transaction. While your real estate agent or attorney may help you with this, your home purchase is ultimately your responsibility.
One of the most important documents you must review and understand is the Michigan Seller’s Disclosure Statement. It contains information from the seller about the property’s condition, which will help you make an informed decision about whether to go through with the purchase and what repairs or issues to expect.
What Michigan Sellers Must Disclose on the Disclosure Statement
The seller must disclose certain known conditions about the property in the disclosure statement, and give the form to you prior to signing the purchase agreement. As a practical matter, you will likely receive the form early in the process, perhaps at an open house. Review the form for a complete list of required disclosures, which include such things as:
- the condition of appliances such as the oven, dishwasher, refrigerator, ceiling fans, washer, and dryer
- the condition of systems such as the plumbing system, HVAC system, electrical system, septic system, and water system
- the condition of structural components such as the roof, basement, and shared walls, and
- the existence of flooding issues, environmental problems, encroachment issues, outstanding utility or municipal fees, and any pending litigation concerning the property.
What’s Left Out of Michigan’s Required Disclosures
Significantly, the seller is required to disclose only information about the property that he or she actually and personally knows. The seller is not expected to be an expert in construction, architecture, engineering, or any other specialty and does not have to perform inspections on the property to complete the disclosure statement. In fact, if the seller does not know the condition of a particular property aspect, he or she may indicate “unknown” on the statement.
So, if the seller is aware, for example, that the dishwasher leaks, he or she must indicate such on the statement. If there is a leak in the attic that the seller does not know about, however, the seller is not responsible for disclosing it (even if you think the seller “should have known”).
Unlike some states, Michigan does not specifically require a seller to disclose whether a property is “stigmatized” (by death, murder, infectious disease, and so forth). If that information is important to you, consider performing your own independent investigation of the issue, starting with an online search of the property address.
There are limited circumstances when a seller is not required to provide a disclosure statement at all. Those exceptions include transfers required by court orders, between cotenants, between certain family members, from a divorce or separation, and of certain new property that has not been inhabited. For more information and a complete list of exceptions, see “Home Sellers in Michigan: Your Disclosure Obligations.”
Using the Information in the Disclosure Statement
Because you will likely receive the disclosure statement prior to signing a purchase agreement, take this opportunity to review it carefully. Use the information contained within to develop the terms of your offer to purchase. For example, if the seller discloses that the dishwasher does not work properly, you may wish to lower your offering price on the house in the amount of a new dishwasher. Or, you may wish to add a provision to the purchase agreement stating that the seller must provide a new dishwasher prior to the closing.
You may also use this information to schedule additional inspections on your property. If the seller indicates that there is a termite issue, for example, in addition to the home inspection, you may wish to arrange for a special termite inspection prior to closing.
In some cases, the disclosure statement may reveal issues that cause you to lose interest in the sale. Although disappointing at the time, you will likely be in a better position walking away from the transaction earlier rather than later.
If the Seller Does Not Provide the Disclosure Statement
As stated above, the seller is required to give you the disclosure statement prior to signing a purchase agreement. If the seller does not do so, you may terminate the purchase agreement and not go forward with the sale. In practice, however, if both parties want the purchase to occur, they will work together in satisfying the disclosure requirement.
Minimizing the Risk of Unknown Defects
There are things that you can do to protect yourself against unknown property defects. First, as stated above, make sure to review and understand the disclosure statement. Follow up with the seller on items that are disclosed or marked as “unknown” on the statement. You may wish to follow up with a special inspection concerning both the “unknowns” and the issues or defects that the seller acknowledged.
Inspect the property on your own. Are there water marks on the ceilings? Are there cracks in the wall? Does the basement smell musty or moldy? Is there a part of the house that looks like it was an addition? Don’t be afraid to conduct a thorough inspection and follow up with the seller on any issues that you identify.
Always make sure your purchase contract contains a contingency allowing you to get a professional home inspection and to call off the deal if you’re dissatisfied with what the inspector discovers. The home inspector will examine the property and create a written report advising you of its problems before the sale closes. See “Getting a Home Inspection” for more tips on this part of the process; and “How to Remove an Inspection Contingency When You Buy a House” for a discussion of how to negotiate over needed repairs.
Remember that you have a right to full information about the property that you are about to purchase. While you may have a legal claim against the seller if he or she misrepresented information, in most cases, if there is an issue, you will be responsible for fixing the problem. So, ask lots of questions and inspect the property fully for your own benefit and protection.