Buying a North Carolina Home: What Does the Seller's Disclosure Form Tell Me?

As exciting as it is to buy a new home, there's always a specter of fear: What if, after moving in, the house turns out to be not as perfect as it first seemed? Perhaps the upstairs water pressure will turn out to be poor, the stairs will start giving way, or the refrigerator and stove will be unreliable? You would not be pleased with this situation—particularly if you realized that the seller actually  knew  about these defects and purposely failed to tell you about them.

Fortunately, the state of North Carolina requires that sellers of residential real estate make certain disclosures to potential buyers. The law in the Tar Heel State mandates that sellers identify any known defects in their property before a purchase contract is signed. The purpose of this is to ensure that buyers like you are not surprised with a big problem after moving into the home. If you’re preparing to buy a North Carolina home, what disclosures are you entitled to receive from the seller?

Real Estate Disclosure Law in North Carolina

The Residential Property Disclosure Act, codified as  North Carolina G.S. 47E, requires the seller of residential real estate to complete a form disclosing conditions and defects affecting the property. This form is known as the Residential Property and Owners’ Association Disclosure Statement. The law applies to any transfer of residential property, whether or not a licensed real estate agent or broker is involved. This also applies to leases with an option to purchase (in which, for example, you lease a home for one year and at the end of the year, have the right of first refusal to buy it).

Specifically, the statute requires that the seller disclose, in writing, to the buyer, agent, and subagent, "all material defects of that property that are known at the time the property is offered for sale.” The law also requires sellers to give the buyer with any information on radon from tests or inspections in their possession, and notify you of any known radon hazards.

The idea is to compel sellers to detail any facts of which they are aware that negatively affect the property. This could cover a wide variety of defects in the home, ranging from the condition of the roof to that of the gas tank. The legislature’s goal, of course, is to prevent you from encountering any nasty surprises after moving into the home. The North Carolina Real Estate Commission provides the approved form—a four-page document—which contains all the necessary information. It is the seller’s responsibility to fill it out and provide written copies to you.

The timing of the disclosure is important. According to  North Carolina G.S. 47E-5, the seller must give you the disclosure “no later than the time [you make] an offer to purchase, exchange, or option the property.” If the seller fails to deliver the statement, you can rescind your offer of purchase by written notice within three days of receiving the disclosure. In other words, you have a few days to back out of the deal if you learn of something scary.

You’ll notice that North Carolina’s disclosure statement is fairly comprehensive; it asks the seller 37 questions about various aspects of the home. Some of the questions are simply informational. For example: What is the address? When was the home constructed?

Some of the questions are more legal in nature: Are there any liens against the property? Have any lawsuits been brought involving the property? Is there a homeowners’ association in the neighborhood that restricts any of a buyer’s rights?

The vast majority of the questions touch on specific elements of the home: Is the seller aware of any leaks in the basement, for example, or any problem with the water supply source?

Note that  North Carolina G.S. 47E-4.1  entitles you to a further disclosure from the seller relating to mineral, oil, and gas rights, which is somewhat unique to North Carolina. The statute itself,  here, has a series of six questions that the seller must answer on a separate sheet of paper—all of which can be included with the primary disclosure form. (Not surprisingly, most real estate transactions do not involve mineral or gas rights, so these questions may be irrelevant.)

How Much Can You Reply Upon the Seller’s Disclosures?

You may wonder whether or not you can truly rely on the seller’s disclosure statement in North Carolina. The answer is that you can rely on it to a certain degree. But you should always treat it with a healthy skepticism. As the form reminds the seller, he or she is “only obligated to disclose information about which [he or she has] actual knowledge.”

Actual knowledge means that the seller actually possesses information about that particular defect or condition. Of course, many (if not most) homeowners do not actually know of all of the latent conditions that may lurk in their homes, such as asbestos, a shifting foundation, or an HVAC system that's on its last legs.

The seller is under no obligation to hire a home inspector to verify or shed light on any answer in the disclosure statement. To the contrary, the form specifically warns that “Purchasers are strongly encouraged to obtain their own inspections from a licensed home inspector or other professional.”

Your best safety net is to hire your own  professional inspector  to review the home from basement to roof. Your real estate attorney or agent can probably suggest someone with a good reputation. This is common practice when purchasing a home, whether the home is (seemingly) new or old. The seller’s disclosure statement might be a useful starting point for your inspector; for example, if the seller discloses that there are occasional issues with the plumbing. But the statement should not be the endpoint.

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