Imagine that you want to buy a house, condominium, or parcel of land in Tennessee. You should want to ensure that the property is in good condition. Consider how you'd feel if you bought a condo in Nashville only to discover that the windows had been installed wrong and were prone to leakage, or a home in Memphis where the water doesn’t run on the second floor, or a plot of land in Knoxville over a huge sinkhole.
Surely, the seller would have known about these sorts of major issues. Fortunately, Tennessee law requires that, well before actually making the transfer to you, the seller must give you a disclosure statement unless you waive this right. This disclosure is intended to put the buyer on notice of any known material defects with the property. If you’re buying property in Tennessee, what sorts of disclosures are you entitled to?
Tenn. Code Ann. § 66-5-201 et seq. broadly covers disclosure requirements for home sellers in Tennessee. Home sellers must provide buyers with a disclosure statement before a purchase contract is signed. A disclosure statement is a short document signed by the seller that lists “any material defects known to the owner” about the property.
As the buyer, you may waive the right to receive a full disclosure statement under this law. This might be useful if, for example, your intention is to demolish the entire home anyway, or if time is of the essence in the transaction. If you do choose to waive the disclosure statement, the seller will give you a “disclaimer statement.” This document essentially says that the seller makes “no representations or warranties as to the condition of the real property” and you will be receiving the property “as is,” that is, with all defects that may exist. Like the disclosure statement, the disclaimer must be given to you before a purchase contract is signed.
You will want to ensure that any disclosure statement given to you by the Tennessee home seller is complete. The disclosure statement must identify any material defects in the property about which the seller has actual knowledge. Tennessee’s legislature provides a model form within Tenn. Code Ann. § 66-5-202. The Tennessee Realtors Association has also created a similar seven-page form, which is available online. (If for some reason the seller gives you a different version of this form, double check that it contains the same, legally required information.)
You will see that the seller’s disclosure form contains a few dozen questions, answered with “Yes,” “No,” or “Unknown.” These concern various aspects of the home, ranging from the validity of the seller's legal title to the condition of the plumbing system.
Tenn. Code Ann. § 66-5-202 also requires certain specific disclosures to be contained in the purchase contract itself. The seller must disclose “the presence of any known exterior [water] well”; the results of any known “percolation test or soil absorption rate performed on the property”; the existence of a “sinkhole” on the property; and any known “groundwater erosion causing a surface subsidence of soil, sediment, or rock.” These sorts of environmental hazards would likely be a serious concern for you.
Tenn. Code Ann. § 66-5-202 requires that the seller’s statement include a notice to prospective purchasers buyers that they may wish to obtain professional advice or inspections of the property. This is important. The Tennessee legislature is not-so-subtly advising you that it would be wise to hire your own independent inspector to perform an evaluation of the property.
It is true that Tennessee law requires sellers to make disclosures in good faith, or face a variety of penalties. So, you might think: Why spend money performing your own evaluation of the home?
First, not all sellers are completely honest or forthcoming. Sellers have a natural incentive to make their home seem perfect in order to command a higher sales price.
Second, even assuming sellers comply with the letter of the law, Tennessee law is clear that sellers must disclose only defects about which they have actual knowledge. According to Tenn. Code Ann. § 66-5-201, a seller “shall not be required to undertake or provide any independent investigation or inspection of the property in order to make the disclosures.” In other words, a Tennessee home seller is not required to hire a mechanical engineer to make sure that the HVAC system works before submitting the disclosure statement to the buyer. The seller merely needs to answer the questions on the disclosure form to the best of his or her own personal knowledge.
For these reasons, only an independent inspector’s report can give you the confidence you need to proceed with the sale.