As a home seller in Indiana, you obviously want to make your house look its best for prospective buyers. On the other hand, if it's got flaws that you don't want to fix, the law requires you to disclose these, in writing. You'll most likely need to fill out a real estate sales disclosure; a sort of checklist that you must give the buyer before accepting the purchase offer. Indiana law determines who, exactly, has to fill out the standard form, and what must be told to the prospective buyer of the property, as discussed below.
Indiana's Residential Real Estate Disclosure Law, Ind. Code §32-21-5-10 requires sellers of residential property to complete a standard form. This "Residential Real Estate Sales Disclosure" form is available online at the State Forms Center (enter form number 46234 in the search box or search for it by name). Real estate agents and real estate attorneys also have the form readily available.
Using the standard Indiana form, sellers need to tell potential buyers about known defects in the house structure and major systems, as well as any defects in the included appliances, that the seller knows about. Failure to do so would allow the buyer to drop out of the sale before the closing, regardless of your signed purchase contract.
For example, the condition of any appliances that are included in the sale, such as the garbage disposal and the oven, are something the seller needs to tell the buyer about. The seller also needs to tell the buyer about the age and condition of the furnace and/or the heat pump. The condition of the water heater is also included.
Sellers should tell potential buyers about the building itself: Does the foundation have any significant cracks? Does the roof or the siding leak? Are the support beams sound? The systems used in daily living are also in question. Does the seller have any problems with leaky pipes or sewer pipes backing up and discharging into the house? If there is a septic system, what is its condition?
If your home is within a development governed by a homeowners' association (HOA), you must also disclose this fact. You will be expected to provide the prospective buyer with information about it, including the amount of the assessments and a copy of the HOA's governing documents.
There are a number of other questions on the Indiana disclosure form. Some ask about whether the house is zoned for residential use. Others ask whether the seller knows if the house, garage, fence or other structure encroach upon, or sit on a part of, someone else's property line. Other questions ask about moisture and water problems, as well as termite or rodent problems. The law also requires the seller to let the potential buyer know if the property is within one mile of an airport.
Indiana also requires the seller to tell the buyer if the house was once used as a methamphetamine lab. Homes that have been used to produce methamphetamine should be decontaminated through a special process before anyone lives there.
When there is a willing buyer and a willing seller for an Indiana property that includes a house (though not more than four residential units), the seller must comply with the disclosure requirements described above. There are exceptions to this requirement however, notably when property transfers in name only. (See Ind. Code § 32-21-5-1.)
Examples of this include a transfer from a husband alone to the marital community of husband and wife and a transfer from a husband and wife to their own living trust. Another transfer that does not require a disclosure form is when parents transfer title of real estate to children.
Property transfers can also happen when the seller is not a willing one. If there is a foreclosure sale, a condemnation, or a court-ordered transfer, such as in a divorce, a residential real estate disclosure in not required. Likewise, if the trustee of an estate or a bankruptcy is selling property, the trustee is not required to complete a disclosure form.
You might notice that the disclosure form leaves out any defects that the seller does not know about—an important distinction, because it means sellers don't have to actually test or investigate for problems.
Also, the form defines a "defect" as a condition that would have a significant adverse effect on the property's value. Minor issues like cracked paint or chipped tiles probably wouldn't meet this standard, and thus don't need to be disclosed. On the other hand, there's little harm in disclosing them; in fact, doing so might increase buyer confidence in your honesty, smoothing relations as you head toward the closing.
The focus of the Indiana disclosure form is on physical and legal aspects of the property. The law specifies that sellers need not disclose whether the property is "psychologically affected." (Ind. Code § 32-21-6-5.) More specifically, you need not state your knowledge or reasonable suspicion that:
But you can't lie in response to a direct question, either.
There's also a federal legal requirement to be aware of. You must disclose whether your house might contain lead paint, as described in Seller Responsibility to Disclose Lead-Based Paint Hazards.
You must update the buyer of any changes that would affect the disclosure form. Otherwise, you'll be expected at closing to certify that the house is in substantially the same condition as when you earlier provided the disclosures.
Mere errors made in good faith should not expose Indiana home sellers to lawsuits by disgruntled buyers. In fact, the statute specifies that home sellers can't be found liable for inaccuracies or omissions that weren't within their actual knowledge or were based on information provided by a public agency or licensed professional who provided a written or oral report, if the seller was not negligent in obtaining and transmitting that information.
But if you actually commit fraud when completing and providing the disclosure form, that's another matter. The Indiana Supreme Court found that homebuyers can bring a common-law fraud claim based on a real estate sales disclosure form if they can prove that:
(See Wysocki v. Johnson, 18 N.E.3d 600 (2014).)
If you have any questions about your Indiana real estate disclosure obligations, speak first with your real estate agent and perhaps also with a real estate attorney. When in doubt, it's often better to disclose more rather than less. You'll avoid angry buyers and the possibility of lawsuits this way.