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'll give the buyer before the real estate sale is completed. Indiana law determines who, exactly, has to fill out the form, and what must be told to the prospective buyer of the property.
Before about 25 years ago, Indiana law said “let the buyer beware,” and made buyers responsible for discovering any problems with property before the purchase. But as in many U.S. states, the Indiana legislature has become more protective of residential homeowners. And, Indiana courts have taken this a step further by holding sellers responsible for instances where they've hidden known defects or problems in the property from potential buyers.
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 this form, sellers need to tell potential buyers about material defects in the house structure and major systems, as well as any defects in the included appliances, that the seller knows about. Notice what this leaves out, namely 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.
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?
There are a number of other questions on the 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 property that includes a house, the seller must comply with the disclosure requirements described above. There are exceptions to this requirement however, notably when property transfers in name only.
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.
The focus of the Indiana disclosure form is on physical and legal aspects of the property. The law specifies, however, 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:
If you have any questions about your 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.