When selling your home in the United States, you are likely obligated to disclose problems that could affect the property's value or desirability. In all states, it is illegal to actively, fraudulently conceal major physical defects in your property. Beyond this, however, most states' laws require sellers to take a proactive role in making problems known to buyers, by making written disclosures about the condition of the property, usually using a standard form. This article will take a closer look at the typical disclosure requirements and how to best comply with them.
Even in the states whose laws require seller disclosures, you are likely to be responsible for disclosing only information within your personal knowledge. In other words, you don't usually need to hire inspectors to turn up problems you never had an inkling existed. But many of the issues are things that sellers would know just by having lived there, for example:
In addition, some states' laws identify certain problems that are actually the seller's responsibility to search for, whether you see signs of the problem or not. In these cases, or where you could have seen a particular defect but turned a blind eye, you could ultimately end up in court, compensating the buyer for the costs of your failure to speak up sooner.
California is among the strictest states in the nation regarding property sellers' disclosures. Sellers must fill out and give the buyers a disclosure form listing a broad range of defects, such as a leaky roof, deaths that occurred within three years on the property, neighborhood nuisances such as a dog that barks every night, and more.
In addition, California sellers must fill out a separate form that discloses potential hazards from floods, earthquakes, fires, environmental hazards, and other problems. (This is called a Natural Hazard Disclosure Statement.)
California sellers must also alert buyers to the availability of a database maintained by law enforcement authorities on the location of registered sex offenders.
While it's not usually required, some sellers hire a property inspector to look things over before they put the house on the market. (See Getting a Home Inspection.) The results will help you determine what items or house features need repair or replacement and will assist you with preparing any required disclosures. An inspection report is also useful in pricing your house and negotiating with prospective buyers.
Some sellers balk, knowing that once they get the report back, they'll have to disclose what was discovered to potential buyers; in fact, they'll likely need to give them a copy of the actual report. But keep in mind that the buyer was likely to find out this information one way or another regardless. In fact, except in super-hot markets, buyers routinely put an "inspection contingency" into their purchase offer, allowing them to hire an inspector separately, and cancel the sale if they're not satisfied with the results (which as a practical matter usually just means negotiating over repairs, price reductions, or credits to do the work).
Some buyers, however, if they feel you've hired a trusted inspector, might waive the inspection entirely.
There are limits on your obligation as a home seller. Most state laws require only "material" defects, which would affect the value of the property, to be disclosed. That leaves out average wear and tear, such as a scratched tile or loose doorknob. It leaves out minor, non-stigmatizing crimes, such as a past home burglary. It leaves out natural deaths in the house. And latent defects, which would be obvious to anyone looking at the property (such as missing front steps) might also not need to be disclosed.
Then again, if you have even the faintest question about whether or not to disclose something to potential buyers, avoid the potential for liability and tell all. Full disclosure of any property defects will help increase the buyer's confidence that you're dealing fairly. And it will protect you from legal problems later, such as buyers who want out of the deal or who claim damages suffered because you carelessly or intentionally withheld information about your property.
Also remember, just because you disclose a problem doesn't mean you must repair or correct it. The property buyers have an interest in getting the deal closed as well, and often overlook minor issues. Or, the disclosed item can become a point of negotiation between you and your buyer.
If you are selling a house built before 1978, you must comply with a federal law called the Residential Lead-Based Paint Hazard Reduction Act of 1992 (U.S. Code § 4852d), also known as Title X. You must:
If you fail to comply with Title X requirements, the buyer can sue you for triple the amount of damages actually suffered. For more information on lead hazards, prevention, and disclosures, contact the National Lead Information Center by phone at 800-424-LEAD, or check its website at www.epa.gov/lead.
Check with your real estate agent or attorney or your state department of real estate for disclosures required in your state. Nolo has also summarized the laws in select states. Also check with your city planning department for information on local ordinances and disclosures that affect your sale.
Finally, be aware that real estate agents are increasingly requiring that sellers complete disclosure forms, regardless of whether or not it's legally required in their state.
Most states' laws mandate that disclosures be on special forms the seller must sign and date. Even in states whose laws don't specify this, however, it's common for the state Realtors' association to offer a standard form for this purpose.
Be sure the home buyer acknowledges receipt of the disclosures by signing and dating the forms as well. Or if your state doesn't require a specific disclosure form, be sure the buyer otherwise affirms receipt of your disclosures in writing.