For most Iowans, a home is their single most expensive asset. If you are selling your home, you know that the process can be long and difficult. Legislators in Des Moines have made your life a little bit more challenging through an additional requirement: mandatory disclosure of defects. In Iowa, like in many states, sellers are required to reveal various problems that could affect the property’s value or condition. For example, a seller cannot fraudulently conceal major physical defects, such as a leaking basement or termite infestation. If you’re selling your Iowa home, what must you disclose, and when?
The legal basis for this disclosure requirement is Iowa Code § 558A, which broadly covers disclosure statements. The law states that you, as the seller, “shall deliver a written disclosure statement to a person interested in being transferred the real property… prior to… a written offer for the transfer of the real property….”
The law further requires that the disclosure be sent to the potential buyer either by personal delivery or by certified or registered mail. If you fail to give the potential buyer the disclosure before a formal offer is made, the buyer “may withdraw the offer or revoke the acceptance without liability” within three days following personal delivery of the statement or five days following delivery by mail. As the seller, you also have the obligation to file the disclosure with the county recorder or clerk--a requirement fairly unique to Iowa.
Note that the disclosures, obviously, cannot be oral. You are required under this statute to deliver a written disclosure form and file it.
Iowa’s law also requires that all information in your disclosure be made in good faith: “All information required by this section… shall be disclosed in good faith… [and the] disclosure statement shall be amended, if information disclosed in the statement is or becomes inaccurate or misleading….” This requirement signifies the legislature's intent to prevent sellers from engaging in unscrupulous conduct or misstatements. This means that you should not, for example, use sneaky wording to cover up the existence of a defect. These sorts of tactics could expose you to liability if and when the buyer later discovers them.
The Iowa Department of Licensing and Regulation has created a standard disclosure form—six pages long—that you, as a home seller, must fill out. You’ll see that you must certify that the information presented is accurate as of the date of the form, and that the buyer must also sign the form (as proof that he or she actually received it).
In 19 questions, the disclosure form asks you to state “all known conditions materially affecting the property.” The form takes you through different areas of the home, such as the roof, basement, sewer system, and so on, and asks you to state “Yes” or “No” whether you are aware of any problems. You are also asked about the presence of certain environmental hazards, like radon and asbestos.
The form also encourages you to attach additional information or pages, should you need to explain any responses in more detail. This can be useful if you want to alert potential buyers to a known defect (and thus comply with the statute), but then note that the defect is relatively minor (and thus reassure the buyer).
Any seller has a natural incentive to say only good things about the property he or she is selling. But be careful; lying or concealing issues on your disclosure form can lead to trouble down the road.
Remember, the Iowa statute requires you to disclose “material” problems concerning your home. It is highly likely that the buyer will, eventually, discover a “material” problem. The Iowa statute specifically provides for liability against sellers who make misrepresentations on their disclosure forms: “A person who violates this chapter shall be liable to a transferee for the amount of actual damages suffered by the transferee….”
For example, if there is a hole in your roof, a termite infestation, or a busted heating system, it will not take long for the buyer to find it once he or she moves into the home. Once the defect is discovered, it is very possible that the buyer might pursue legal action against you to recover the cost of repair, given the language of the statute. The “good faith” requirement in the Iowa disclosure statute makes this especially likely.
Having said this, you do not need to perform an exhaustive inspection of your home before submitting your disclosure. The disclosure form requires that you “provide information in good faith and make a reasonable effort to ascertain the required information.” Reasonable effort does not mean any extraordinary or costly efforts. In Iowa, you are required to disclose only problems that you knew about when making the disclosure. You are not required to hire inspectors to check every last inch of the home for defects. Indeed, if you only lived in the home for a short amount of time, it is perfectly plausible that you simply would not know every issue with the house.