As a Nevada resident, you're probably familiar with games of chance. But as a home seller, the last thing you want is any risk when it comes to closing your sales transaction. Potential buyers of your home feel the same way. To ensure a lack of surprises in the process, Nevada law requires that before you actually make the transfer, you first give the potential buyer a lengthy disclosure statement.
This disclosure is intended to put the buyer on notice of any defects with the home. Defects might include something as small as a cracked window, or as significant as a large-scale termite infestation. The key is that it materially affects the value or use of the property in an adverse manner, such that the buyer will want to know about it.
If you're selling property in Nevada, what must you disclose, and how?
N.R.S. 113.130 broadly covers disclosure requirements for home sellers in Nevada. The statute provides that, at least ten days before residential property is conveyed to the buyer, the seller must complete a disclosure form covering all known defects that materially affect the value or use of the property in an adverse manner.
Moreover, if you discover any new defects after giving the disclosure form to the buyer but before the actual closing, you must tell the purchaser or his or her real estate agent about it, in writing, as soon as practicable (and before closing the sale).
After getting the disclosure statement, the buyer can rescind the purchase. Imagine, for example, that you give the buyer a disclosure statement stating that the heating system doesn't work. The buyer can back out of the transaction, or alternatively negotiate for a change in terms; perhaps a lowering of your purchase price in order to recover the cost of the broken heating system, or an agreement that you will make repairs before the closing. Or, the buyer can simply stick your disclosure statement in a drawer and move ahead with the sale, as some have been known to do.
Importantly, Nevada law specifically "does not require a seller to disclose a defect in residential property of which the seller is not aware." In other words, you have no obligation to hire an inspector to tell you whether your plumbing works or not. If you do not know about a particular problem, you have nothing that needs to be disclosed.
Unlike in some states, Nevada's legislation does not specifically state what areas or aspects of the property require some sort of disclosure. The Nevada Real Estate Division (a state agency that monitors the real estate industry) offers a widely used multi-page disclosure form containing all of the necessary information that you should disclose to a potential buyer.
The form asks you to answer a series of questions about various elements of your home by checking a box for "Yes," "No," or in some cases, "N/A" (not applicable). The disclosure asks about the condition of various categories of aspects of your property, including systems and appliances (such as plumbing, garbage disposal), property conditions (roof, renovations, flooding, and so on), and environmental hazards and conditions (such as radon, asbestos, lead, meth production, and fungi), and more.
Remember, the form is asking you whether you are "aware" of any conditions affecting the specified area. If you are not aware, simply check "No." If you are aware, you can check "Yes" and offer an explanation on the final page (or attach additional pages of explanation).
You'll notice that the form asks various miscellaneous questions, particularly about legal aspects of the home. Is the property the subject of any lawsuits? Are there any unpaid contractors who have done work on the property? Are there any homeowners' associations or Nevada common interest communities with governing authority over the area? These are questions that a buyer would like to have answers to.
And, lest you think that an unasked question on the form allows you to remain silent about a defect, there's a catchall question regarding "Any other conditions or aspects of the property which materially affect its value or use in an adverse manner."
Both you and the buyer will sign this form, acknowledging that it has been given and received. You must supply this form before the buyer makes a formal written offer for purchase. From your perspective, an important purpose of this exercise is to prevent buyers from coming back to you after the closing and complaining that you never told them that there was a huge hole in the roof. Assuming you are honest on the form, you would have mentioned this sort of defect.
Like anyone trying to sell a house in Nevada, you want the transaction to go as smoothly as possible. You might think to yourself: Why should you be honest in making these disclosures?
There are several important reasons for openness and honesty. First, Nevada law gives the buyer the ability to rescind any agreements to buy your property if you fail to fully comply.
Second, a buyer who sees that you aren't hiding problems is likely to be cooperative in negotiations leading up to the closing. Also, a buyer who learns of problems with the house after commissioning an inspection report might not negotiate as hard for price reductions or repairs if he or she realizes that your price already took the problems (which you disclosed) into account.
Finally, disclosing a defect in your home will insulate you from legal liability down the line. Imagine that you sell your condo in Las Vegas to a buyer without disclosing that the interior bathroom walls contain an outbreak of mold. If the buyer closes on your property without having discovered the mold, moves in, and then (inevitably) finds it, he or she might decide to sue you for breach of contract or fraud in order to cover the costs of remediation.
However, if you had disclosed the mold, the statute would prevent the buyer from recovering; the buyer would have accepted the property with the defect as revealed by the seller "without further recourse."
Simply put, honesty is the best policy for negotiating a fair deal that won't result in lawsuits or frustration down the line.