Selling your Texas home is no easy task. With a difficult housing market, sellers need to be aggressive in marketing their property and preparing it for potential buyers. Still, Texas law requires that you make certain disclosures to the buyer before the closing. The purpose of these is to reveal various problems with the property that could affect its value or desirability. If you’re selling your home in the Lone Star State, what must you disclose to prospective buyers, and when?
Seller disclosures in Texas are governed by Texas Property Code Section § 5.008. That statute provides: “A seller of residential real property comprising not more than one dwelling unit located in this state shall give to the purchaser of the property a written notice” of material defects in the property. The statute asks sellers to use the disclosure formdeveloped by the Texas Real Estate Commission (TREC), which is a state agency charged with generally overseeing the real estate market.
This form must be delivered to the buyer “on or before the effective date” of the property purchase contract. In other words, you cannot have the buyer sign the purchase contract a d become bound by it, and then a week later, hand the buyer a disclosure form saying that the electricity in the house does not work. Obviously, this sort of material defect would have influenced the buyer’s decision about the transaction, or at least the price the buyer was willing to pay for the home.
If you fail to deliver the disclosure form pre-contract, the buyer may terminate the contract for any reason within seven days after receiving the notice from you. Given all of the uncertainties and stresses involved in selling your home, you do not want to create this additional layer of uncertainty by allowing the buyer to escape the contract.
Both you and the buyer will sign the disclosure form, as proof that it has been given and received. (Obviously, you should retain a copy for your records.)
Before considering the specifics of what the Texas disclosure form covers, it is useful to remember what the form does notcover. Importantly, the form only needs to be “completed to the best of seller's belief and knowledge as of the date the notice is completed and signed….”
This means that you are not required to conduct any independent inspections of your property, or hire an engineer or professional inspector to verify the condition of any aspect of your home. If the information required by the form is unknown to you, the statute simply directs you to indicate that fact on the form.
The statute also specifically excludes certain information from required disclosure: “A seller or seller’s agent shall have no duty to make a disclosure or release information related to whether a death by natural causes, suicide, or accident unrelated to the condition of the property occurred on the property or whether a previous occupant had, may have had, has, or may have AIDS, HIV related illnesses, or HIV infection.” The purpose of this is to prevent buyers from making decisions based upon irrelevant information about prior owners of the property.
Now let's turn to what is on the form. The Texas statute is very specific about the information that home sellers must disclose to prospective home buyers. TREC’s three-page form is divided into several sections.
On the first page, you are asked to check whether your property has specific elements: for example, central air conditioning, a swimming pool, or a satellite dish. It then asks you to explain in detail whether you are aware of any “known defects” with the elements you have identified.
You are also asked to disclose whether you are aware of any prior problems or repairs to particular aspects of the property. Is there a history of termite infestations? Previous structural damage? Evidence of radon gas? These are the sorts of potential issues about which a buyer would want to know before signing a purchase contract.
Remember, though, that you need only disclose information that you personally know. Thus, if you have no reason to believe that the home contains asbestos, you have no obligation to hire an inspector to find out before submitting the form. (The buyer has every right to do this, however, but at his or her own expense.)
You simply want to sell your Texas house. All of these disclosures may seem to make life more complicated, since they force you to confront some potentially value-diminishing aspects of your property. Is there any real, practical reason to be honest in making these disclosures?
Imagine that you sell your suburban home outside of Dallas, and neglect to mention on your disclosure form that there is a massive termite infestation eating away at the base of the home. You had treated the termites previously, and managed to keep them at bay just long enough to unload the home. The buyer closes on the home. Inevitably, the buyer discovers the issue and realizes that the cost of exterminating the critters and remediating the foundation of the house will be substantial. The buyer might sue you for breach of contract or fraud.
Consider another scenario. You do not disclose the termite infestation history before the purchase contract is signed. Before closing, the buyer hires his or her own inspector, who immediately finds the termites. The buyer realizes that you failed to disclose the issue, and immediately distrusts you, then tries to back out of the contract.
In either case, the buyer’s eventual “surprise” will only make your life more difficult. As a Texas home seller, honesty on your disclosure form is generally the best policy.