Texas law requires that you, as a home seller, make certain disclosures to the buyer before the closing. The purpose 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. It says that sellers of single-unit residential real property must give purchasers a written notice containing their knowledge of the condition of the property, and sets forth language that should be on that form, focusing on material defects.
That language has been incorporated into a standard form created by the Texas Real Estate Commission (TREC), a state agency charged with 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 become bound by the purchase contract and then, say, 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 could influence a buyer’s decision about the transaction, or at least the offer price.
If you fail to deliver the disclosure form pre-contract, the buyer may terminate the deal within seven days of receiving it from you. Given all of the stresses involved in selling your home, you do not want to create this additional layer of uncertainty.
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 not cover. Importantly, it only needs to be filled out "to the best of seller's belief and knowledge" as of the signing date.
This means that you are not required to conduct any independent inspections of your property, or hire an engineer or professional inspector to verify its condition or turn up problems you yourself couldn't see. On the form, one of your options for answering questions is to say "unknown."
The statute also specifically excludes certain information from required disclosure. You have no duty to disclose information related to whether the property has been the site of "a death by natural causes, suicide, or accident unrelated to the condition of the property," nor whether a previous occupant had or might have had AIDS or HIV or related illnesses. The purpose of this is to protect privacy and 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. TREC’s form starts by asking you 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. Several questions contain prompts to enter "other" defects, to make sure you don't overlook anything.
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 or other hazardous or toxic substances? 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 don't need to hire an inspector to find out before submitting the form. (The prospective buyer has every right to do this, however, but at personal expense.)
All of these disclosures might 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 open and 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. 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 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 an inspector, who immediately finds the termites. The buyer realizes that you failed to disclose the issue, loses trust, then backs 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 tends to be the best policy.