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Seller Disclosure: It Protects Both Sides

by Courtney Ronan

Longtime homeowners will snicker knowingly, but newbies learn the hard way: Seller disclosure is of critical importance. It makes you wonder why most states didn't make seller disclosure a law until the late '90s.

Nevertheless, it's true. A buyer could move into an immaculate and seemingly idyllic home formerly owned by a family of Brady Bunch look-alikes, only to find out just weeks later that they'd purchased the Bride of Frankenstein disguised with strategically placed Band-Aids.

So what exactly is seller disclosure? A law that requires a seller to report in writing any and all items in need of repair ("to the best of your knowledge," the form states), all of which could affect the property's value negatively. States vary in their individual disclosure requirements, of course, but the general purpose of the disclosure statement remains constant. Some sellers tempted by the lure of a potentially quick sale may "forget" to disclose various problems with their homes, which may prove to be a costly error. Keeping mum about current problems -- or waving away problems you experienced in the distant past just because they haven't shown up lately -- violates the terms of disclosure.

It's really in your best interests to be thorough, regardless of what you might believe. Why? Well, aside from the fact that you're in violation of the law when you omit items of importance from your seller disclosure, it's quite likely that the buyer will encounter the problems about which you kept mum soon after he or she moves into the house. Particularly in today's real estate world - a vital and active one in which young people are purchasing their first homes much earlier in life than their parents did, and subsequently becoming experienced in the murky waters of homeownership at a younger age - sellers are marketing their homes to the most savvy audience in history. Attempting to pull the wool over a buyer's eyes has never been a good idea, but attempting to pull the wool over a buyer's eyes now is, in fact, dumber than it's ever been.

Being honest and forthright about any potential problems with your house informs the buyer what he or she is in for in terms of home repairs. In many cases, being honest about such problems isn't likely to change the buyer's mind, especially in a hot real estate market. What that disclosure will do, however, is probably prompt the buyer to request an allowance for the repairs in his/her contract. And again, you're protecting yourself from finding the buyer on your doorstep months down the road, with his hand out demanding that you cover the cost of the repair about which you kept silent.

The typical seller's disclosure form has become more comprehensive over the years since the establishment of state laws, and now covers the following areas:

Structure: including code violations issued anywhere on the property.

Land: Is the home sitting on flood-prone or lands, or on an area that has experienced landslides in the past? Is there a landfill near the property?

Environment: Is the home situated near an airport, making residents vulnerable to excessive noise from jet engines? Has a nearby waterway been targeted for hazardous waste-dumping? Has seepage into the drinking water from a sewage facility or hazardous waste facility been a problem?

Title to the property

Homeowners' association: Does the owner have to pay monthly dues? How much, and what do they cover?

Plumbing: including various components, their location and condition.

Appliances: including problems with electric or gas

Heat and air conditioning systems: including fireplaces and smoke detectors

Other: including damage to carpet, doors, windows or fence; presence of termites, etc.

As indicated above, seller disclosure covers not just the structural aspects of the house, but also the built-in appliances in the house, in many cases. If the built-in microwave in your kitchen hasn't worked in ages, you'd better disclose that information. Disclosure, of course, includes the inherent risk that the buyer will reject your asking price if he or she feels that the price isn't justified considering the number of necessary repairs it will take to get the house in good working order. But once again, if you need to sell your home quickly for whatever reason - or even if you're not in a hurry to sell - you'll still catch more flies with honey than you will with vinegar, as the old adage goes.

Being forthright and agreeable to allowance negotiations will help you seal the deal and do it relatively quickly. If you're a buyer, before you hire a professional inspector to come to the house and survey it, request that the seller complete a disclosure form so that that you, your Realtor and your inspector are aware of any and all problems prior to the inspection. Although a professional inspector is likely to pick up on a problem not disclosed, inspectors aren't perfect - and so problems are so hidden that they don't rear their ugly heads until after an inspection is completed, and so they remain undetected, and the seller unaccountable.

For sellers, completing a thorough disclosure statement may mean conceding to repair allowances, but those allowances are far easier than entangling yourself in squabbles after the transaction becomes final. Being forthright keeps the transaction positive on both sides, enabling both seller and buyer to get on with the business of moving and new homeownership.

Published: November 24, 2000

Use of this article without permission is a violation of federal copyright laws.

Courtney Ronan is a freelance writer who contributes a weekly column profiling various communities. She also writes a weekly review of real estate related web sites. Courtney's career in journalism has included recent stints as managing editor of Agent News and as associate editor of Texas Business magazine.

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