Disclosures are a key part of any real estate transaction. They protect the buyer, the seller, and the real estate agent or broker from future liabilities regarding defects in a property.
Real estate disclosure statements are designed to provide a buyer with an opportunity to gather as much information as possible about a property and the seller’s experience with it. This gives the buyer the chance to make a fully-informed decision based on the facts about the property before closing on a purchase. Disclosures also protect sellers from future legal action by ensuring anything that can negatively affect the value of the home is disclosed ahead of time so the buyer can’t come back on them for future defects.
What are the Rules for Real Estate Disclosures?
In most states, sellers cannot legally conceal major physical defects to a property or other important information that could affect a buyer’s decision to enter into a sale. And many states require sellers to make honest, written disclosures about the condition of the property when it is put on the market.
The key is that these need to be hazards or defects that are already known to the seller. They are not required to go searching out issues for disclosure, but only to report what they know.
Depending on which state the transaction is taking place, the defects, hazards, and issues required in disclosure will vary. But some of the most common are:
- Pest issues, such as termite infestations.
- Boundary issues.
- Structural defects, such as roof and foundation issues.
- Lead paint.
- Sewer, plumbing, and drainage issues.
- Natural hazard risks, such as flood and seismic zones.
It is the responsibility of the real estate agent to ensure that all of the disclosures from both the agent and the seller are in writing either before the buyer makes an offer or once the seller accepts an offer, depending on where the sale is taking place.
The more a buyer knows about a property in advance of commitment, the better. The rule of thumb is to err on the side of giving too much information than not enough. If a seller or agent fails to disclose legally required information, the buyer can make a legal claim against them.
Both sellers and real estate agents should ensure they understand their disclosure obligations before listing a property on the market.