Helping Your Clients Understand Seller Disclosures

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While disclosure laws vary state to state, in many parts of the country it is customary for sellers to give prospective buyers disclosure reports. Here’s a guide to help your sellers fully understand what they should include in their real estate disclosures to streamline the sales process and avoid potential liability.

What Is a Real Estate Disclosure?

Real estate disclosure statements give buyers an opportunity to learn as much as possible about a home and the seller’s experience in it. The typical seller disclosure could include everything from knowledge of stuck windows, to work done without permits, to major development projects in the surrounding area. In addition to informing would-be buyers, disclosure documents help protect sellers from any potential future legal action. In most cases, as long as the seller discloses an issue with a property prior to closing, the buyer will not be able to hold him or her liable for that issue.

How it Works

This all depends on the state or local community. Disclosure laws can vary wildly, depending on the state, county or city. In California for instance, sellers are required to complete all sorts of documents, including Advisories about Market Conditions, Local and State Transfer Disclosure Statements and Natural Hazards Disclosure Statements, among others.

Notwithstanding any local requirements, a standard disclosure will include documents with a series of yes/no questions about the property, which the seller will answer. The seller will also usually be required to provide documented communication about any significant defects which could adversely affect the property’s value. This could be communications between past owners, neighbors or a real estate agent. It is important for sellers to answer as honestly as possible, since many states hold them accountable for undisclosed defects for up to a decade after a sale.

What Sellers Should Expect

A typical real estate disclosure will include information about flaws and previous repairs, along with details about past renovations, improvements or upgrades. Prospective buyers will often cross-check the information in a disclosure with local building permit and zoning reports. Since any work completed without permits may not have been performed up to code, it could be a potential fire or health hazard. Be sure to make your clients aware of this before they complete their disclosure statement.

Disclosures should also include information about potential neighborhood nuisances, termite problems, former pets, defects in major appliances, property line disputes and anything else that might make a home seem more or less desirable. The typical disclosure statement will also tell buyers if there are liens on the home or if the seller is involved in bankruptcy proceedings.

When Should Sellers Provide Disclosures?

In certain areas, sellers deliver their disclosures before a prospective buyer makes an offer. In most places, however, sellers provide disclosures once they agree to accept a buyer’s offer. In addition to loan contingencies and inspections, the buyer will have a chance to review the disclosure statement. If it reveals troublesome information, the buyer is usually able to retract their offer.

Since buyers are required to sign-off on disclosures, it’s important that they review them carefully and ask questions before they give their approval. From a seller’s point of view, it’s important to be up front about any problems, since this can protect them from liability issues, while saving everyone the time, hassle and expense of having a deal fall through once it’s in escrow.


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