What to Disclose When Selling a Home
If you are like most home sellers, you know of one or more present issues with your home that could impact the sale price. Every seller is forced to balance the desire to make money off of the home with the need to disclose known issues.
Sometimes there is a balancing act that can be surprisingly difficult. Over the years many owners have asked me “what do I have to disclose when selling my house?”
You do not have to be dishonest to worry that listing every little problem may make the sale harder. Like every home seller, you will need to determine what is important to disclose – and legally mandated – and what you can avoid talking about unless you have to.
What things you have to disclose when selling a house depends on the state you live in. Some states are more stringent than others when it comes to disclosing issues.
For example, in Massachusetts, home sellers are not required to disclose known problems with a home unless asked a direct question from a buyer. This is what’s referred to as “Caveat Emptor” or “let the buyer beware.”
The term let the buyer beware means the buyer assumes the risk of purchase. It might fail to meet expectations or have defects.
Disclosure laws in Massachusetts differ significantly, however, for a real estate agent. Realtors MUST disclose any known problems with a home. Finding out the rules on disclosure in your state will be critical to your sale. Knowing disclosure laws is something you should be aware of right away from your real estate agent.
Some sellers mistakenly believe that selling a home as-is relieves them from being honest with prospective buyers. This is not the case and could easily cause an unnecessary lawsuit.
I’m also of the belief that just because something is legal doesn’t mean it’s ethical. I would want to know if I was purchasing a home that had a basement that flooded every spring or had mold in the attic at one time. If a buyer doesn’t ask the question, it is perfectly legal as a seller in Massachusetts not to disclose these facts. Concealment of problems when selling a home, however, is not wise.
Folks this is why it is paramount to understand disclosure laws in your state whether you are a buyer or a seller. Lawsuits are brought every week because of non-disclosure of problems in homes. What to tell a buyer when selling a home is not to be taken lightly.
It’s the law.
Wherever your home is located, the chances are that laws exist about what must be disclosed when selling a home. Typically these laws require that any major defect is disclosed to the buyer before you complete your transaction.
Laws can vary from state to state, so you need to ask your Realtor or find out for yourself what the laws are in your particular area.
You may have to write it down.
Most of the time a verbal disclosure is enough to meet your legal requirements, but in some states – like California – you have to draft a disclosure form that lists a wide variety of defects.
Your Realtor should know whether or not you need to give a disclosure form to buyers before you finalize your sale. Here in Massachusetts a seller’s statement of property condition is not mandatory but has become a standard practice in real estate transactions.
A pre-sale inspection could simplify things in the long run.
Many sellers are choosing to get a pre-sale home inspection before they put their home on the market. While it may seem like an unnecessary step – since the buyers will be doing their own inspection – getting your own inspection as a seller can make things easier on your end. The inspector may turn up some issues you were unaware of.
This can be frustrating, but it also ensures that you can make repairs as necessary and that you can disclose all significant problems. As long as you communicate, you should be protected from lawsuits should the buyer discover a problem after closing.
Getting ready for the buyers home inspection is just plain smart to do anyway. With the home inspection being one of the biggest hurdles to clear in a real estate transaction it is just prudent to do so. More home sales fall apart due to a home inspection than any other reason.
Disclosure can relieve stress and simplify the sale.
If you are working with a reputable Realtor, he or she will emphasize the importance of disclosure. Being honest about what you are selling not only protects you legally, it encourages trust on the part of buyers. No home is without problems, so a buyer’s agent will be naturally suspicious if you try to pass your house off as trouble-free. Clearing the air about any big problems lets the buyer make an informed decision. If the buyer wants the house with the existing issues, you can feel confident he or she wants the home.
Focus on significant issues.
Buyers need to know about major problems, not every single imperfection in your home. You may have noticed that a tile in the bathroom was crooked, or that one cabinet is not quite square. Don’t confuse buyers with these little things. If however, you think the item is something the customer will ask to be fixed after the home inspection takes place then list it. It is much harder for a buyer to ask for repairs or a seller concession after a home inspection when it’s disclosed up-front.
Things To Disclose
The ground rules for disclosure are that you notify the buyer of any significant physical issues with the home. Anything that will be expensive to replace, make the home dangerous or unlivable should indeed be disclosed. Disclosure laws also apply to things in proximity to the property as well.
Keep reading and you will find a comprehensive list of what you may or may not have to disclose when selling a house:
Some states require disclosure of haunted homes or paranormal activity and others do not. Finding out whether disclosure of mysterious things happening in and around your home is something that needs to be disclosed is paramount. Some buyers don’t believe in ghosts or other types of demonic entities. On the other hand, there are buyers who would not come near a haunted home if their life depended on it.
Murder & Deaths on the property
Some areas require you to disclose any deaths that occurred on the property in a certain number of years. You may not have to disclose this information depending on where your home is located, so make sure to check the laws. Buying a home where a death took place recently is something that makes quite a few buyers uncomfortable.
Roof leaks, or it needs to be replaced.
Replacing a roof is expensive, and a bad roof can quickly make a home uninhabitable. Most buyers will want to know the age of the roof so that you will get asked questions about the roof anyway. Most of the time it is not hard to tell if a roof needs replacement, especially if a home inspector is looking over the home.
Foundation cracks, sinking, and other issues
It takes a lot of effort and expense to repair a foundation with major structural problems. If the foundation is in bad enough shape, it can make the home unsafe to live in. Everything else is resting on top of the foundation, so it is understandable that buyers want a home with a foundation in good repair.
Federal law requires that anyone who is selling a home that was built before 1978 disclose all information about lead-based paint in the home. This law is referred to as the Residential Lead-Based Paint Hazard Reduction Act of 1992 ( U.S. Code § 4852d) which is also known as Title X. There are multiple requirements under the law, including
- Disclosing all known lead-based paint and hazards in the home.
- Real Estate agents must give buyers a pamphlet prepared by the U.S. Environmental Protection Agency (EPA) called Protect Your Family from Lead in Your Home.
- You must include certain warning language about lead paint in the contract as well as signed statements from all parties verifying that all requirements were completed. In Massachusetts, this is referred to as a property transfer notification certification. This is executed by the seller, buyer and respective real estate agents.
- The lead paint acknowledgment must accompany the offer to purchase real estate.
- You must give buyers a ten-day opportunity to test the house for lead.
- You must keep signed acknowledgments for a minimum of three years as proof of compliance.
Lead paint is a mandatory disclosure in all states. If you fail to comply with lead paint disclosure requirements, the buyer can sue you for triple the amount of damages suffered. This is part of what’s known as Chapter 93A. Accuracy on lead paint is one of the most important disclosures for any seller.
Known Toxic Materials in The Home
There are some things that can be considered hazardous to one’s health found in a home. If a seller is aware of one of these issues, they should be disclosed to a buyer.
- Radon – Radon is a toxic gas that comes from the ground and is suspected to cause cancer over years of exposure.
- Asbestos – Asbestos is a toxic material that when found in the air can be extremely dangerous. Asbestos is often found in older homes as insulation of pipes in the basement. It is also found in vinyl flooring and tiles as well.
- Urea Formaldehyde – Formaldehyde was used as an insulating product many years ago so it can be found in older homes. It has been determined that the toxicity of this product dissipates over the years, so it is probably not a health hazard anymore. If, however, you know it exists it would be smart to disclose it.
- Mold – selling a home with mold is at the forefront of the real estate industry right now. There is a lot of misinformation out there when it comes to mold. One thing that most people don’t realize is that every home has mold. There are, however, different types of mold. Some molds are toxic and hazardous to one’s health. Common household mold is not. If you know of toxic black mold in your home known as Stachybotrys, I would highly recommend disclosure. Even if you have done remediation of mold in your home, it should be disclosed.
Water damage is common in homes. It is also one of the problems that homeowners try to conceal more than any other issue. Don’t do it! When water comes into a home, it can easily lead to mold in the future. You should make certain when selling a home to disclose any water problems whether it is a flooding basement or an ice dam that was fixed. If water has entered the building, disclose it!
Off Site Hazards
If any off-site conditions, such as waste, toxicity, or other contaminants are present, it’s possible they could have an impact on the property value. Issues that affect the value of marketability of a property should be disclosed. In my neck of the woods, there was a hazardous waste site known as Nyanza in Ashland Massachusetts. Nyanza was a company that manufactured dyes and pigments. For years they dumped these toxic materials in the ground, contaminating much of the area in which the plant was located. As a result, quite a few people got cancer and died.
Nyanza was in operation until 1978. The contaminated land would remain untouched for another seven years until the EPA gave it Superfund status. The site was named as one of the ten most toxic sites in the country. The soil and water in and around the Nyanza site were a horrid concoction of hazardous waste. This kind of hazard is something that should be disclosed to potential buyers.
In some states, it is required to disclose if the home is located in an earthquake zone, a flood plain, or if the surrounding area is susceptible to wildfires. California, for example, is one such state. Consult with your Realtor to find out if your area features any of these conditions and if disclosure is required.
One of the most contentious areas of disclosure in real estate is the actual size of a home. The square footage of a home is typically published in the multiple listing service for those who are selling a home. Unfortunately, the square footage is often wrong. This is an area where real estate agents often rely on the seller having accurate information.
Quite often sellers are lax on making sure the size is correct. The square footage of a home is not something that should be taken lightly. Buyers often place a lot of stock in the square footage as it pertains to home value. Homeowners and real estate agents should take the time necessary to validate the size of a home to avoid getting sued.
The Number of Bedrooms
The number of bedrooms might seem like an odd disclosure issue on the surface, but it really isn’t. In some states, including Massachusetts you are not allowed to market a home for having more bedrooms that the septic system capacity. For example, if the septic system is engineered to have the capacity for three bedrooms and you happen to have four in the home, you can’t market the home as a four bedroom.
Marketing properties for having more bedrooms than the septic system capacity is quite common with naive real estate agents who do not know any better.
Repairs or Improvements Made to The Home
Anytime you make repairs to a home it is wise to disclose them. Why? Let’s say a problem resurfaces a few years after the buyer purchases the home. If the issue comes back, it will be impossible for the buyer to say they did not know about it.
Sellers should disclose anything that required a permit in their home. These are usually significant items that should be disclosed. Examples include the heating system, air conditioning, the roof, or anything related to the plumbing or electrical systems.
When selling a property, it is important to disclose any kind of legal issue that could cloud the title. For example, if the home is a short sale and needs third party approval this is something that must be disclosed. Another example would be an estate sale. If the home is subject to approval by the estate or probate buyers should be made aware of this fact.
Another example would be there was a cloud on the title or a mechanics lien on the property. A cloud on the title will most likely need to be cleared before selling, so make sure you have it taken care of as soon as possible. By not taking care of such issues it is very possible a closing could be delayed or not happen at all.
Depending one where you live there is probably some gray area when it comes to what constitutes a lousy neighbor. If, however, you have constantly been fighting with a neighbor because they blare loud music at all hours of the night or have a vicious barking dog I would error on the side of caution and disclose this. This is something I have discussed in the past on how to sell a home with awful neighbors.
Whether or not you have to disclose a sex offender is not something you should take lightly. The laws on disclosing sex offenders vary from state to state. Check with a local real estate agent or visit the police department. Either one of these sources should be able to give you an accurate answer.
If you live in proximity to an airport, it would be smart to disclose to potential buyers there could be points in time where things get noisy. Any loud noises that could influence a buyer from purchasing a home should be disclosed.
Homeowners Associations and Covenants
Disclosing whether there is a homeowners association is something that should be disclosed up front. There are lots of people who do not want to be governed by various rules. Having an HOA could influence whether a buyer wanted to purchase in a particular neighborhood or not.
The same can be said of any restrictive covenants placed on a neighborhood. Buyers should have this information up-front, so they can make decisions that will affect them moving forward. For example, if the neighborhood does not allow you to change the color of your home or let you raise livestock, this should be pointed out before the buyer signs a contract.
Other Miscellaneous Home Related Issues
- Siding problems – If the siding has been peeling away from the house, or if there are leaks caused by siding issues, you should let the buyer know about it.
- Window leaks or malfunctions – Windows can wear out like anything else in the home. If there are any major leaks or other known issues with the windows, they should be disclosed.
- Plumbing – Leaks, clogs, old plumbing not up to code – there are a lot of things that can go wrong in the plumbing.
- Electrical – Electrical systems are complex and can be dangerous if they malfunction. Repair and replacement is a major problem, which means you should certainly say something if you have noticed issues.
- HVAC – Buyers should ask about the age of the heating and air conditioning units, but even if they don’t, you should definitely disclose major problems that you are aware of.
As you can see there are quite a few potential disclosures in the sale of a home. It is your job to determine which items should or should not be disclosed. Again, disclosure laws vary tremendously from state to state. Be sure to find out how your state treats these issues. In my opinion you should always err on the side of caution. Most of the time it is better to disclose than to end up in a nasty lawsuit. It is also the ethical thing to do.
Article courtesy of www.maxrealestateexposure.com