In many states, home sellers are required by law to provide buyers with a disclosure statement. Disclosure statements give the buyer the opportunity to learn as much as they can about the property and the seller’s experience in it, both positive and negative. A disclosure statement not only serves to inform the buyers, they can also protect home sellers from future legal action.
Sellers must disclose any known issue that might affect the property’s value or habitability. A disclosure statement may include things like; leaky faucets, info about a major construction project nearby, loud or obnoxious neighbors, work done without permits, etc.
Disclosure statements often include; termite problems, any history of property line disputes, defects or malfunctions of appliances or major systems, a sellers involvement in bankruptcy, liens on the property, and so on.
Too often, the lack of proper disclosure can result in a lawsuit.
Case in point; A buyer bought a house, that the seller had disclosed a kitchen remodel was done without permits. Several years later the buyer sold that same property but didn’t disclose that the previous owner had remodeled the kitchen without a permit.
The new buyer decided to do some electrical work with a permit. When the city inspector found that some of the electrical work done during the kitchen remodel was not done to code, he probed a bit deeper and found that much of the kitchen remodel (both plumbing and electrical) was not to code. Now, the new buyer was advised that he had to rip out the remodeled kitchen and start over.
A lawsuit arose between the current owner and the second seller for not disclosing. The original sellers had covered themselves, but the second seller had not.
NOTE: Buyers should independently investigate any non-permit work that was done.
Disclosure laws vary from state to state… and sometimes at the city or county level.
“California has some of the most stringent disclosure requirements. Often, sellers there are required to complete or sign off on over 50 pages of documents, such as a Natural Hazards Disclosure Statement, Lead Based Paint Disclosure, Advisories about Market Conditions and even Megan’s Law Disclosures.” Source: Zillow.com
If a house has not been properly disclosed, it’s possible for the seller to be responsible for a disclosure for up to 10 years. For this reason, it is always a good idea to err on the side of caution… if you know it – disclose it!
Disclosure documents usually come in a standard form, where the seller is responsible for answering a series of YES or NO questions about their home and their experience living there. In addition to that, when there is something negative to report about the property that is not included in the standard form, that communication should be in written form. It is important to note that disclosure statements are legal documents that can stand up in court.
Usually the seller’s disclosure statements are delivered to the buyer once the seller has accepted their offer. However, sometimes the seller provides the disclosure up front so that the buyer knows everything they need to know to make an informed decision. This is also smart because it saves time, and the expense of a deal falling apart once it is in escrow.
Once the buyer receives the disclosure, it is important to review it carefully and, if necessary, ask questions due to the fact that the buyer is required to sign off on disclosure documents and reports.
If you are in the market to buy (or sell) a home in Northern California, Realtors associated with Century 21 M&M look forward to walking you through the process. Rest assured that Century 21 M&M Realtors will do their best to make sure that both Buyers and Sellers are protected during the transaction.
NOTE: A disclosure is not the same thing as an inspection due to the fact that the seller may not be aware of problems that a home inspection will reveal.