What potential buyers need to know
Fact checked by Marcus Reeves
Reviewed by Julius Mansa
Sellers are required to disclose property information to the realtor and potential buyers based on state and local laws. A disclosure document details a property’s condition and what might negatively affect its value. Sellers who willfully conceal information can be sued and potentially convicted of a crime.
Disclosure laws are available from local and state real estate planning departments and vary by location. Buyers and sellers can also consult a real estate attorney for rules and information.
Key Takeaways
- Property sellers are required by law to disclose negative information about a property.
- The seller must follow local, state, and federal laws regarding disclosures.
- Selling a home “as is” may speed up the homebuying process, but it does not exempt sellers from disclosure requirements.
1. Deaths or Crimes
State rules vary on disclosing information about a death in a home. In Texas, deaths from natural causes, suicides, or accidents unrelated to the property do not have to be disclosed. However, sellers commonly disclose deaths related to the condition of the property or violent crimes.
Some states impose a duty to disclose a stigmatized home or apartment in which there has been a suicide or murder. Some states even go so far as to impose an affirmative duty on a seller if they know that their real estate is being haunted by the dead.”
Georgia doesn’t require the disclosure of homicide or suicide unless the seller is directly asked. However, sellers may want to err on the side of informing the buyer of a death on the property. Buyers will likely hear information or gossip from neighbors, so immediate disclosure is preemptive.
2. Neighborhood Nuisances
A nuisance is often a noise or odor from a source outside the property that could irritate the property’s occupants. North Carolina requires sellers to disclose noises, odors, smoke, or other nuisances from commercial, industrial, or military sources that affect the property.
Michigan requires sellers to disclose farms, farm operations, landfills, airports, shooting ranges, and other nuisances in the vicinity. These laws vary from state to state. Sellers and buyers should know what the law requires regarding neighborhood nuisance disclosures.
3. Hazards
If the home is at an increased risk of damage from a natural disaster or has known or potential environmental contamination, sellers may be required to disclose this information to the buyer. Texas law requires sellers to disclose the presence of hazardous or toxic waste, asbestos, urea-formaldehyde insulation, radon gas, lead-based paint, and previous use of the premises for the manufacture of methamphetamine.
States may also require disclosing mine subsidence, underground pits, settlement, sliding, upheaval, or other earth-stability defects. California’s Natural Hazards Disclosure Act requires sellers to disclose whether the property is in a seismic hazard zone and subject to liquefaction or landslides after an earthquake.
New York State’s Property Condition Disclosure Act requires sellers to notify buyers about whether:
- The property is located in a floodplain, wetland, or agricultural district
- Whether it has ever been a landfill site
- If there have ever been fuel-storage tanks above or below ground on the property
- If and where the structure contains asbestos
- If there is lead plumbing
- Whether the home has been tested for radon
- Whether any fuel, oil, hazardous, or toxic substance has been spilled or leaked on the property
Important
The federal government mandates one disclosure: that lead-based paint may be present on any property constructed before 1978.
4. HOA Information
If the home is governed by a homeowners’ association (HOA), sellers must disclose this. Associations generally impose monthly fees and rules on their membership that a prospective buyer might not find acceptable. Buyers also need to know about the HOA’s financial health.
5. Repairs
What has a seller repaired, and why? Buyers need to know the home’s repair history such as electrical or plumbing work to have their home inspectors pay extra attention to problem areas.
Texas law requires sellers to disclose previous structural or roof repairs; landfill, settling, soil movement, or fault lines; and defects or malfunctions in walls, the roof, fences, the foundation, floors, sidewalks, or any other current or previous problems affecting the home’s structural integrity.
Warning
Selling a property “As Is” does not always exempt a seller from disclosures.
6. Water Damage
Water in a home can damage personal possessions, undermine the home’s structure, and create a health hazard by causing mold growth. Sellers should disclose past or present leaks or water damage. Michigan requires sellers to disclose evidence of water in a basement or crawl space, roof leaks, significant damage from floods, the type of plumbing system, and any known plumbing problems.
Sellers commonly rely on a home inspector to find evidence of water and other damage within a home. Sometimes the seller may not be aware that previous damage occurred so they should check with the state’s laws regarding disclosing information they are unaware of.
7. Missing Items
Sometimes homebuyers don’t realize until the move-in day that their new homes are missing something they assumed would be there such as a light fixture or refrigerator.
Some states’ disclosure laws attempt to prevent this problem. Texas and Michigan require sellers to disclose whether the property comes with kitchen appliances, central air conditioning and heating, rain gutters, exhaust fans, and water heaters.
8. Permits and Pests
Buyers need to know if the home is in a special historic district because it will affect their ability to make repairs and alterations. Sellers may also be required to disclose problems with drainage or grading, zoning, pending litigation, changes made without permits, boundary disputes, and easements.
Texas law requires sellers to disclose active termites or other wood-destroying insects, termite or wood-rot damage in need of repair, previous termite damage, and previous termite treatment. Michigan and North Carolina law also require sellers to disclose any history of infestation. Sellers should consult their state’s laws to see if they must disclose information about pests.
What Is a Seller’s Disclosure Document?
A seller’s disclosure is a real estate document that provides details about a property’s condition and how it might negatively impact the value of the home. It is often required by law, though what it needs to contain can vary by state and locality. The seller should make all disclosures in writing, and both the buyer and seller should sign and date the document.
How Are Property “Flippers” Affected By Disclosure Rules?
Disclosure rules can affect anyone selling a home. Still, they’re especially likely to affect property flippers, who buy properties to upgrade them and resell them for a quick profit. Property flippers often deal with properties in poor condition.
What Happens if a Seller Lies on a Disclosure?
A seller often risks being fined, sued in court, or both. Lying on a seller’s disclosure is illegal, as the undisclosed hazards could cause serious damage to an unknowing buyer.
The Bottom Line
Even if a particular disclosure is not required in a seller’s locality, sellers who have information about their house might want to disclose it anyway. This avoids the expense and hassle of a potential lawsuit. Sellers who have any concerns about whether they’ve disclosed the property’s condition correctly should contact a real estate attorney in their state.