Things to know about a seller's disclosure
Updated: Apr 24, 2022
What is a Seller's Disclosure?
A seller's disclosure is a legal document that enlists the details about the condition and history of the property including the list of defects present currently, that the buyer must know about the home, it usually includes the problems that might have occurred before and the details about the remedy that was done to fix it. It may also include the details about whether the repair that has been fixed need a regular maintenance or does it have the potential to cause any future problems. Usually the questions about the property are answered as Yes, No or Unknown. In California, death in the property has to be disclosed if it was within the last 3 years. The listing agent usually provides a list of forms to be completed before listing the home. Once an offer is accepted, the listing agent usually has 7 days to complete all the forms to provide it to the the buyer or buyer's agent. In California, the seller may be held liable if the facts are not disclosed upfront. Usually a documentation is done with the buyers to acknowledge that they received the disclosures.
Common material facts
These are the some of the common material facts disclosed in the Seller's disclosure.
If the roof leaked after buying a home, you may have to check whether the roof has any warranty as most of the new homes have warranty. This may resolve the issue. If it doesn't have a warranty, you may check the seller's disclosure if there are any issues mentioned. If nothing is mentioned in a seller's disclosure, you may check the inspection report. If there are any facts disclosed in the inspection report and you didn't do anything about that, your ability to go after the seller is very thin. It is very important to read all the details of Seller's disclosure and inspection report carefully before buying a home.
Pest damage is a serious issue and must definitely be disclosed in the disclosure statement even if it has been fixed. Termites and rodents are the usual cases of pest damage. It may be easily be found by the inspector while inspecting the home. If the seller discloses it as a known fact and fixed, buyers may ask for more information about the issue in detail such as the year occurred, what was it caused by and who fixed the issue etc.
The sellers are usually required to disclose any known history of water damage occurred in the property. Water damage is a very serious issue and may be caused due to a number of reasons such as leaky roof, leakage in the plumbing systems, structural issues and the water damage also may cause mold issues.
Heating and air conditioning issues
The condition of the heating and cooling systems, age of the systems are usually disclosed in the disclosure. If there are any water damages in the home, it might also be caused by the issues in the air conditioning or heating system. It includes a clogged drain, pipes that are not connected properly etc.
The information about the homeowners association such as the monthly fees associated, any special assessments planned for the future, meeting minutes, financial health of the HOA must be disclosed. For example, if a seller sells a home without informing the buyer about the special assessment that might be charged in the future and the buyer finds out about it, the buyer may sue the seller for hiding the known fact.
It is crucial for the seller to disclose any facts known about the hazards both that might be at the home and that occur due to the environmental conditions of the home. The hazards such as presence of mold, radon, asbestos has to be disclosed in the disclosure. According to the law, anyone selling a home that is built before 1978 are obligated to provide a Lead Paint disclosure to the buyer. Environmental impacts like flooding, earthquake, home located near the wildlife area or high fire risk area must also be disclosed in the seller's disclosure.
If there are any boundary disputes in the property, it must be disclosed by the seller in the disclosure as it might disrupt the peace of the buyer and have a major impact on the property value.
Structural and foundational issues
The structural and foundational issues may cause a major destruction of the building in the future even though it might not be an issue currently. Any known facts about the issue must be disclosed in the seller's disclosure by the seller no matter how small it might seem currently.
Any renovations, improvements or a remodel done in the house must be disclosed. Even though it is a small modification or addition, it is always safe to disclose the information to the buyer. It might have an impact in the property tax or insurance.
Megan's law disclosure
California Association of realtors have a Megan's law disclosure form that has to be signed by all the parties involved in the real estate transaction. Megan's law database has all the information about the sex offenders present nearby to the area and the disclosure usually states that the buyer or the tenant are responsible to research about the sex offenders in that area.
Water heater & Smoke detector compliance
The disclosure states that all the existing water heaters are secured and properly braced and strapped to avoid falling off at the event of an earthquake or any other disaster. According to the California building code, the smoke alarms are usually required to be installed in all residential units in each bedroom, near the fireplace etc.
Property tax disclosure
Property tax disclosure statement usually states that the buyer may not rely on the current property tax of the seller. In California, the property tax is usually calculated to the value of the home during the change of ownership. The improvements made on the property may also increase the property tax.
If a death is caused by AIDS, the seller or the seller's agent are not obligated to voluntarily disclose it to the buyer. Individuals with HIV or AIDS fall into a protected class under the federal law. If the buyer specifically asks an agent or the seller about the death of the person due to AIDS or HIV, they may imply that any disclosure of such information might be a violation of the federal fair housing laws.
Death in the property
If the death in the property occurred more than 3 years ago, it may not be essential to disclose. But if the buyer insists to know the details about the death in the property that occurred more than 3 years ago and the seller knows about it, it is advisable to let them know.
Issues related to the neighborhood nuisance such as a construction work nearby, any nuisance created by neighborhood pets such as excessive barking, any domestic or legal incidents occurred mast also be disclosed in the seller's disclosure.
Some cases where the disclosure may not be needed
Seller's disclosure may not be needed in certain cases such as foreclosures, bankruptcy, Transfer of properties within relatives or a divorce settlement between spouses, Business transfers between co owners of a rental property.
What happens if the seller fails to disclose a fact?
It is very important for the seller to consider the seller's disclosure seriously and disclose all the known facts. If any known fact in it was found to be hidden by the seller after closing, the buyer may have the right to sue the seller and the seller is made responsible to pay for all the repair costs even after the closing of the home.
The best way to avoid disclosure related issues are to disclose all the facts even if they are small and share all the details of the home that may negatively impact the value of the home. All the signed disclosures must be kept safely for at least 3 years after the closing process. If something is fixed by the seller, they may provide all the documentation and receipts to the buyer to document that the issue was remedied.