What Is a Seller’s Disclosure?
When you make an offer on a home, one of the first pieces of paperwork you’ll get is a seller’s property disclosure. Also known as a “property disclosure statement,” “home disclosure” and “real estate disclosure form,” this document contains a list of known problems with the home.
Although seller disclosure laws vary from state to state, most require some kind of seller’s disclosure statement. Still, they all have the same goal — to make real estate transactions more transparent.
How does a seller’s disclosure work?
Typically, you’ll get a home disclosure form once your purchase offer is accepted; however, a seller disclosure before an offer isn’t unheard of. Again, your real estate agent can tell you the disclosure laws in your state.
Even a property being sold “as is” still needs a seller’s disclosure if it’s required in that state. However, it’s unlikely the seller will fix any additional issues uncovered by a home inspection — this means you’ll need to cover the renovations yourself if you buy the home.
In some states, no seller disclosure is required. In addition, a residential property disclosure might not be required with estate sales or foreclosure sales conducted by a court or sheriff. In these instances, the state’s real estate disclosure laws would specify what’s required.
Common types of property disclosures
The answer to “What is a property disclosure?” is “That depends.”
“The United States of America has 51 sets of rules,” said Mindy Jensen, a real estate agent based in Denver.
For example, the state of Colorado mandates only six disclosures, such as the home’s source of drinking water and whether the property has ever been used as a methamphetamine lab. (Federal disclosures, such as the presence of lead paint, would also have to be noted.) While the state does provide a property disclosure form on its website, no Colorado law requires sellers to fill it out.
Suppose you live in a state where a seller’s disclosure isn’t required? The fact that a seller doesn’t offer a property disclosure statement on their own “tells me for sure that you need a home inspection,” Jensen says. (More on that below.)
In states that do require an in-depth seller disclosure form, a seller will typically be expected to disclose past or current issues in the following categories:
Sellers will likely be asked to provide the age of the roof, to the best of their knowledge — though sometimes people honestly don’t know, according to Jensen. Some common ways to find out how old your roof is include communicating with the previous owner, as well as seeking out building permits and receipts from the roofing company; a home inspection is also a consideration.
A few typical disclosures:
- Whether the roof has ever leaked
- Whether it had been repaired during the seller’s ownership
- If the roof is warrantied and whether the warranty is transferable
Other requirements will vary by state. For example, as of January 2021, California sellers must disclose whether a roof has features that “may make the home vulnerable to wildfire and flying embers,” such as rain gutters without metal or noncombustible covers and ventilation that isn’t flame- or ember-resistant. In Alaska, the real estate disclosure form asks whether ice dams have ever formed on the roof.
Basement and/or crawlspace
Water infiltration is a major concern in these areas of the home. Sellers may need to disclose whether a sump pump was installed and/or any other repairs/preventive measures have been taken. It’s also common to disclose issues like previous flooding or seepage that results in standing water in the basement.
Requirements vary, but may include:
- Whether the structure was altered, such as remodeling, adding a room or changing the roof
- Movement, shifting and/or deterioration in foundation or walls
- Problems with use/operation of windows
- Rot/water damage, fire/smoke damage
- Termites, rodents or pests
- The presence of asbestos
Plumbing and water/sewerage systems
The seller might only be asked whether there were any problems with or replacements of these systems. The property disclosure form might also require more specific information to answer the following questions:
- When was the septic system/cesspool last serviced?
- Are the pipes made of copper, PVC or lead, or are they galvanized?
- Are there any problems with any plumbing fixtures or the water heater?
- What is the drinking water source? If it’s a well, when was the water last tested?
- If public sewer system service is available, is the home connected and if not, why?
Soils and drainage
Some residential property disclosures focus on general topics, such as soil-settling issues, improper grading, the presence of debris burial or filling or potential contamination by chemicals.
Sellers may have to disclose situations specific to their regions, however. For example, some parts of Pennsylvania have “mine subsidence” issues: ground movement due to shifting/collapsing mine tunnels. The state’s disclosure form lets potential buyers know where to find subsidence maps, to see if the property might be affected.
Heating/cooling and electrical systems
Again, some states simply ask the seller whether any problems are known to exist in these systems. In other places, however, the real estate disclosure statement will ask very detailed questions, such as:
- Do the systems run on electricity, fuel oil or natural gas? Does the property have wood heat or solar panels?
- Are there central air or window units that will be included in the sale?
- Are there any areas of the home that aren’t heated?
- Does the house have working fireplaces?
- Are (or were) there fuel tanks on the property?
Most states require seller disclosure of a murder that occurred on the property. In all but three states (Alaska, California and South Dakota), sellers aren’t required to disclose deaths from natural causes. However, the seller must be truthful if asked, unless state law allows them to say that they don’t wish to answer.
Certain regions have unique disclosure issues. In Hawaii, sellers must disclose tsunami, geothermal or volcanic hazard zones, as well as the possibility of noise from frogs. Alaska sellers must specify whether the property is in an avalanche or mudslide zone.
Some other types of location-specific disclosures:
- Trains, airports, racetracks and other noise-producing situations
- Waste disposal sites
- Gravel pits
- Designated wetlands
- Agricultural districts
Condo or homeowners association rules
Interested in a condominium or a house in a development that has a homeowners association (HOA)? Several very important issues must be addressed:
- Whether membership in a HOA is required as a condition of owning the property
- What types of fees, surcharges or special assessments are generally required
- Whether certain features (such as walls or roads) are shared with neighbors, since their use or maintenance could affect the property being sold
Understanding condo and HOA rules is very important, according to real estate attorney Laura Bramnick. The Scottsdale, Ariz.-lawyer says she’s seen cases where people didn’t check the HOA rules before buying properties as real estate investments — “then they find out that the condo can’t be rented,” she adds.
5 things to look for on a seller’s disclosure
The seller’s property disclosure statement might seem a bit overwhelming, so ask your agent about anything that isn’t clear to you. In particular, watch for these important issues on a residential property disclosure form.
→ Mold or water damage. A plumbing problem or water coming in from outside the house can set the stage for mold or mildew: Both can spread into wallpaper, rugs, drywall and ceiling tiles. Depending on the laws in your state, a seller might be required to list these issues on the home disclosure form — if they know about them, that is.
“You might have a compromised roof and the seller doesn’t know because it hasn’t started leaking,” says Anthony Kirlew, a real estate agent in the Phoenix area.
→ Termite treatment or damage. Left unchecked, termites can seriously damage a home’s structure — and standard homeowners insurance policies typically won’t cover this.
→ Lead-based paint. Lead is toxic and can lead to serious health issues, especially in children. The U.S. Department of Housing and Urban Development (HUD) requires disclosure of lead-based paint being used in a home built before 1978.
→ Floodplain location. Not every state requires sellers to disclose that their property is part of a floodplain as designated by the Federal Emergency Management Agency (FEMA). However, you can check this yourself by using the FEMA Flood Map. Depending on what you learn, it might be necessary to get flood insurance; mortgage lenders often stipulate this.
→ Other natural hazards. A seller might have to disclose the fact that a nearby river floods seasonally, or that the property is near a fault line. For example, in California, a seller’s disclosure notice must include whether the property is within a “designated hazard area.”
‘Caveat emptor’: What does it mean?
“Caveat emptor” is Latin for “let the buyer beware” — and in terms of real estate, this means that ultimately it’s up to the buyer to be fully aware of any defects or issues in the home.
As noted, disclosure laws vary widely. If a state’s disclosure law doesn’t require the seller to mention a nearby airport, this is something the buyer will have to discover on their own.
In some states, buyers might seek recourse if:
- A reasonable initial inspection didn’t turn up the defects in full, or
- The seller intentionally defrauded the buyer
Generally speaking, however, buyers must take responsibility for having the home inspected and following up on any potential issues before the purchase takes place.
Seller’s disclosure vs. home inspection
A real estate disclosure form lists known issues with a home, such as a nearby fault line or a cracked foundation that has been repaired. A home inspection is a report written by a professional inspector, detailing the home’s overall condition.
The homebuyer, not the seller, hires and pays the inspector. In return, they get an objective report on the condition of the home.
Again, some sellers honestly don’t know about current or pending home issues. For example, Bramnick knew people whose plumbing developed a small leak behind the laundry room. There was no indication of a problem, until “one day they walk in and there’s a flood,” she says.
Here are some examples of home issues a seller might not be aware of that an inspector could find:
|Component of home||What a home inspector might find|
|Structure||Foundation cracks, settling cracks|
|Roof||Roof at the end of its lifespan, or roof damage not visible from the ground|
|Exterior||Grading issues, drainage problems|
|Plumbing||Leaks, faulty seals, evidence of past repairs|
|Electrical||Electrical panel access issues, broken ground-fault circuit interrupter (GFCI) outlets, insufficient wiring|
|Exhaust systems||Insufficient ventilation in bathrooms, laundry room, kitchen or attic|
What happens if the seller lies on their property disclosure?
If you think the seller lied on the real estate disclosure statement, you have several options. First, start by asking your agent to talk to the seller’s agent. If they can’t fix the issue between you and the seller, you should speak with a real estate attorney.
Know that not every case of this sort will wind up in court — for example, Arizona law requires mediation first for buyers and sellers who used a standard real estate contract. But, according to real estate attorney Bramnick, most cases she sees settle out of court with both parties splitting the cost of the mediation.
Although this typically runs from $300 to $500 an hour, mediation is usually a benefit. Going to court could cost “tens of thousands of dollars,” with no guarantee of success.
“My experience has been that the cost of a lawsuit is a lot more than fixing the damage,” Bramnick says.
If mediation doesn’t work for a residential property disclosure statement dispute, then a lawsuit might be the next step. Should the seller lose the case, the court has several ways of making things right for the buyer:
- Fixing the property. If this could be done with a reasonable expenditure, the court might specify enough damages to cover the repair.
- Awarding other damages. If fixing the home would cost more than the house is currently worth, a court might require the seller to pay “loss of value” damages.
- Rescinding the sale. It’s possible the court might cancel the sale if the seller violated the statute requiring disclosure. However, this would need to “be proven by expert testimony,” Bramnick says.