I once saw a TV show about a family who moved into what they thought was their dream home. Everything was fine, until they found out the home was the site of a grisly murder. However, under the housing disclosure laws in that particular state, the seller was under no obligation to tell the family what had happened inside. So, as a seller, what exactly do you need to tell buyers before you hand over the keys? And, as a buyer, what information will you learn before you sign on the dotted line? But first things first… What is disclosure?
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It’s a variety of forms that are designed to tell buyers everything they need to know about the home they’re about to buy. Typically, disclosure documents are handed over after the seller has accepted the buyer’s offer. However, if the buyer sees something in the documents that he doesn’t like, he can back out of the deal without losing any of his escrow money. (It’s just like going through the inspection process. If the inspector finds something the buyer would rather not deal with, he can walk away, no strings attached.)
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The exact details you’ll find out as a buyer in disclosure forms will depend on what state you’re in. That’s because each state has its own disclosure laws (some states will require sellers to hand over 50 pages of disclosure documents!). So, in some states, you may have been told all about that grisly murder – while, in others, it would be perfectly legal for the seller not to mention a thing about it. In fact, in California, sellers are required to disclose if anyone has died in the house within the past three years (regardless of the circumstances surrounding their death).
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However, there are federal disclosure regulations when it comes to certain safety issues. For example, if your soon-to-be home was built before 1978, federal law requires that the seller disclose whether lead-based paint was used anywhere in the house (assuming that the seller has done his own lead testing and knows the answer). From there, the buyer has 10 days to do their own lead-based paint inspections. What happens if the seller doesn’t disclose everything he’s supposed to?
That’s a giant no-no! Sellers are liable for their disclosure statements. So, if you’re a buyer, and you discover that a seller knowingly left something out or lied during the disclosure process, you can sue him. In fact, in some states, sellers are bound by the disclosure process for 10 years – meaning that you have a full 10 years to file a lawsuit if you discover anything fishy occurred during the disclosure process.
Since everything is done in writing, a good realtor will tell a seller to err on the side of caution during the disclosure process – meaning that it’s better to disclose too much than not enough. So, in addition to telling the buyer everything you’re required to by law, you might also want to tell him about the plumbing problems you had fixed a few years ago or those noisy neighbors that live across the street. That way, you won’t have to worry about the buyer coming back months or years later and claiming that you tried to hide anything.
Basically, the disclosure process is designed to make the sale as fair as possible. After all, the buyer is about to hand over hundreds of thousands of dollars for a house he’s only seen a couple of times. As a seller, you have a duty to tell him as much as you can about what he’s getting into!
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