Tuesday, May 15, 2012

Sellers: 6 Disclosures That You Must Make

These days, the trend among cash-strapped home sellers seems to be to say less in hopes of getting more at closing. But in the long run, this less-than-full disclosure can prove costly. Lawsuits stemming from nondisclosure of a property's problems are becoming a bigger issue, according to respondents in the National Association of Realtors 2011 Legal Scan survey. Of the agents who responded, about 75% ranked this issue among their "top three current and future issues."

While the rule with homebuying was once "caveat emptor," or "buyer beware," an increasing number of sellers are finding themselves on the hook for nondisclosure. A lot of sellers don't have a full understanding of what the seller disclosure statement means when they fill it out. You can often tell there has been work done, but these fixes don't show up anywhere on paper. Sellers must disclose anything that could affect the property's value or desirability, from big problems such as a compromised foundation to — in some states — simple neighborhood nuisances such as that dog next door that barks every night.

Disclosure laws vary. Some states require sellers to look for and cite certain problems even if they are not aware of them. No one gets out of these disclosures: Even those marketing a home "as is" have to obey state disclosure laws. As-is sellers are simply advertising that they're not going to negotiate on price because of these issues.

Here are the six things that a seller must reveal about a home to avoid legal trouble down the road.

1. Repairs
This is a pretty broad category but one that a lot of buyers seem confused about. If you have made repairs to your property, you should disclose them, even if the problem has been resolved.

That could be something as major as a crack you had sealed in the foundation, or something as minor as snaking your sewer line every year to clear tree roots. Any repairs to the roof, plumbing, electrical system or heating and cooling unit that you are aware of — including any repairs disclosed to you by previous owners — should be laid bare, as well as any drywall or structural repairs to remedy water damage. If you knew that there had been hail on the roof and it was leaking, you should disclose that. If you knew last fall that the A/C didn't work, that's something you should disclose to a buyer.

The bottom line is that sellers should disclose anything that is not readily identifiable by the buyer.

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