Real Estate Disclosure: What Sellers Need to Know

Real Estate Disclosure: What Sellers Need to Know

Learn what real estate disclosure is, why it is important, what information you should provide and how to avoid legal issues.

Marcio VasconcelosMarcio Vasconcelos

Published on November 28, 2023

What Is a Disclosure in Real Estate?

In the world of real estate, a disclosure is a document that provides all the information you need to know about the property you are interested in. Information such as the property's condition, history, or any potential issues that may affect its value or desirability is made available to the buyer.

The disclosure will start as soon as the escrow (documents and funds associated with the property that are held by a third person) is open, and its purpose is to ensure that buyers and sellers have a clear understanding of the property's true state before completing a transaction.

What is the most common disclosure in real estate?

The most common disclosure in real estate is the "Seller's Disclosure" or "Property Disclosure Statement". This document is typically completed by the seller and provides detailed information about the property's condition, including any known defects, repairs, renovations, or environmental hazards.

Common items covered in a Seller's Disclosure may include history of death in the property, the age of the roof, the condition of the plumbing and electrical systems, the presence of mold or pests, and any past or current issues with the property.

Disclosure basics

Laws regarding disclosure vary state to state. There are states that favor the buyer and require that all information regarding the home be disclosed and there are states that operate more on a “buyer beware” approach.

Regardless of the state you are in, make sure that all disclosures are in writing, even if the state does not provide a form for doing so. Fortunately, most states obligate sellers to disclose before or during the purchase agreement.

What Is a Seller's Disclosure?

property disclosure
Image: Canva

Seller’s disclosure, also called property disclosure, is a legal document requiring the seller of a property to disclose information about the property that a buyer may find unfavorable. The document is intended to create transparency regarding the property, for two reasons.

The first is so that the buyer knows what he is buying and is aware of any issues, present or previous, with the property. Second is to protect the seller from any potential legal issues in the future, should the buyer come to sue the seller because of an undisclosed issue with the home.

Which disclosures are the most commonly required?

Seller’s disclosure requirements vary state to state, but there are a few common disclosures, such as hazard disclosures, including the presence of lead paint on the property, neighbor nuisance disclosures, among others. We will take a look at the most common disclosures and describe each.

Death in the home disclosure

Depending on the circumstances of a previous death on the property, the seller may or may not be legally obligated to disclose this information. Deaths of natural causes are, in many states, not obligatory disclosures. 

However, deaths related to the property in any way, in many states, do have to be disclosed. It is important to know the laws in the state in which you are buying a home regarding disclosure to best understand what you have the right to know about your new home.

Neighborhood nuisance disclosure

Again, depending on the state in which the property for sale is located, the seller will be obligated to inform the buyer of anything noises or odors in the surrounding area that might affect the occupant of that property. Examples include living near farms, airports, landfills, or commercial areas that generate smoke or odors.

Hazard disclosure

If a home is vulnerable to natural disasters, like hurricanes or earthquakes, or if a home has had a history of exposure to toxic or hazardous substances in any way, then it is likely that the seller will have to disclose this information to the buyer. The presence of lead paint and asbestos on the property are the most common disclosures within this category.

What Happens if I Lie on a Seller’s Disclosure?

If it is found that you have lied or omitted information that you are legally bound to share with the buyer, there will be consequences. Firstly, the buyer will have the right to cancel the sale, and you would likely be charged a fee, as well.  The second possibility is that the buyer could sue you for not disclosing important details about the home that you knew about but did not disclose.

What are other common disclosures?

Natural hazard:

As stated above, natural hazard disclosures cover a wide range of potential issues, including earthquake zones, wildfires, flooding, and contamination.

Market conditions advisory (MCA):

This type of disclosure takes into account financial aspects of the home, including any loans, as well as an analysis of market conditions. This disclosure clarifies that the value of the home is susceptible to various aspects of the market and that these conditions tend to change, thus rendering any expectation of home value appreciation speculative and, ultimately, not guaranteed.

State transfer disclosure:

This disclosure is an evaluation of the condition of the property, itself, and contains any defects of the property.  In some states, this disclosure is obligatory.

Local transfer disclosure:

This disclosure concerns the area surrounding the home or property in question. Any issues that might arise from any nearby location, such as a landfill or manufacturing company, are disclosed here.

Megan’s Law Disclosure:

As a federal law, it is obligatory to inform homebuyers of any known sex offenders living in the area.

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