Painting a room in your house before putting your home up for sale is typically seen as a positive for buyers… but what if the homeowner only painted it to cover up mold? There’s nothing unusual about a renovated basement… unless the homeowner only did it to hide flood damage. These are exactly the kind of reasons that the need for real estate disclosures exist.
A real estate disclosure statement is typically a standard form that sellers have to fill out in order to list a property. It’s often a series of yes/no/no representation questions about the home and property. It is intended not only to inform buyers about potential problems but also protect sellers from future legal action.
Material fact: A fact about the condition of the home, if known, may have caused the buyer to make a different decision in regards to buying the property or agreeing to the seller’s asking price.
It is a bit of a delicate dance between all parties, seller, buyer, real estate brokers to be reasonable about the expectation of a home’s condition and trust that all will be reasonable if something is discovered that challenges that shared expectation.
The disclosure is the seller’s chance to report anything that could negatively impact the value of the property. Disclosure laws vary from state to state but can include everything from leaky windows, to flooding issues, to unpermitted construction to information about development nearby. In North Carolina the form looks like this.
Here’s what else you should know
- Regular wear and tear does not apply to disclosure laws.
- You don’t have to conduct an investigation to find defects.
- You don’t have to repair any defects you report.
If you don’t know what to disclose, your real estate agent can guide you. Not all issues are major enough to warrant being reported on the actual form but you may want to inform the buyer verbally or in an email.
Now keep in mind, a disclosure does not negate the need for an inspection. If you are buying a home you still want to have an inspection done before the sale is final.
Here’s the bottom line. Sellers should disclose what they know about the property to their listing agent. nothing more, nothing less. You don’t want to misrepresent a problem. After all, in some places, sellers can be on the hook for what they disclose or fail to disclose for up to 10 years! We recommend erring on the side of caution.