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What is a Seller’s Disclosure? Here’s Why It’s Important

Friday, April 29, 2022   /   by Laura Larson

What is a Seller’s Disclosure? Here’s Why It’s Important

There's a lot to study and paperwork to complete whether you're buying a new home or selling your present one. A seller's disclosure is one of these crucial documents.

A seller's disclosure, also known as a property disclosure, is a legally required document that sellers must disclose to buyers. This document will outline all of the property's hidden characteristics that have a detrimental impact on its worth. So, before you finish your home purchase or sale, keep reading to learn why a seller's disclosure is an important element of any real estate transaction.
Why is a seller’s disclosure important?
A seller's disclosure is a legal document that protects the seller as well as the buyer. It protects the buyer by advising them of any difficulties or defects with the home and its surroundings. If the seller's disclosure is done appropriately, it also protects the seller from being sued by the buyer after the sale.
For buyers
The purpose of the seller's disclosure is to provide the buyer with information about the property's history and prospective repairs so that they can make an informed decision. Buyers can walk out of a contract without losing their earnest money deposit if the seller's disclosure exposes a material flaw with the house. Any issues revealed in the seller's disclosure can provide the buyer leverage when it comes to reducing the price of the home or having the seller make any necessary repairs.

For sellers
Only accurate and truthful disclosure by the seller can protect the seller. If completed correctly, this form will shield the seller from being held legally responsible for any future troubles with the residence. This is only true if the seller informed the buyer of all house material faults before the sale was completed. The vendor is only required to disclose what their state requires.

When should a seller provide the disclosure?
During the closing stages of the deal, a seller's disclosure is usually issued a few days following mutual acceptance. However, some sellers may choose to reveal information during home tours. Because the listing agent must inform buyers about any known faults with the home, some will do so ahead of time to expedite the process. Your state's standard form will usually be filled out by the seller, while other laws enable sellers to disclose more informally. The buyer can still back out of the contract before the seller signs the disclosure. However, once signed, the buyer has only a few days to cancel the contract without penalty.

How a seller’s disclosure can impact a home sale
If a property has serious flaws, the seller's disclosure can have a big impact on the home selling process. Buyers must decide whether they are satisfied with any severe flaws revealed and have a professional inspection to determine what is required to address the issue. It's critical for a buyer to thoroughly analyze the seller's disclosure packets with a real estate agent and during the house inspection.
What are the standard real estate disclosures?
Each state has different requirements for seller disclosures – it’s best to check with your state’s guidelines. They can vary on a county basis, so make sure to check there as well. To help you get an idea of what to expect, here’s a list of some common disclosures:

- Neighborhood nuisances: Often refers to noise or odor from a source outside the property that could irritate the homeowners.
- Hazards: High risk of natural disasters or threats like contamination, lead paint, radon, asbestos, and toxic mold.
- Repairs: Any significant repairs the house may need and has had. Significant repairs would include structural, electrical, and plumbing issues.
- Water damage: Flood risk or existing flood damage.
- Missing items: The seller needs to list any items that will be removed after the sale, such as refrigerators or lighting fixtures.
- Other possible disclosures: Other disclosures could include special historical districts, homeowners associations, and unpermitted improvements.
- Not every state requires all of these disclosures. Most required documentation is mandated at the state level, but there are a few federally mandated disclosures. 
- Some federally mandated disclosures include lead paint, asbestos, wetlands, and floodplain disclosures. If you want to know something about the property, you can always ask the seller. Take time to understand what disclosures aren’t required to be disclosed in your state. That way, you’ll know what to ask when the time comes.

As a buyer, will I always receive a seller’s disclosure?
There are several circumstances in which a buyer may not receive a seller’s disclosure – this is known as a “no seller’s disclosure sale.” This means the seller is selling the property without disclosing any defects or issues that the buyer might need to know to make an informed decision. We’ve outlined the basics below, but visit your state government page for further information.

- Selling an as-is property
- A foreclosure or deed-in-lieu of foreclosure (usually applies to a bank-owned home)
- A gift or other transfer to a parent, spouse, domestic partner, or child
- A transfer between spouses or between domestic partners in connection with a divorce or ending of domestic partnership
- Certain business transfers in which the buyer already had partial ownership of the property (usually applies to rental properties)
- Estate sales or bankruptcy sales
- Sales in which the buyer waives the right to disclosure. However, the buyer can’t waive certain environmental disclosures, which refer to naturally occurring concerns like mold or flood zones.
- If no seller’s disclosure occurs, there will be a due diligence period. During this time, the buyer will thoroughly inspect the property. If the buyer goes through the due diligence and closing process, about 14 days, without raising any concerns, then they’re deemed to have waived their rights against the seller.

What happens if the sellers fail to disclose issues adequately?
If the seller fails to disclose or actively conceals material facts they’re aware of that affect the property’s value, the buyer can sue. The seller can be subject to lawsuits for recovery of damages based on fraud, deceit, misrepresentation, and breach of contract. If the law doesn’t require you to disclose something, it’s best practice to find out if it may impact the buyer.

Even with a seller’s disclosure, don’t skip a home inspection
In addition to the seller’s disclosures, the buyer should always have an inspection done. No matter how thorough or trustworthy the seller may be, a seller’s disclosure is no substitute for a thorough home inspection by a licensed and qualified professional. Most buyers aren’t trained to look for and identify the issues that can affect the average home. Before you buy, it’s in your best interest to get an inspection.

Final takeaways about seller’s disclosure
- The seller’s disclosure is necessary for both sellers and buyers.
- There are several disclosures, but not all will be mandatory in your state. Work with Laura Larson to understand your situation better.
- In some cases, you will not receive a seller’s disclosure. This is known as a “no seller’s disclosure sale.”
- In addition to a seller’s disclosure, it’s recommended to still have a professional inspection of the property.