Seller property disclosure statement
An owner or seller must reveal or disclose any material defects about the property or asset that is being sold which are not readily apparent. This kind of disclosure statement is formed to help the seller to comply with any requirements of disclosure and to also help the buyer to evaluate the property in consideration. It discloses the owner’s information of the property condition on the date it is signed by the parties. However, it is not an alternative for any warranty that the buyer would like to acquire. The purchaser is also encouraged to bring out any concerns he may have about the condition of the asset that could be included in the statement. However, this statement does not reduce the owner of a duty to divulge a material defect that is not addressed here. A material defect is any problem with the asset or property that would have a negative effect on the value of the property.
Points in the Statement –
The Statement includes the following –
- The type of property and whether it recently had any repairs done to it. For example – roof work, gutter work, termite problems, water repairs
- Any structural problems or remodeling or additions done.
- If the water supply is public or if not then if water was tested. Sewage and plumbing details.
- Type of air-conditioning or heating provided.
- Other safety requirements like security alarm systems or smoke detectors.
- Any electrical appliances provided like washers or ovens or heaters.
- Any existing legal conditions.
FAQ
What is a Seller’s Property Disclosure Statement?
A Seller’s Property Disclosure Statement is a legally required document in most jurisdictions where the seller discloses all known material defects and specific information about the property’s condition. It is designed to provide transparency to the buyer and help the seller comply with disclosure laws.
Is this document a warranty or guarantee from the seller?
No. It is crucial to understand that this disclosure statement is not a warranty or a home warranty policy. It is a statement of the property’s condition based on the seller’s actual knowledge as of the date it is signed. It does not guarantee future performance or condition.
Why is this disclosure so important for a buyer?
The statement is a vital risk assessment tool. It helps you, the buyer, make an informed decision by revealing known issues that may not be apparent during a walk-through. It allows you to:
1.) Evaluate the true value of the property.
2.) Negotiate repairs or a price reduction.
3.) Plan for future maintenance.
4.) Decide whether to proceed with the purchase or walk away based on discovered material defects.
Why is it important for a seller to be thorough?
Providing an accurate and complete disclosure helps protect the seller from future legal liability. Knowingly concealing or failing to disclose a material defect can lead to a lawsuit for fraudulent concealment or misrepresentation after the sale closes.
What is considered a “material defect”?
A material defect is a specific issue with the property or its systems that would have a significant negative effect on the property value, or that poses an unreasonable health or safety risk. Examples include a faulty foundation (structural problems), an aging roof with known leaks, malfunctioning septic systems, or chronic plumbing issues.
What specific areas does the statement typically cover?
While forms vary by state, most statements require detailed information on:
1.) Structural Systems: Foundations, walls, floors, and roofs, including any history of water damage or termite problems.
2.) Mechanical Systems: The condition of HVAC (heating and air-conditioning), electrical systems, and plumbing.
3.) Appliances: The operational status of included appliances like ovens, dishwashers, and washers.
4.) Water and Sewage: Source of water supply (public or well), and details on sewage (public sewer or septic system).
5.) Safety Features: Presence of smoke detectors, carbon monoxide detectors, and security alarm systems.
6.) Legal Issues: Any encroachments, zoning violations, or unpermitted additions or remodeling.
Does the statement cover every single minor issue with the property?
No. The focus is on material defects—significant problems. Normal wear and tear and minor flaws are generally not required to be disclosed, though honesty is always the best policy to avoid disputes.
Can a seller simply check “Unknown” for every item?
While “Unknown” is an option on most forms, using it excessively can be a red flag for buyers and may be viewed as a failure to fulfill the seller’s duty to disclose. Sellers are expected to make a reasonable effort to be aware of the property’s condition.
What happens if a seller lies or intentionally omits a known problem?
If a seller knowingly fails to disclose a material defect, they can be held legally responsible after the sale. The buyer may sue for damages (the cost of repairs) or even rescission (undoing the sale) based on claims of fraudulent concealment or negligent misrepresentation.
Is the disclosure statement a substitute for a professional home inspection?
Absolutely not. The disclosure is based on the seller’s knowledge, which may be limited. A buyer should always hire a licensed professional home inspector to conduct an independent, thorough inspection to uncover any latent defects the seller may not be aware of. The disclosure statement and inspection report are complementary due diligence tools.
What should a buyer do if the disclosure reveals significant issues?
You have several options:
1.) Negotiate: Request that the seller make the repairs or provide a credit at closing to cover the cost.
2.) Investigate Further: Hire a specialized inspector (e.g., for foundation, roof, or mold) to assess the severity and cost of the issue.
3.) Walk Away: If the problems are too severe, you can typically terminate the contract (contingent on your state’s laws and the contract’s specific contingencies).
