A simple guide to home seller disclosure
How would you like to find out after you've closed and moved into your new home that the basement is rat-infested? You call a local pest company and discover that the sellers hired the company to treat the house for rat intrusion.
Pest infestation might not be a material fact to all buyers. A material fact is one that would affect whether or not buyers would buy a property or the price they'd be willing to pay.
However, most buyers would be annoyed at the least that the sellers hadn't informed them in advance that the property had a condition that required routine maintenance. It could also make the buyers suspicious that the sellers may have withheld other information.
Home-seller disclosure laws vary from state to state, although most states require disclosure of material facts. Check with your real estate broker or attorney for information about disclosure requirements before you put your home on the market.
Sellers often fear that if they disclose too much, buyers won't buy their home. Generally, the opposite is the case. Buyers appreciate knowing as much about a property as possible before they close the sale.
When buyers discover conditions affecting the property that they didn't know before closing -- ones that the sellers had to have known about -- they could use legal channels to remedy the situation.
The goal in selling your home should be to sell for the highest price possible in the current market, and to keep as much of the proceeds as you can. Getting involved in a claim, mediation, arbitration or lawsuit over lack of disclosure or concealment can be time-consuming, stressful and very expensive.
In today's environment of economic uncertainty, buyers who feel they were duped are more likely to pursue a claim against less-than-forthright sellers than they might have when home prices were appreciating at such a fast clip that it was often easier to fix the problem themselves than get into a legal battle with the sellers.
HOUSE HUNTING TIP: Here's a guideline to help you decide what should be disclosed. If you're asking yourself whether something should be disclosed, it's probably material to someone, so disclose it. Keep in mind that it's often not clear whether a fact is material. There's a certain amount of subjectivity involved.
For example, a woman was raped in a home in a trendy area of Oakland, Calif. This happened before the current owners bought the house. To err on the safe side, the current sellers disclosed this fact, figuring that it might be significant to someone interested in the property.
It was also common knowledge in the neighborhood that the event had occurred. If the sellers hadn't disclosed it, the buyers would surely have found out about it later.
A single woman who was interested in the house decided not to buy. The house had a detached garage, which gave her cause for concern even before she learned about the crime that occurred at the property. Another buyer had no concern at all about the past incident. The house sold. There was no discount in price due to the disclosure.
It takes time to make complete and accurate disclosures. Some sellers take their disclosure obligations less than seriously. It's foolish to shortchange yourself, literally, by failing to make accurate and forthcoming disclosures about property defects. It could significantly affect your net proceeds.
The burden of disclosure doesn't rest entirely on the sellers. Real estate agents are required to disclosure material facts. And buyers have a responsibility to protect themselves by thoroughly inspecting the property before deciding to proceed.
THE CLOSING: A well-inspected property, complete with sellers' disclosures, protects all parties involved.
Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author.