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Home Disclosures and Material Facts

What Should Sellers Disclose to Home Buyers?

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seller disclosures and material facts

Most disclosures include some type of material facts statement.

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By law, real estate agents cannot fill out any sellers' home disclosures unless the agent is the seller or a party to the transaction. However, that doesn't stop some naive agents from completing disclosures on behalf of their clients and opening themselves up for potential lawsuits. After all, it's mostly lawsuits that have prompted the creation of many of the disclosure forms agents ask sellers to complete. If your agent can't tell you, ask a lawyer if you need to sign every disclosure handed you.

Federal Disclosures
Every state has its own laws regarding disclosures, so the forms will vary depending on where you live.

A federal disclosure such as Lead-Based Paint is required for all transactions if the home was built before 1978. The disclosure also gives the buyer 10-days to conduct inspections for lead-based paint, unless that time period contingency is waived in writing. It's considered good practice, however, to give every buyer, regardless of where she lives and regardless of the type of property she is under contract to purchase, the disclosure regarding lead-based paint. The potential for a lawsuit is too great to do otherwise. Besides, even though it's prohibited, there are still places where lead paint is sold.

Material Facts
Material Facts are commonly referred to as anything that would affect the buyer's decision to purchase or the price and terms the buyer offers. In other words, if you have knowledge about a defect, it should be disclosed. In California, sellers are to notify buyers if a death has occurred on the property within the last 3 years. Some buyers are creeped out by knowledge that a seller died in the house.

A seller once asked me if she should tell the buyer that her husband died in their bedroom five years ago. Although the law doesn't require it, because the death occurred outside of the three-year window and because the buyer did not ask about it, I suggested she disclose this to the buyers, and she did. Moreover, if she had chosen to withhold this information from the buyer, I would have had to disclose it because now I had knowledge of a material fact.

Causes of Death
Many home buyers are fine with news of a death occurring in the house as long as it wasn't violent or gruesome. There are also buyers who believe homes are haunted by former occupants who died in the house. If you have specific details, you might want to consider sharing it with the buyer unless it pertains to AIDS. Check with your local laws and a real estate lawyer for advice about deaths surrounding AIDS because in some states, AIDS falls into a protected class and could be subject to discrimination claims as well. There are times you're darned if you do and darned if you don't.

External Disclosures
Some states require disclosures about items that affect or could affect the property such as:

  • Earthquakes
  • Natural Hazards
  • Zoning Changes
  • Flood Zones
  • Fire Hazards
  • Noise Pollution
  • Ground Pollution
  • Air Pollution, among others.
Due to the volume of lawsuits, the California Association of Realtors publishes a number of disclosure forms for buyers, some of which tell a buyer that if she purchases a home on a golf course, errant golf balls might break her windows. Why? Because a homeowner who bought on a golf course once sued for non-disclosure when golf balls smashed her picture window.

Do You Need to Disclose Every Home Repair?
If I were personally disclosing the condition of my own home to a buyer, I would not use the term "repair," because it could be deemed to imply that the defect was permanently corrected. But if I had called a plumber to fix a leak under the sink, I would disclose:

  • The pipes once leaked.
  • I paid ABC Plumbers $175 to stop the leak.
  • The pipes have not leaked since.
Are the pipes good as new? I don't know. Probably not. I'm not going to guarantee it, however.

In lots of cases, home buyers feel a sense of relief if they know certain things have been repaired. It brings a security to buyers if they know a seller has:

  • Replaced a roof
  • Upgraded electrical & plumbing
  • Bolted the foundation

Foundation Problems
In areas with basements, this is a huge issue, as are problems surrounding wet basements. But so are defective slabs. I represented a seller whose newer wood floor showed discoloration in spots. Was it due to moisture? The sellers didn't know. We simply removed the rugs, disclosed the discoloration to the buyer and offered a $5,000 credit for new floors, which the buyers accepted without further discussion or fuss.

What About Rumors?
Generally speaking, unless you will violate a state or local law by disclosing, if you have knowledge of a defect or material fact, then disclose it. If a neighbor repeated a rumor, and you have not verified nor disproved the rumor, you might want to consider telling the buyer about the rumor. Follow the Golden Rule. If you would like to know, your buyer probably does as well. Typically, buyers aren't upset by receipt of negative information. They get upset and call a lawyer when they feel they have been duped, deceived or lied to.

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

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