Many of the claims made against sellers today are related to disclosures that were not properly relayed to the buyers before closing.
In 2006 home prices were escalating so fast that buyers often overlooked sloppy disclosures. They were happy to own a home in a market where prices in many places rose monthly. Today, home prices are still declining in many areas. Buyers are more likely to make a claim against sellers if they discover after closing that the sellers were less than candid with their disclosures.
Seller disclosure requirements vary from state to state, but the trend nationally is to require that sellers disclose known material facts. A material fact is one that might affect a buyer’s decision to buy or the price offered. It’s a good idea to discuss your disclosure obligations with your real estate agent or attorney before you put your home on the market.
In states that have mandatory home seller disclosures, like California, sellers often complete the mandated forms in a hurry without providing thorough explanations of current and past problems. Your real estate agent should read your disclosures and alert you if they seem incomplete.
If you should have the misfortune of ending up in court, a judge may not look favorably on slipshod disclosures.
Many sellers are busy and feel they don’t have time to devote to what they may see as a ridiculous chore. Completing disclosures may feel like drudgery. But, dealing with an after-closing claim will be far more time-consuming and could be expensive.
Ask your agent to provide you with copies of any disclosure forms you need to complete when you list your home for sale. Read them; they’re designed to help you recall material facts that should be disclosed.
As you prepare your home for sale, make a list of things you see in the process that may need to be disclosed. If you ask yourself if something should be disclosed, it probably should. Check with your real estate professional.
Some sellers fear that if they disclose what’s wrong with their home, buyers won’t buy it. This is a possibility, depending on the severity of the problem. For example, if you disclose that the house needs a new foundation and you won’t pay for it, buyers who can’t afford to make the improvement would probably back off.
HOUSE HUNTING TIP: Buyers appreciate candid and complete disclosures. The time for the buyers to receive the disclosures and any reports you have on the property is before they make an offer. This way you minimize the chance that the buyers will try to renegotiate the contract price after they complete their inspections.
Buyers who don’t have the benefit of reviewing the property information before they make an offer could back out after you’re in contract and they find out about the defects. Why put yourself and the buyers through this ordeal? You’ll have to put your house back on the market and find another buyer. A well-informed buyer is more likely to go through with the sale.
Don’t withhold reports on your property. One seller had two termite reports on his property. One was better, meaning that it recommended fewer repairs. This report was given to the buyers; the other was not.
The buyers wanted a second opinion, so they ordered a termite inspection from another company. Coincidentally, this company had done the second report on the property for the seller. When the buyers learned of this they sued the seller and won.
THE CLOSING: What you choose not to disclose to the buyers might be conveyed to them by the neighbors after they move into the neighborhood.