Most people think property disclosures are intended to only protect buyers, but making a full property disclosure benefits home sellers as well. When selling a house in California, sellers are required to provide an accurate disclosure statement and doing so really benefits both sides in the transaction. An honest disclosure statement will help the seller protect themselves from future legal action and the buyers will have a better understanding of the home they intend to buy.

Before getting started, it’s important to remember, most real estate transactions go quite smoothly and there are rarely any problems with property disclosures. Homeowner’s should NOT stress over creating their property disclosure statement lists.

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What the Heck is a Property Disclosure Statement

During the course of selling a home, the seller completes a written disclosure statement informing the buyer of what they know about their property and neighborhood. This might include roof leaks, leaky pipes, mold or any other hazardous condition. It also might include any disputes with neighbors or local construction projects. Using good common sense, the seller should disclose what they know about the property, but they also might be responsible to disclose the not so obvious. After all, in most instances no one knows the home and community better than those persons living there. Although we say, making a full property disclosure benefits home seller, the buyer will benefit the most!

What Should Sellers Disclose

All sellers must disclose all facts that are material. Whether facts are material may depend on the circumstances or intentions of each individual buyer. Basically, a fact is material if a buyer would not have entered a contract with a seller if the fact was known.

Legalities Surrounding Home Disclosures

First of all, here at the Gregory Real Estate Group, we are realtors, not lawyers. If you are planning to sell a home we have the experience and expertise to help guide you through the full property disclosure process. However, if you have special conditions or concerns we also advise consulting with a legal professional.

One thing we do know is, anyone can sue another, with or without good reason. Do a Google search for “real estate disputes” and you’ll see for yourself. Just remember, as the seller, you have certain responsibilities and claiming ignorance won’t work. The bottom line is, if you sell your home and later a problem develops, you could be held responsible. Again, if you are unsure or have reason to be concerned about disclosure, consult with your attorney.

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Strict California Disclosure LawsNow that we have the legalities out of the way, we can share that property disclosure laws do change. It should be noted, all recent changes with regard to disclosure laws tend to lean in favor of the buyer. Here in California home sellers and their realtors must complete a plethora of paperwork, including a Natural Hazards Disclosure Statement, Transfer Disclosure Statements, Market Conditions and more. Unless it’s a distressed property such as a foreclosure, there is no such thing as selling a home “as is”.

Broker/Realtor ResponsibilityIt’s NOT just the seller who must make the disclosure. The real estate agents are also required to make a reasonable inspection of the property and disclose any observations to the buyer which could indicate a problem. The agent is not going to be aware of any hidden defects and the agent is not a contractor or home inspector. However, the agent is still expected to at least notice any obvious red flags. Examples might include obvious water stains on the ceilings, uneven floors, cracks in walls, smell of dampness, etc.

Buyers ResponsibilityAlthough most of the responsibility of disclosure is on the seller, the buyer has obligations too. The buyer must do more than only rely the disclosures provided by the seller and agents. The buyer must also exercise reasonable due diligence to investigate the property being purchased. If there is an obvious defect in clear view, of course it should be in the disclosure statement, but also, the buyer should be expected to notice that. This is to keep the buyers from taking unfair advantage of disclosure laws that are intended for the buyer’s protection.

Research the Neighborhood and HOA

If you’re the buyer or the seller, we encourage you to conduct your own research about the local neighborhood, local HOA, schools and more. If you’re the seller you’re expected to be aware of what’s going on with your neighbors, local homeowner’s association, schools, etc!

Home Seller’s Disclosure ExampleRecently a large construction project had begun on a new High School. Because this was such a large project and located within a residential neighborhood, sellers were required to disclose the fact that construction was in progress and expected to last a period of time. That’s because of any potential problems the buyer might encounter as a result of the construction. This might include things such as grading, dust, noise, road work, etc. As the home seller, you might think disclosing something like this was unnecessary, but the law takes property disclosure very seriously, so you must too!

What Must the Home Seller Share?

The home seller should honestly share any problems of which they are aware, but it goes further. Sure, the list might include a leaky roof, poor landscape drainage, or a crack in the slab, but it could also include problems with neighbors, fence line disputes or just about anything that might impact the value of the property. If you are the seller, we encourage you to make your disclosure list as complete as possible. The more thorough the list, the more protection for yourself and your buyer.

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Common disclosures might include pests, termites, problems with the HVAC, electrical, plumbing or appliances. Think about unnoticeable problems such as an electrical circuit breaker that has a history of tripping. Your disclosure papers may also ask sellers if there are any bankruptcy proceedings or property liens. Certainly, these items would seem obvious, but you don’t want to miss anything.

But, I Didn’t Know!

What if the home seller was an elderly couple and they had never seen the condition of their concrete slab foundation. After all, the slab had been covered with carpet for as long as they owned the home. So, the couple sells their home, but a few months later while doing a carpet replacement project, the buyer discovers a small structural crack in the slab. Now the buyer is upset and accuses the seller of failing to disclose the crack in the slab. What happens next? The seller was honestly unaware of the problem, and of course it didn’t turn up during the home inspection. Who’s responsible? Unfortunately, we cannot answer this question. Although it would seem the seller is not at fault, who knows the outcome. In many cases, if it’s just a small problem, the buyer will fix the crack, install the new floor finish and move on. On the other hand, this could turn into a legal action.

Be Honest and Use Common Sense

Our advice on making disclosures is to just be honest! Keep it simple, but be thorough. You can’t disclose what you don’t know, so we also advise obtaining an independent home inspection. Yes, the home inspection is usually for the buyer, but the seller benefits as well. If something pops up during the inspection take care of it, or work it out with your buyer. At least it’s documented and you can show you made a good faith effort and went over and above to discover any defects you might have not been aware of.

Research the Buyer

If you’re the seller, you might also want research the character of the of the buyer BEFORE accepting the offer. Unfortunately there are dishonest, sue happy people out there looking to take advantage of any situation. It won’t hurt to do a little online investigating to learn of the people we’re dealing with. It’s common practice for service companies to research clients before entering into a contracts. It’s simply a sound business decision that can apply to home sellers as well.

As agents, we do at least a little research on every person we might do business with. Our primary objective is to protect the interests our clients. We also want to do our part to protect the real estate industry and our community at large.

Conclusion

If you’re selling your home be honest with your disclosure and treat the buyer they way you would like to be treated. No trickery, no holding back and no games. Regardless of the outcome, being fair and honest will go a long ways to help avoid hard feelings and possible legal actions.

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