Seller Disclosures: What Are They & How Do You Fill One Out?

Posted by Lauren Schneider on Tuesday, May 25th, 2021 at 8:52am.

Seller Disclosures: What Are They and How Do You Fill One Out?It's easy to see why selling a house can feel stressful. It's a process full of things that a homeowner may have never encountered before—and often things that are quite serious. One of these elements is the "Seller Disclosure." A Seller Disclosure is an important document that the seller will fill out before closing. And the consequences of filling it out incorrectly could be significant.

Here's an introduction to understanding Seller Disclosures.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

What Is a Seller Disclosure?

A Seller Disclosure is a questionnaire that the seller fills out regarding the status of the property. The seller will be asked questions such as whether the property has flooded or whether the property has lead-based paint. It's important to note that answering "yes" to any of these questions isn't necessarily a deal-breaker. Rather, it's just something that the buyer needs to know about to remain safe.

Some things that buyers might ask about the property include:

  • Is there a Homeowner's Association?
  • Has the property flooded in the past?

That being said, if the Seller Disclosure includes something important that the buyer wasn't aware of before (such as asbestos), they may pull out of the sale. That can make filling out a Seller Disclosure feel a little nerve-racking.

What Does the Seller Need to Disclose?

The seller needs to answer the questions to the best of their ability directly.

If the seller doesn't know whether, for example, there's lead-based paint, they can say that they don't know. But they also shouldn't say "no" unless they are sure of it. If they didn't get the property tested, they shouldn't say an emphatic "no."

In fact, unless they've tested and verified things themselves or they have documentation from a previous owner, they should usually say that they don't know. This puts it into the buyer's court; the buyer needs to verify everything on their own.

This isn't to be difficult. It's simply that, absent any testing, they really don't know. Their property may not appear to have any flooding damage, but they may be unaware that it flooded and was repaired right before they themselves purchased it. If they haven't lived in their house since it was built, they can't really know everything that's happened to it.

What Can the Seller Not Disclose?

While it can be nice, the seller doesn't need to disclose anything that the form does not ask about. For instance, they might be aware that they repaired a specific wall. But if the damage wasn't structural and there's no reason for the buyer to know about it, there's no reason to outline every little thing.

For the most part, if they specify something they don't need to, they will encounter it as a problem. Something as simple as saying, "the hardwood floors were refinished because they had been damaged," may make the buyer wonder why the damage occurred, even if it was something as mundane as wear-and-tear. It's a bit like showing a home in that, so long as it won't impact the buyer, some things might be better left unsaid.

So, the general rule on a Seller Disclosure is only to provide the information that is asked for, including the information that the seller feels is truly relevant. If it isn't asked for and it's something mundane, such as the above, they don't need to disclose it.

The exception, of course, is for things that sellers are required to disclose, such as disclosures that came with their deed. Frequently, these are things like flood plains, notices of ambient noise pollution, and lead-based paint. Sellers should also be aware of and disclose latent defects, home issues that can't be reasonably expected to be caught by a standard inspection.

What Happens If Issues Are Discovered?

So, the seller fills out the Seller Disclosure to the best of their ability. Then, a month after the sale of their house, they get an angry call. The buyers have found toxic mold throughout the walls of the house.

If the seller didn't know about this and no inspections caught it, they're not liable. Inspections are part of a due diligence process; it may be the inspectors who are liable, it may be someone else, but it isn't the seller.

However, if it can be proven that the seller did know about the issues and didn't disclose them (and they were asked about), then they might be liable for damages. This could happen if, for instance, a buyer could show that the seller got termite treatment just before the sale of a property but didn't inform the buyer that termites might be a problem.

When the seller fills out a Seller Disclosure statement, it's in their best interest to answer as truthfully as possible. At the same time, they shouldn't volunteer information that isn't asked for because it could obfuscate the sale, and they shouldn't state anything that they don't directly know. The seller's real estate agent can help them determine what is and isn't relevant and whether there is anything additional they should disclose.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

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