What is a Seller’s Disclosure? Here’s Why It’s Important

Whether you’re about to purchase a new condo or sell your current home, there is a lot to learn and paperwork to sign. One of these critical documents is called a seller’s disclosure.

A seller’s disclosure, also known as a property disclosure, is a document that sellers are legally required to provide buyers. This piece of paperwork will include all the undisclosed details related to the property that negatively affect its value. So before you finalize the buying or selling of a home, read on to find out why a seller’s disclosure is an essential part of any real estate transaction.

Why is a seller’s disclosure important?

A seller’s disclosure is a legal document protecting both the seller and the buyer. It protects the buyer by informing them of any issues or defects the home and surrounding property may have. It also safeguards the seller from being sued by the buyer after the transaction if the seller’s disclosure was completed correctly.

For buyers

The goal of the seller’s disclosure is to inform the buyer of the property’s history and future repairs so buyers can make an informed decision. If the seller’s disclosure reveals a major issue with the home, buyers can back out of the deal without losing earnest money. Any problems documented in the seller’s disclosure can also give the buyer some negotiating power, such as the price of the home or requesting the seller make any necessary repairs.

For sellers

The seller’s disclosure can only protect the seller if done accurately and honestly. If done correctly, this document will protect the seller from being held legally liable for any issues that may develop with the home in the future. This is only the case if the seller made the buyer fully aware of all home defects before the completed purchase. The seller only needs to disclose what is required by their state.

When should a seller provide the disclosure?

Typically, a seller’s disclosure is provided a few days after mutual acceptance during the closing stages of the transaction. However, some sellers may choose to disclose as early as home tours. The listing agent must be transparent with buyers about any known issues with the property, so some will do this upfront to make the process quicker. Usually, your state will have a standard form the seller fills out, while some states allow sellers to disclose more casually. Before the seller’s disclosure is signed, the buyer can still back out of the deal. However, once it’s signed, the buyer only has a few days to back out of the agreement without consequences.

How a seller’s disclosure can impact a home sale

The seller’s disclosure can significantly impact the home selling process if a property has substantial issues. Buyers will need to decide if they’re comfortable with any significant issues disclosed and get a professional inspection to assess what it takes to handle the problem. As a buyer, it’s important to carefully review the seller’s disclosure packets with a real estate agent and during the home inspection.

What are the standard real estate disclosures?

Each state has different requirements for seller disclosures – it’s best to check with your state’s guidelines. They can vary on a county basis, so make sure to check there as well. To help you get an idea of what to expect, here’s a list of standard disclosures:

Neighborhood nuisances: Often refers to noise or odor from a source outside the property that could irritate the homeowners.
Hazards: High risk of natural disasters or threats like contamination, lead paint, radon, asbestos, and toxic mold.
Repairs: Any significant repairs the house may need and has had. Significant repairs would include structural, electrical, and plumbing issues.
Water damage: Flood risk or existing flood damage.
Missing items: The seller needs to list any items that will be removed after the sale, such as refrigerators or lighting fixtures.
Death: Sellers are required to disclose deaths that occurred because of the property’s condition or violent crimes that occurred on the property.
Other possible disclosures: Other disclosures could include special historical districts, homeowners associations, and unpermitted improvements.

Not every state requires all of these disclosures. Most required documentation is mandated at the state level, but there are a few federally mandated disclosures. Some federally mandated disclosures include lead paint, asbestos, wetlands, and floodplain disclosures. If you want to know something about the property, you can always ask the seller. Take time to understand what disclosures aren’t required to be disclosed in your state. That way, you’ll know what to ask when the time comes.

As a buyer, will I always receive a seller’s disclosure?

There are several circumstances in which a buyer may not receive a seller’s disclosure – this is known as a “no seller’s disclosure sale.” This means the seller is selling the property without disclosing any defects or issues that the buyer might need to know to make an informed decision. We’ve outlined the basics below, but visit your state government page for further information.

Selling an as-is property
A foreclosure or deed-in-lieu of foreclosure (usually applies to a bank-owned home)
A gift or other transfer to a parent, spouse, domestic partner, or child
A transfer between spouses or between domestic partners in connection with a divorce or ending of domestic partnership
Certain business transfers in which the buyer already had partial ownership of the property (usually applies to rental properties)
Estate sales or bankruptcy sales
Sales in which the buyer waives the right to disclosure. However, the buyer can’t waive certain environmental disclosures, which refer to naturally occurring concerns like mold or flood zones.

If a no seller’s disclosure occurs, there will be a due diligence period. During this time, the buyer will thoroughly inspect the property. If the buyer goes through the due diligence and closing process, about 14 days, without raising any concerns, then they’re deemed to have waived their rights against the seller.

What happens if the sellers fail to disclose issues adequately?

If the seller fails to disclose or actively conceals problems they’re aware of that affect the property’s value, the buyer can sue. The seller can be subject to lawsuits for recovery of damages based on fraud, deceit, misrepresentation, and breach of contract. If the law doesn’t require you to disclose something, it’s best practice to find out if it may impact the buyer.

Even with a seller’s disclosure, don’t skip a home inspection

In addition to the seller’s disclosures, the buyer should always have an inspection done. No matter how thorough or trustworthy the seller may be, a seller’s disclosure is no substitute for a thorough home inspection by a licensed and qualified professional. Most buyers aren’t trained to look for and identify the issues that can affect the average home. Before you buy, it’s in your best interest to get an inspection.

Final takeaways about seller disclosures

The seller’s disclosure is necessary for both sellers and buyers.
There are several disclosures, but not all will be mandatory in your state. Work with a real estate professional to understand your situation better.
In some cases, you will not receive a seller’s disclosure. This is known as a “no seller’s disclosure sale.”
In addition to a seller’s disclosure, it’s recommended to have a professional inspection of the property still.

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