Buying a new home is a difficult process – there’s a long list of procedures that you must go through in order to purchase a new home. Right from viewing homes to finding a realtor and then finally deciding on the place.
However, there’s another hoop you probably haven’t thought of to jump through: it’s known as the Real Estate Disclosure or Seller Disclosure.
No matter how pretty and new a house may look on the outside, there could be many minor and major faults in the house. To protect a buyer’s interest, the added step of real estate disclosure is put in place. Zumbly’s here for you to simplify the home buying process. With that in mind, here’s our guide to real estate disclosures.
Related: Buying a House Checklist
What is a Real Estate Disclosure?
Real estate disclosure statements act as a safety net for both buyers and sellers. In this statement, a seller has to disclose any possible issues that they are aware of which any potential buyer should have the knowledge of.
These disclosures can be minor ones or major ones, from a leaky bathroom to a possible property boundary issue with the neighbor. By making a real estate disclosure statement, a seller saves themselves from any legal action and a buyer is in the position of making a well-informed decision.
The legality of the disclosure statement varies from state to state but a seller is responsible for up to 10 years at most.
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What is included in the disclosure?
The information that a seller is required to disclose varies from state to state and can even differ from county or city level. The general rule of thumb is that they have to mention any upgrades and renovations done to the house and whether or not they have the required permits. If the statement doesn’t mention any permits, it’s best to check with the city building reports for authenticity and verification.
There are some disclosures that are mandatory to include in a statement, while some of these differ from state to state
- Lead Paint
If the home is pre-1978, a document has to be signed where both parties acknowledge the presence of lead paint regardless of it being present or removed. However, if a seller isn’t aware, they don’t have to disclose it.
Downpayment and Closing Costs
Before you begin your home search and homebuying process, is it a good idea to check your own credit. Most lenders see your FICO score, so make sure that you are using a FICO score. This will grant you the time that is necessary to work on further building your credit score if required. Even the slightest increase in your credit score can make a big difference for you in the long run.
- Paranormal Activity
In most states, sellers are required to disclose whether or not the house is ‘haunted’ or there has been an exorcism performed on the property. The law varies from state to state. These properties are often called “stigmatized properties”.
- Emotional Distress
Emotional distress is when there has been a traumatic event such as a murder or a suicide in the home. In some states, the period of this disclosure is only upto 3 years, whereas in some states sellers are not obligated to disclose it unless a buyer asks.
The federal government requires that the presence of asbestos be disclosed by a seller.
Sellers are required to disclose any and all incidents of pest infestation, this ranges from snakes, rats, termites, bed bugs, etc.
- Neighbor Disputes
Neighbor disputes and property boundary issues have to be disclosed by sellers in their real estate disclosure statement.
- Faulty Foundations and Structural Issues
Perhaps the most obvious ones are any major and minor structural issues which include faulty foundations, faulty drainage, faults in major appliances, etc.
When do buyers receive the disclosure statement?
There are two main milestones where a seller releases the disclosure statement.
- After an offer is made
In some circumstances, sellers release their real estate disclosure statement after a buyer makes an offer. This often comes with inspection documents and other legalese. In such circumstances, buyers have the option of backing out of an offer if they aren’t comfortable with any of the mentioned issues.
- Before an offer is made
Some sellers release their disclosure statements before an offer is made. This gives buyers the flexibility to either back out or to put an offer after analyzing the possible risks and repair costs if any.
Disclosure statements are a great way for buyers to make an informed decision and it can also help them choose between multiple sellers. An offer can only move ahead if both parties have signed off on the disclosure statement.
The difference between a seller disclosure and an inspection
Is a real estate disclosure the same thing as an inspection?
The simple answer is no.
The difference lies in the term ‘knowledge’. A seller can disclose only those issues which they are aware of. They aren’t obligated to carry out an inspection in many states. This means that whether or not an issue finds is way into a disclosure statement solely depends on the seller’s knowledge of its existence.
In the absence of a third party inspection, it is recommended that one be carried out by a buyer. The inspection involves analyzing all major and minor aspects of the house and a detailed inspection report regarding the status of all elements is provided by a third party independent inspector.
Closing the deal
As a buyer, there are many rights one can exercise. This involves asking questions about any of the disclosures and moving ahead with the deal only after receiving a satisfactory response. In most cases, there is a valid and genuine answer to a particular issue.
However, if one feels uncomfortable, they can always back out without forfeiting the deposit (if paid).
The main thing to remember is that a real estate disclosure includes only known problems. Hence, there is almost always a grey area with these disclosure statements. Many states do punish sellers or the real estate agents for failure to disclose issues, but as a buyer, the smart thing to do is carry out an inspection, even if it is for mental peace.
After all, buying a house is a huge, long-term investment and the process should be a pleasant one not filled with expensive repairs or court cases against the seller. Check out our homes at Zumbly to buy your house the easy way.
Related: Easy Guide to Leasing and Renting
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