Disclosure: What Sellers Need to Tell Buyers

Because of stricter disclosure laws and higher expectations from buyers, sellers have more responsibility to disclose any fact that could affect the sale of the property.

States are cracking down on sellers' obligations to disclose known material facts about a property for sale, especially conditions not readily apparent to a buyer (such as a cracked foundation). A material fact is anything that could influence a buyer's decision to purchase a home or affect the sales price. The major cause of post-sale disputes and lawsuits involve defects and disclosure. Most of the cases could have been avoided if proper disclosures had been made.

Know the Law

Delaware Law Chapter 25, Title 6, requires a seller of residential property improved by dwelling units for 1-4 families to disclose in writing all material defects of the property that are known at the time the property is offered for sale or that are known prior to the time of final settlement. The "Seller's Disclosure of Real Property Condition Report" is the form approved by the Delaware Real Estate Commission and must be completed and updated as necessary for any material changes occurring in the property before final settlement. This report is given to all prospective buyers prior to the time the buyer makes an offer to purchase. And once signed by both the buyer and seller it becomes part of the purchase agreement. Pennsylvania disclosure regulations are similiar to Delaware. Maryland regulations provide two options to sellers; to complete a disclaimer statement stating that the owner is selling the property "as is" and makes no representations as to the condition of the property or to complete a disclosure statement disclosing defects actually known by the seller. In addition, certain transfers of residential property are excluded from the Maryland requirement.

In completing the disclosure form sellers often wonder what they should disclose. Usually a seller is required to disclose any known material facts that are not readily apparent to a buyer, although this is not the case in every state. A basement that floods, but where all evidence of flooding has been removed prior to selling, is an example of a material fact. If the house were sold during the summer months, the buyer would have no way of knowing about this drainage problem unless the seller told him.

A good rule of thumb for disclosures is: If you're asking yourself if something should be disclosed, it's probably material to someone, so disclose it. You want to avoid being sued after closing by buyers who feel that material information was intentionally concealed from them. If you have any questions about what should and shouldn't be disclosed, I can provide you with guidance or you may want to consult a knowledgeable real estate attorney.

FIRST-TIME TIP: Buyers who are purchasing a home in a state that doesn't have a seller disclosure requirement should consider asking the seller to complete a generic disclosure form.

Even when you do have the benefit of a seller disclosure statement on a property, you should not rely on this alone for your information about the property. Most disclosure forms state that the report is a good faith effort by the seller to make the disclosures required not a warranty of any kind and not a substitute for inspections. Be sure to include a home inspection contingency in your purchase agreement.


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