If you’re planning to put your home on the market, whether you’ve owned it for three years or 30, you’re probably well familiar with all its quirks and kinks, good and bad. Before you list it, it’s important to know that any problems you’re aware of need to be disclosed to potential buyers up front.
Although most buyers will decide to have a home inspection performed before they commit, even a professional home inspector may miss some issues. As the seller, you are obligated to abide by state and federal regulations regarding known facts about the property. Of course, it might pain you to reveal problems that could scare off buyers, but it’s best to be frank about any problems before your house goes under contract. Otherwise, you risk a potential lawsuit if, after the sale is complete, the buyer finds a problem that you were probably aware of.
The majority of disclosure issues fall under state regulations, while federal laws apply to just one area: lead paint. If your house was built before 1978, it must be checked for lead paint and a disclosure form completed.
Your real estate agent can be very helpful when it comes to understanding your state’s regulations governing disclosure. Some states allow sellers to provide a disclaimer form stating that the homeowner has no information regarding issues with the property, while some require a disclosure form listing more detailed information.
Some areas require homeowners to disclose knowledge about natural hazards, like whether the house is located in a flood zone, or in an area vulnerable to earthquakes. Pollution hazards, potential zoning changes, or historic district regulations that may affect the home’s use of future renovations may also also subject to disclosure. Previous problems with mold, termites, a leaky roof, plumbing or electrical concerns should be earmarked for disclosure, in addition to any repairs or renovations you have made to the property.
One issue that can be of particular concern to sellers a home that has been the scene of a crime or if someone died in the home. Disclosing this kind of information can stigmatize the property, but if the buyer discovers this kind of information after the purchase, they may be able to sue the seller if they believe the property’s history will harm its resale value.
Benefits of disclosure
Just as there are benefits to letting prospective buyers know about a home’s positive features, there really can also be a benefit in being up front about the home’s defects. Put together a file of maintenance visits, appliance receipts, insurance claim records and any other paper trail that will tell a buyer what work has been done and to prove you have made sure the home was cared for over the years. Any ongoing problem that you have not fixed yourself and prefer the buyer to handle is best presented up front. This way you can negotiate the repair cost and time frame fairly.
In fact, if you aren’t sure if an inspection will turn up any problems, it might make sense to enlist a home inspector yourself to know what you can expect before you put your property on the market. Once you have your own inspection, you can present it to potential buyers or fix any problems that the inspection unearths yourself before listing the property.
Openness is always the best way to go. Non-disclosure can cause major issues during escrow; you could lose a qualified buyer, be forced to renegotiate the price or relist the property altogether. Self-disclosing, pre-inspections and putting it all out there prior to a buyer making an offer helps to usher the sale along and make the process simpler. It’s smart business, and ultimately saves time and money.
Always inform the listing agent of any defects in the home that you’re aware of. Your agent can help you strategize a plan of action most beneficial to you that protects you legally and promotes a trouble-free sale. Remember, your listing agent is on your side. Keeping him or her fully informed will enhance your credibility if problems arise during the sale.