Decoding the seller’s disclosures

When a home is being sold, most states require a seller’s disclosure to be produced before a buyer is locked into their purchase. The document helps the buyer know exactly what they’re getting into. Let’s take a deeper look at what a seller’s disclosure covers and how it comes into play when buying a home.

What is a seller’s disclosure and why is it important?

A seller’s disclosure is drafted on behalf of the seller and spells out everything the owner knows about the home — especially any outstanding issues with the property. The seller’s disclosure helps the buyer to make an educated purchase and to back out of the transaction should any undisclosed issues arise. This document also protects sellers from being sued after the title transfer.

When do you receive a seller’s disclosure?

The rules vary by state, but buyers usually receive a seller’s disclosure after an offer has been made, before the title is transferred — though some sellers may make disclosures available earlier. The purchase offer typically includes the buyer’s requests for the seller’s disclosure, including the due date and any contingencies. The seller will then provide the completed disclosure sometime during the closing process or before making an offer, giving the buyer an opportunity to back out before the purchase becomes binding.

What’s in a seller’s disclosure?

The contents of seller’s disclosures also vary by state. If you want to know what information is typically included in the seller’s disclosure for a property like the one you're looking at, an agent or attorney for the buyer or seller may be able to provide an outline. A seller's disclosure is typically several pages long and may include information such as:

• Deaths that took place in the home
• Property hazards, like environmental risks or proximity to toxic waste
• HOA (homeowner’s association) information
• History of repairs
• Liens, or legal claims, on the property that could affect the title
• Known neighborhood nuisances
• Details disclosed by previous owners

The above information is typically recorded in a questionnaire format using “yes,” “no” or “unknown” as answers. There is additional room for notes and further explanations, which are not required but may help prevent any miscommunication or legal recourse from the buyer.

Note that seller's disclosures aren't necessarily all encompassing. The information is provided to the best of the seller’s ability, and the document is still legally sound if the seller was genuinely unaware of an issue that exists. However, if the seller deliberately withholds an issue about the home that the buyer discovers after completing the purchase, the buyer may have grounds to sue for damages.

In summary

The rules surrounding seller’s disclosures vary by state but are overall meant to keep the buyer informed about the potential nuisances of a property before the purchase becomes binding. If the buyer moves forward, then the document also protects the seller from legal recourse over the issues once the title is transferred.