What is a seller’s disclosure?

Woman carrying documents, including a seller's disclosure, walks into a house with a "for sale" sign on the lawn.Image: Woman carrying documents, including a seller's disclosure, walks into a house with a "for sale" sign on the lawn.

In a Nutshell

A seller’s disclosure is a legal document a home seller must provide when you make an offer on the house. It should list any known problems with the home you should be aware of.
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When you buy a house, you have to provide all sorts of information about your finances. The seller has some requirements to meet, too.

A seller’s disclosure is a form that home sellers must provide that lists important features of the house and any known problems that these features have. The requirements for what must be disclosed vary from state to state, but generally the disclosure should alert you to defects the home may have before you close on the purchase.

We’ll go over how a seller’s disclosure works and what you should do when you receive one.

How does a seller’s disclosure work?

The seller’s disclosure is a legal document required by many state laws to be provided to potential buyers before a residential home is sold. In 1985, California became the first state to require such a disclosure, and most of the country followed suit over the next decade.

Typically these disclosures require sellers to let you know about any material defects in the home that you may not be able to discover during a home inspection. But sellers generally don’t have to go looking for problems with the house — they only have to disclose conditions they know about.

Seller disclosures may be required in most residential real estate transactions depending on state law, but you may not get a seller’s disclosure if the home is newly built and has never been lived in. Disclosures also may not be provided during a foreclosure sale.

It’s important to note that the seller’s disclosure is different from the closing disclosure you’ll receive from your lender. The closing disclosure lists all the money you’ll need to pay to close on the home, the terms of the loan and your monthly payment. You’ll get this at least three days before your closing date.

Are certain conditions legally required to be disclosed?

Federal law requires seller disclosures to include any known presence of lead-based paint or lead-based paint hazards for buildings constructed before 1978, according to the Environmental Protection Agency.

But in general, seller disclosure requirements vary by state and are determined by state statute. Most states require sellers to go through a lengthy checklist and provide information about the age and condition of the various systems, appliances and other key features of the home.

Sellers may need to say whether or not these components are working or not, or whether the seller knows of any problems with them.

Information about the following specific features is frequently required to be disclosed:

  • Age of the home and roof
  • Whether the seller currently lives in the home
  • Presence of hazardous materials, like asbestos, radon gas or lead paint
  • Defects in the home’s electrical system, plumbing, heating and cooling, or other systems
  • Water leaks, water damage, flooding or flood damage
  • Pest infestations, including damage from termites or rodents

Some states require the seller to disclose whether the home was previously used to manufacture methamphetamine or is currently involved in any litigation. If a home is part of a homeowners association or condo owners association, the property disclosure may also include information on whether there are any restrictions imposed by the association, and any dues or fees required to be a part of it.

There’s generally also a requirement that the seller disclose any other known problems that aren’t covered elsewhere on the form.

But some states allow the home seller to simply state that they’re making “no representation” as to the condition of the property. Essentially, this means you’re buying the home as-is.

Other states don’t have disclosure requirements. In these states, sales are known as “caveat emptor,” which means “buyer beware.” In a caveat emptor state, the responsibility is on you, the buyer, to do an inspection and determine if there are any issues with the home you’re not comfortable with before moving forward.

When do you receive the seller’s disclosure?

This also varies by state and is determined by the seller’s disclosure laws. In many cases, you’ll get the seller’s disclosure form before you make an offer on the property. The form will be ready for all prospective buyers.

But in some states, the seller must provide the disclosure a certain number of days after your offer is accepted or a certain number of days before closing.

What to do with the seller’s disclosure

Review the seller’s disclosure notice carefully and talk it over with your real estate agent. Before you move forward, you’ll need to sign the property disclosure statement acknowledging that you received it.

You’ll still want to do your own home inspection of the property, probably using a licensed home inspector. Make sure you’re comfortable with the disclosures, and consider hiring a licensed contractor or other professional to give you an estimate of how much it will cost to fix any issues brought up. You may also want to consider negotiating with the seller to make repairs before closing on the sale.

Can you walk away after receiving the seller’s disclosure?

In many cases, yes — but state law may have a say. You generally have a chance to back out of the sale within a certain number of days after receiving the seller disclosure statement. Also, if you don’t get a seller’s disclosure and the sale doesn’t fall under one of your state’s exemptions, you may be able to cancel the purchase without penalty.

What to do if you find problems after closing

If you move into your new home and discover a problem that the seller didn’t disclose — like roof leaks, a flooding basement, or a failed septic system — you may have some legal recourse.

Typically you can sue the previous owner of the home if you believe they knew about a defect that they didn’t disclose. If the court finds the condition should’ve been disclosed, you may be entitled to receive monetary damages. Any misrepresentation may get them in legal trouble as well.

You’ll want to discuss the matter with a real estate attorney and determine the best way to move forward.

About the author: Andrew Dunn is a veteran journalist with more than a decade of experience as a reporter and editor at North Carolina news organizations, including the Charlotte Observer and the StarNews in Wilmington. In those roles,… Read more.