How Important is the Seller's Disclosure Notice?

How important is the seller’s disclosure notice for a home seller?  Short answer, VERY!

More issues arise for home sellers after closing from failing to disclose a latent defect than anything else.  Often times it could have been avoided with a simple check in a box and brief explanation.  The Texas Real Estate Commission provides a promulgated disclosure that satisfies the disclosure requirements for a seller in Texas.  Here is a copy that can be downloaded: TREC Seller’s Disclosure Notice.

There is a fine line between OVER disclosing things that are not required and meeting the minimum disclosure requirements.  When one of our sellers asks for advice when filling out the disclosure, our answer is usually pretty simple, disclose, disclose, disclose.  In order to avoid legal liability, be honest and forthright.

Do keep in mind though that the typical home seller is considered a lay person with no intimate knowledge of current code standards, structural integrity, mechanicals, roofs, etc.  So don’t feel like you have to transform in to a professional home inspector.  Rather, focus on things in which there is no question whether or not you were made aware of something that IS a problem.  For example, if a professional trade person or someone with a license/certification has informed you of a defect like Mold, Hail damage, foundation problems, water leaks or other water penetration issues then yes, failing to disclose that can put you in a very precarious legal situation.  Especially if any information was presented to you clearly in writing.  Below are some frequently asked questions we come across.

What should I do if there was a previous problem that has been completely fixed?

• Some previous issues/conditions must be disclosed even if they have subsequently been fixed.  A few examples are foundation, water penetration, mold etc.
• If the issue was insignificant or quickly fixed, then describe that in detail so the buyer can see you are not hiding anything and were diligent in taking care of the problem.  If there isn’t enough room to elaborate on the Seller’s Disclosure Notice itself, attach a separate document with a detailed explanation.

What if I don’t agree with an inspection or repair item that was brought to my attention?

If you have a report that you don’t necessarily agree with, there are methods to negate those findings and make a home buyer feel even more compelled to purchase your home.  For example if you had a foundation company look at your home due to a potential issue and they provided you with a report that you feel is inaccurate or more than what would be required to fix the problem.  An un-biased third party solution is an engineer.  They have no “skin in the game” and there isn’t any concern of them trying to inflate a problem to make more money.  Also agents and buyers are going to be much more inclined to trust a structural engineer than a sales rep for a foundation company.

What could happen to me if I fail to disclose a known defect?

The quick answer is you could get sued and in extreme cases, the sale could be rescinded. To piggy back off the example above, I’ll give you an example of how deciding not to disclose a foundation repair bid can come back to bite you.  Many of these companies keep a database of their “bids” so if someone calls back at a later date, they are in the system.  The database is usually based on the address rather than a name (but your name will be in the system as well).  So if the buyer has concerns about the foundation after they  purchased the home and by coincidence call the same foundation company out, guess who’s address and name will already be in there system?  Then guess who’s going to get a call or a nasty letter from an attorney?

I think my house has an issue but I have never had it professionally checked out, do I have to disclose that?

Like I mentioned above, the average seller can’t reasonably be expected to diagnose complex issues with their home.  But, the buyer is almost certainly going to get the house inspected and if you can see the problem, they are likely to find it.  Failing to include an easily visible problem on a disclosure is a quick way to lose trust with a buyer and have a deal potentially fall apart.  If you are fairly certain the issue is going to come up, it can be good to be pro-active instead of re-active.  If it can be fixed within budget, that’s great, do that.  If not, having a bid and offering a credit can be a way to overcome that issue with a buyer.

In Texas, the burden of proof is on the buyer to prove that the seller knowingly failed to disclose a latent defect that has caused or will cause future damages.  But like anything else, if a buyer feels slighted, they can sue for almost anything.  The more thorough your disclosure is, the more you are protected against a frivolous claim.

Long story short, homes can have problems, it’s just the nature of being a home owner.  Most agents and inspectors will candidly explain that to their buyers.  In my experience, a spotless disclosure with absolutely no issues can be more suspicious then one that has a few items listed.  As long as there is an explanation paired with information about the repair, you are likely to still have a smooth transaction and clear yourself of that liability.