It's one of the most important forms in the Listing Appointment. Perhaps, you guessed that I am referring to signing the Listing Contract. Well, while that is a significant moment, there is another document which has the potential to impact your life in a adverse fashion far beyond the six month term of a listing contract.
The form that I'm referring to is the Seller's Disclosure Statement. In Michigan, it's a two page document in which the home owner is asked to provide details about various aspects of the general condition of their home. It is your opportunity as a home owner to reveal all that you know about issues in your home which may be of concern or interest to a potential home owner.
No home is perfect. Just like human beings, each home will have its' own specific quirks. To a degree these issues, like the imperfections in all of our lives are what make a home unique. You know, little distractions such as the fact that you have to turn on burner #3 first or else the other burners on the stove sputter and fail to light up properly.
Or...perhaps the time the washer on the second floor flooded and leaked into the basement. You may insist that it was cleaned up and repaired...but when the Seller's Disclosure asks about IF there have been ANY water issues...it's referring to ALL past tense events! It does NOT matter if you fixed it. This document is asking for an accurate historical accounting.
You will find Three Major Sections on the Michigan Seller's Disclosure Statement. These sections are divided as follows.
Section #1 ~ Appliances/Systems/Services...deals with the condition of a variety of items such as the condition of your stove and refrigerator as well as if your garage door opener works and if you have a functioning sewer or septic system.
Section #2 ~ Property Conditions, Improvements & Additional Information. This section may at first glance look to be a repitition of Section number one. It is not. The questions and the explanations which may be provided here are of a broader nature and encompass issues which pertain to the welfare of the system, repairs and upgrades made. There are several questions here which pertain to 'historical' knowledge and the age of various aspects of the dwelling. The detail requested on this section may necessitate additional space. This is provided on page 1 or just beneath section #1.
Section #3 ~ Other Items. This section covers aspects of potential ownership conflict such as commonly shared driveways or fences as well as requesting information about structural modifications done with or without the required legal permits. In addition, this section requests knowledge about natural disasters which may have affected the property or operations such as your proximity to landfills, airports or farming operations.
Section #3 also asks you to highlight any Pending litigation which may impact your ability to convey the title to the property is also requested. If you have defaulted on your payments and are in the redemption period, this must be disclosed by your agent to the local real estate board. It may be prudent to disclose the potential for litigation by your lien holder here as well.
Which brings us back to the question about the worth of your home with the leaky basement.
Well, it depends on how you handle the issue. If you choose NOT to disclose the leaky basement and hope that a potential buyer doesn't discover it until the next big rain...the consequences may be worth a lot of money. This is because, in addition to the charge of fixing the problem, you may also have to deal with legal fees and the hassle of some very disgruntled new home owners.
You see, a Seller's Disclosure Statement is designed to protect you. While no one expects you to be an expert and the buyer is responsible for doing their own inspections; completing the Seller's Disclosure as accurately as possible will help prevent potential problems in the future.
A properly completed Seller's Disclosure and a comprehensive inspection by the Buyer are important aspects of ensuring that the home purchasing experience yields few unexpected suprises.
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Lola, in Louisiana the form is 6 pages long and covers many different facets of the home. It's hard sometimes to make a seller understand that it is in their best interest to honestly and completely fill out the disclosure - it's for their own protection. You just condensed into one great post what it took me 6 to do!
Andrew...wow 5-6 pages! We thought ours was long when our one page document became two. In Michigan, we are not allowed to assist in the completion of the form either.
Lisa...6 pages! Michigan sellers have it easy. But you're right...it is in the best interest of the homeowner to fill out the form completely.
If they don't disclose they will be sued and loose - and that you know of the problem you must disclose.
Lola thats a terrific review of the Disclosure Statement - and a good reminder of how critical it is that people fill it out carefully, consciously and honestly!
On point as usual Lola! Disclosure, disclosure, disclosure! It reminds me of the old saying about telling the truth and I'm paraphrasing, "If you tell the truth, you don't have to worry about remembering any small fibs or lies you may have told."
OH Girl...I cannot tell you how close this one hits to home. I was showing a beautiful home recently...standing in the basement looking at long term water damage around the baseboards and reading the property disclosure...stating that there were no known issues with water seepage. Yeah...okay. Buyer beware! GBU!!
Disclose and the buyer will accept the property at the sale and you won't hear from them in a few months through their attorney. Great advice.
We don't have a disclosure here any more. We just have an "as is" form.
Lola, it does not pay to not tell the truth when it comes to any phase of a Real Estate transaction, the consequences can prove to be very costly if you don't.
It's good to cover you as a seller. Disclose disclose disclose. Think of the point of staying out of court.
Would you believe that property disclosures are not required by law in Florida? Fortunately, most brokerages require them anyway. AND, most reputable brokerages wll even instrcut the agents not to fill out the disclosure. We hand a pen and the documents to the sellers, and have them fill it all out. That way, nobody can ever say that the agent was at fault for misleading information.
Oh Lola, the title of this post had me laughing and shaking my head. I can clearly hear it coming out of a sellers mouth.
Your advice is sound and hopefully home sellers that read this article will understand the importance of full disclosure and the consequences that can come about when there isn't.
Lola, having moved to a 'buyer beware' state I am amazed at how laws vary around our country. Your laws are more in line with Calif. Here in NC sellers do not have to disclose anything but agents do! Great advice for your sellers!
Lola~
First of all , congratulations on this well-deserved FEATURE...you always write material worth reading, and this post is not the exception. What it does point out is how well you express what most of us know for sure...disclose, disclose, disclose!!!
I have had elderly clients in the past who were physically unable to fill out the disclosure. I ended up filling it out but then had to note at the bottom that I had filled it out as the seller had provided the answers and then had the sellers sign.
It amazes me in today's litigatious society that some try to get away without disclosing.
Can we ever tell a seller enough times: DISCLOSE, DISCLOSE, DISCLOSE. Nope. Great post!
Recently my sellers were completely frank on their property disclosure about the fact that the basement would get water with heavy rain - what a blessing when the basement did indeed get wet with spring rains - they were covered and no harm came to them.
You are right - sellers protect themselves by being truthful, even if they cannot fix the flaws of the home.
good post..this form is very important..have the sellers fill it out, not you..
Adam...accurate disclosure is important. Sometimes the time constraint of a listing appointment can make it difficult to recall. I will often leave this form for home owners and pick it up later rather than rush through it.
Thank you Liz. I find it helpful to think of what each section of the disclosure is focusing on or relates to.
Jason...thanks for stopping by. Sometimes, it is ommissions which are the issue as well actual fibs.
Elizabeth...when it's that obvious, you wonder what the incentive would be to not disclose?
Terry...that is very true. When sellers disclose even issues that may be perceived as detrimental, buyers can make informed decisions. When disclosures are combined with a well performed inspection, everyone's interests are well served.
Gene, it is always interesting to learn how other states handles various elements of the real estate transaction. It sounds like Virginia is totally...'buyer beware' from your comment. Does the buyer have any recourse?
Lola, I tell sellers that being totally forthcoming on the Sellers Disclosure protects THEM just as much as it protects the buyers.
George, Absolutely. Thanks for your comment.
Robert, the protection for the seller is one of the best aspects of the Seller's Disclosure. We should always present it in a positive light during our appointments.
Lisa, Interesting...Florida must have a policy similar to West Virginia regarding disclosure. Was it mandated at one time or is having a Disclosure completed something that brokers have just decided to do regardless of State law? If so...that's another great reason to use a Realtor!
Kris...LOL...You've probably had a variation of this question asked of you too. Issues are simply that...issues. They don't become problems until we choose to handle or respond to them inappropriately.
janeAnne...Thank you so much for stopping by. I feel the same way about your posts. I've learned so much about conservation from you. I am reminded of the value we bring into the transaction when we assist our clients in understanding the implications of various aspects of the real estate transaction.
Diane...Interesting note on North Carolina...It sounds like your policy may differ a little from Florida & West Virginia. What do agents have to disclose? Afterall, agents have not lived in the property...how could they disclose any material defects with accuracy? Just curious...I'm learning a few things myself through this discussion.
JoEllen, You make an important point! This is a SELLER's Disclosure. I cringe when I think of any agent filling this out. In the situation you described with physically incapacitated clients, you were right to place a note at the bottom indicating what had transpired. Another option is to have the individual who has a Power of Attorney for them fill it out. Thanks for contributing this comment to this post.
Thank you Kathy. Appreciate your comment. That's a pretty cool signature too. :)
Dawn, I appreciate your sharing a personal experience in which stating what happened protected your clients from future hassles and problems. No home is perfect!
Absolutely Michael!
Brian...the buyers are not absolved of due diligence with their inspections, but you're right...home owners should look on the Seller's Disclosure as a valuable document which helps to limit their exposure and liability during a property transfer.
New York law says a seller who does not supply a property disclosure to the buyer is required to pay the buyer $500. at closing. That seems a small price to pay for non-disclosure, and it makes a thorough Home Inspection all the more important.
Fascinating Rosario...I'm intrigued by how other parts of the country deal with the issue of disclosure.
This post reminds me of an appraisal years ago for FHA purchase of a home. Older home on narrow lt with drive abutting the exterior basement wall. Basement was freshly painted and would have slipped by me had it not been during a downpour - the first rain after a 45 day drought! Had the purchaser found this home 1 week earlier, the whole deal may have slipped through. (Dating myself-this was prior to Seller Disclosure forms.)