Disclosures: What to Tell Before You Sell
There are a number of different disclosures that you may be required to complete. Each state and region has different regulations. Your agent will know what disclosures are required in your area. If you are not working with an agent, check with the governing body in your state that regulates the real estate industry. It is often called the Division of Real Estate or the
Department of Business and Industry Real Estate Division. (The phone numbers for all state real estate regulatory bodies are listed in Appendix A.)
Seller's Disclosure Statements
Most states require a seller's disclosure statement. This is usually a form, provided by the state, which a seller must complete. In this form, the seller states everything they know to be true about the components of the home. Many sellers do not want to tell the buyer anything negative about the house for fear that they will scare the buyer away. Properly filling out a seller's disclosure statement will protect you from future liabilities; so filling it out correctly is necessary, even if there are negative features to share.
Most sellers’ disclosure forms have a list of the components of the house to remind the seller of everything he needs to disclose. An average disclosure may look something like this.
Are you aware of any problems with the following? If so, please explain.
Range/oven/hood/cook top/trash compactor/warming drawers/microwave
Built-in refrigerator/wine refrigerator/icemaker
Water softener/purification system
Sinks, showers, toilets, bathtubs
Sewer system and sewer line
Septic system and leach field
Water system and water line
Well and pump
Fireplace/wood burning stove
Alarm system/interior fire sprinkler system/smoke detectors
Sauna/hot tub/swimming pool
Yard sprinkler system/fountains/French drains
Satellite dish/cable/data communication
Water infiltration/high water table/settling
Environmental hazards (such as lead paint, radon, fuel tanks, asbestos)
Any home built before 1978 is subject to a Lead-based Paint Disclosure. This is a federal law, and the penalties for not complying can run into multiple thousands of dollars. Not only is the disclosure required, it is also necessary to give your buyer a pamphlet created by the U.S. Environmental Protection Agency (EPA). This pamphlet is titled Protect Your Family From Lead in Your Home. Your agent can provide the pamphlet for you. As an FSBO, it can be obtained through the EPA. If you have records regarding the use of lead paint in your house, those records must be submitted to the buyer as well.
Lead paint can be very dangerous, especially to children. There is a concern that young children may ingest lead paint chips, but older children can also be at risk. For example, lead paint dust can transfer to a stuffed animal left leaning on a painted wall. This dust can be harmful as the child may inhale it when playing or sleeping with the toy. Depending on the level of exposure, it is also possible for lead to create health concerns for adults. Effects can be as minimal as headaches or as sinister as damage to the brain and nervous system. Lead exposure can create problems with pregnancy or slowed growth in children, as well as problems with the digestive system, high blood pressure, and muscle or joint pain.
The buyer is given a time frame to assess the lead paint situation at the property. If there is an issue, a lead paint abatement may need to be accomplished. A contractor who specializes in this type of work can remove or seal the paint to prevent future problems. If this was accomplished when you purchased the home, these records must be given to the buyer.
Some types of mold are benign, but some can be very dangerous. Mold has received a considerable amount of press in the last few years because certain molds are now known to be a high allergen. This means that many people are allergic to these molds and can have very strong reactions if exposed. A toxic black mold, called Stachybotrys chartarum, has been known to cause rashes, breathing problems, and brain malfunction. Because of the fear of this type of mold, buyers may be wary of the more benign molds as well.
Molds are everywhere, both inside and outside the home. When exposed to moisture, microscopic spores will eventually grow to a proportion that is visible to the naked eye.
If you keep your home free of mold or mildew by washing areas with a solution of one part bleach to nine parts water, you can eliminate some, if not all, of the problems with mold.
If you have had a problem with mold, it is important to disclose this to a prospective buyer. Some buyers will not be concerned. Other buyers, especially someone with a high allergic reaction to mold, may decide to cancel the contract. It is better to know now that a buyer is concerned about mold than to have that buyer sue after the sale because of their reaction to the mold.
If a buyer has concerns about mold, he may require a mold expert to test the home. These experts take air samples and actual samples in several areas of the house, inside as well as outside. They determine if the air inside the home has similar readings to the air outside. If the mold count on the interior of the home is too high or of a dangerous nature, a remediation expert must be called in. This person will eliminate the mold and prepare the home for another test. Then, the mold expert comes back to give the home a clean bill of health.
Radon is an odorless, colorless, and tasteless radioactive gas that is known to cause certain kinds of lung cancer. It is a naturally occurring phenomenon. In enclosed spaces, such as your basement, it can be very dangerous. If you know you have radon, it is important to disclose that fact.
A buyer may also have a test for radon performed at your house. They may use a passive testing device. This device is usually a charcoal-filled canister that is left in the home for a specified period of time. A passive device cannot be moved while it is recording data. If the buyer has a huge concern about radon, they may use an active device. The active device requires power to function and is a more expensive and more reliable option than a passive device. Active devices have meters that continuously measure and record radon in the air. These devices can be moved to record radon in different areas of the house.
Asbestos is a mineral fiber that can be identified with a special microscope. The inhalation of asbestos has been known to increase the risk of lung cancer. Asbestos is a fire retardant material that was commonly used in building products until the mid-1970s, when the health risks became known. Asbestos can be found in textured paint and patching compounds, which are common in the acoustical ceilings of older homes. It can also be found in the insulation of houses built between about 1930 and 1950. Asbestos was also used in vinyl floor tiles, gaskets for oil or coal furnaces, walls and floors around wood burning stoves, hot water pipe insulation (in older homes), and other areas where there may be a danger of fire. As long as asbestos is left in good condition and the fibers are not released into the air, it is not considered dangerous. For more information on asbestos, you can go to www.epa.gov/asbestos on the Internet.
There are environmental concerns that do not fall under the radon, lead paint, and asbestos categories. Many of these are regional concerns. If there was a factory that deposited toxic waste into the water or soil, even if that factory is no longer producing, this must be disclosed. It is also important to disclose if any environmental agencies that dictate building regulations or how a property can be used have jurisdiction over the property.
You may be located in an avalanche area, on a flood plain, or in an area of crumbling coastline. If you do not know if your location is environmentally hazardous, check with your agent. It is their job to know what disclosures you need. If you are an FSBO, you can get information from the U.S. Geological Survey (www.usgs.gov), the Army Corp of Engineers (www.usace.army.mil), or the U.S. Bureau of Reclamation (www.usbr.gov).
There are several types of properties that have association regulations and fees. Planned unit developments may look like freestanding homes, but they have common facilities, and they have an association. Condominiums, townhomes, and cooperatives also have association regulations and fees. It is important to disclose to a potential buyer what those fees are and how the fees are used. Some states have regulations regarding what is disclosed, and some states have even created forms to help you remember what needs to be disclosed. Some states do not have requirements about this type of disclosure, but even if your state does not have regulations for disclosure, it is wise to give your buyer the following information.
CC&Rs (Covenants, Conditions, and Restrictions)
Any additional rules and regulations
Amounts for monthly dues and any additional assessments
Budget, financial statement, balance sheet, and reserves
Any pending legal action against the homeowner's association or by the homeowner's association against another entity or person (such as a contractor)
Minutes of the last several meetings of the board of directors, plus the annual meeting
Common facilities and their use