When selling a home, the seller is required to tell buyers about any issues with the home. This is done using a Property Disclosure Statement.
What Is a Property Disclosure Statement?
A Property Disclosure Statement is a set of documents used by the seller to disclose any defects, current and past issues, and past repairs of the home. It is required, by law, that they are honest and up-front about these facts. The Property Disclosure Statement is attached to the purchase agreement once it has been signed.
A Property Disclosure Statement has several purposes, which include:
- Informing the buyer of issues with the home
- Legally protecting the sellers from a potential future lawsuit
- Allowing a buyer to file a lawsuit should the seller not disclose an issue with the home.
What Issues Must be Disclosed?
Most states require sellers to complete a Property Disclosure Statement. Some details that must be mentioned, by law, are:
- If the home is in an area of special zoning
- Near a military base
- In a flood plain area
- If the home was used for illegal activities
- If construction has been done without getting a permit
- Any electrical wiring repairs that were not done to code
- Mold issues
- Termite issues
- Leaky doors, windows, and pipes
- If lead-based paints were used
- Fire hazards
- Issues with neighbors
- Liens on the home
- HVAC, appliance, and electrical malfunctions
- Disputes regarding zoning or property lines
- Construction and noise issues
- Any deaths that happened on the property
- Issues with unusual odors
- Issues with wild animals or pets
- Any damage was done by weather
- Whether the property itself poses any danger
How to Make a Property Disclosure
Each state will have its own laws around property disclosure. Most of these forms will give you a checklist, along with extra room to give more details about any issues. This is given to a buyer once the seller has accepted an offer. However, the buyer can back out and not lose any deposit based on what is disclosed.
You can download one of our free templates or samples to get a better idea of what a Property Disclosure Form should look like.
Depending on how detailed the form is, there are main areas and details that need to be supplied. The first paragraph of the Property Disclosure Statement should include the following details:
- Sellers full name
- The full address of the property being sold
- Property details, such as the type of property it is, the year it was constructed
- How long you have owned the property
- If the home has been surveyed
Your next step is to inspect your home for any issues, both inside and out. As you go along, tick off any issues to be disclosed. When you are done, you can sign the form, which will go to the buyer when an offer has been made. The buyer can then choose to sign off on the disclosure form if they are ok with the issues, or they can choose not to go ahead with the house sale. Keep in mind that buyers will have the home inspected, so it’s better to disclose issues rather than hoping they will be missed upon an inspection.
The Property Disclosure should list information on the following, and any known issues:
- Water – how it is supplied to the home and its quality
- Fire Sprinkler Systems and their condition
- Water Treatment systems and their condition
- Sewage and its disposal, including any information on septic tanks (when they were last emptied, how they are maintained, and any issues)
- Heating – the method used, whether it is sufficient to heat the entire home when it was last maintained, and any issues
- Air Conditioning – the system used to cool the home, if it cools all rooms, when and how it is maintained, and any issues
- Hot Water – the system used and its age
- Crawl spaces
- Plumbing System
- Electrical System
- Insulation (inside walls, under the floor, in the attic, etc.)
- Exterior Drainage
- Gutters and Downspouts
- Any infestations (i.e., termites)
- Carbon Monoxide Detection
- Materials on the property that are considered to be hazardous or are regulated (i.e., asbestos, mold, underground waste, landfills
- Fire (wood stoves, fireplaces, and chimneys)
- Zoning Violations
- Home Improvements
- Flood Zones
- Murders or suicides within the property
- Criminal Activity or Illegal Drug Use/Manufacturing
- Structural Defects
Bear in mind, many of these may not be applicable to your home.
Terms to be Aware of
Earnest Money: Sometimes a buyer will make a deposit referred to as earnest money. This is not the same as the downpayment. Should the buyer find an issue that was not disclosed, they could be entitled to have their funds returned.
Buyer Beware: Some state regulations don’t require a seller to make a property disclosure and won’t hold them liable for not mentioning defects. This is termed as a Buyer Beware state and includes:
- West Virginia
- New Jersey
- New Hampshire
Free Form & Template
Frequently Asked Questions
A buyer may be able to sue a seller for damages if they have failed to disclose any hazards or damages within the home.
This depends on where you live, but in most cases, it is good for 10 years, which means they can be held liable during that period if they did not disclose an issue at the time of the sale.