What Home Buyers Need to Know about Seller Disclosures

It’s all too easy for property buyers to be lulled into a false sense of security by the seller’s reported disclosures about potential issues with the house you’re considering buying.

Although all states require some form of property disclosure statement, the extent of what must be revealed can vary from state to state, county to county and even city to city.

Federal law requires certain disclosures, such as the existence of asbestos or lead-based paint in the home or other known health or safety risks. But the enforcement of other disclosures (such as reporting certain environmental conditions pertinent to the area, or the existence of Megan’s Law offenders) will be determined by local ordinance or law.

The typical seller disclosure form is several pages long, and it asks the seller to report known defects in the home. This will include the appliances, as well as information about electrical, heating, sewer, water or other mechanical systems. The roof, foundation and other structural elements will be included in the report, as well as latent or hidden defects that are not apparent from a visual inspection, such as: the presence of mold, a crack in the foundation or a prior flooding problem.

Anything that is known — and that could pose a possible threat to the health or safety of the buyer — must be disclosed. If the seller is not aware of these problems, however, he is not obligated to hire an independent investigator unless that is stipulated in the purchase contract. Natural hazard risks, such as earthquake fault, fire or flood zones, should also be disclosed.

But just how detailed must the seller be? In most states, sellers are required to disclose only what they already know. They are not held responsible if they answer “no” or “unknown” to one or more disclosure questions. The disclosure paperwork defines the scope of liability for the seller, who “is not liable for any error, inaccuracy, or omission for information that is not within the scope of [his or her] actual knowledge.”

In other words, a seller could legitimately be unaware of serious problems — like a cracked foundation, termites deep in the walls or a roof on the verge of leaking. Under those circumstances, in most cases, the seller wouldn’t be held responsible.

Some states allow the seller to sign a waiver or disclaimer statement rather than require a full disclosure of all known defects. In Maryland, for example, if the seller opts to sign the Residential Disclaimer Statement and sell the property in its “as is” condition, he is required to report only latent defects. That means those that are not clearly apparent by visible inspection but pose a threat to the health or safety of the buyer or future occupant. Latent defects include the presence of mold behind the walls or a crack in the foundation.

You might assume that a newly built house would not have hidden problems, such as mold or an unstable foundation, but every buyer should still insist upon a full seller disclosure from the builder. Recently, a buyer purchased a new house, and before moving in removed a portion of the living room baseboard to install a built-in cabinet.

Behind the brand-new baseboard, he found black mold. Apparently, halfway through the construction phase the house had sat empty, and because of damp weather conditions the mold had established itself. Fortunately, after the building contractor was notified of the problem, a mold specialist was called, the floors and walls were treated, and all the damaged wood was replaced — at the seller’s expense.

In Virginia, sellers must disclose if their property is in any locality that includes a military air installation. While in the District, homeowners must report historical designation of their homes before selling.

Here’s how to complete your own disclosures:

• Go to your state’s Department of Real Estate and review the Seller Disclosure Statement requirements.
• Get a copy of the neighborhood crime report to track petty theft or home break-in trends. The local police station can tell you if there has been a change — whether in a good or bad way — in the area.
• Ask the local municipality water and sewer management district if there are major road works or water main upgrades planned.
• If you are concerned about radon or hazardous materials, you can go to the Environmental Protection Agency’s Web site www.epa.gov. Click on “Where You Live,” which lists the presence of radon by state and county and local area. Its Web site also provides air and water quality as well as other environmental information.
• The city planning department can provide information on local ordinances, water, and street lighting or planned city works.
• Contact the local fire department for smoke detector regulations. Depending on when the home was built, in some areas the seller must provide devices throughout the house before the property can be sold.

Being as proactive as possible at the beginning of your purchase will help ensure that you enjoy the property and avoid unwelcome surprises, repairs or major problems associated with your new house.