What Are You Legally Required to Disclose When Selling a Property?
If you're currently a landlord thinking about selling a house, you may have to fill out a disclosure statement first. Even if your state doesn’t require this form, it’s recommended that you provide it, since it can protect sellers in the long run.
Here’s how it works and what kind of information you need to provide.
Major Defects on the Property
In general, you have to disclose anything that would affect property value, which includes defects that you're aware of.
For example, if you know the faucets leak, the roof needs to be replaced, and there are cracks in the foundation, you need to disclose these problems. This applies whether you have seen them yourself or your tenants have pointed them out.
Similarly, if there is evidence of a termite infestation on the property, let the buyers know in the disclosure statement.
Even if you're aware that there are lots of barking dogs nearby or construction noise, you should disclose these issues because they could affect the value of the property.
You don’t have to get a full inspection before you sell the house. You only have to disclose the issues you know about, not look for more.
Of course, the buyers will likely hire a property inspector anyway, so they will probably unearth any problems that weren't obvious before.
If you hire an inspector yourself, and that inspector discovers problems you didn't know about, you will have to disclose them.
But on the upside, if your inspector doesn't find additional problems, you will have the documentation you need if the buyer accuses you of not disclosing defects in the future.
If they're not in the inspector’s report, it will be clear that the defects are new and, therefore, the responsibility of the new owner.
Federal Disclosure Requirements
No matter where your property is located, you need to disclose whether there is lead paint in the home. That’s because the Lead-Based Paint Hazard Reduction Act of 1992 is a federal law.
However, it only applies if your house was constructed prior to 1978.
If this is the case for your home, let the buyers know that the house might have lead-based paint, and then give them 10 days to test the paint for lead.
You should also make sure they know the dangers of lead-based paint, which can be achieved by giving them a pamphlet by the EPA called "Protect Your Family From Lead in Your Home."
Then you need to have them sign a statement that they're aware of whether or not the house contains lead. Keep this signed document for at least three years as proof that you're in compliance with this federal law.
Additional Information to Disclose
Once you have disclosed the presence of lead-based paint and general defects in the home, you should find out if there are any other disclosure rules specific to your location. That’s because they vary by state.
For example, most states don't require you to disclose a death in the home, but the exceptions are California, South Dakota, and Alaska.
In California, you must disclose any death that took place in the home in the last three years, even if it was due to natural causes.
But sellers in South Dakota and Alaska only need to disclose murders or suicides that took place within the last year.
In New Jersey, sellers have to disclose whether the house is fit to live in.
They also have to disclose any hidden defects that they know about. On the other hand, sellers in Georgia aren't required to offer a disclosure form at all, but they're still encouraged to do so.
If you’re not sure what to disclose, you can ask your real estate agent about the rules that apply to your specific situation before you sell the house.
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