Real Estate Disclosures: The Good, the Bad, and the Not Known

Seller's Disclosure Statement

Real estate disclosure laws became standard practice for most states over the last thirty years. These laws are designed to protect unsuspecting home buyers from unseen past or current issues that may reduce the value of the home. For example, sellers that are aware of termite or water damage must disclose that information to give the buyer an accurate account of the major items that, despite repair, may affect the value of the home.

While real estate disclosure laws are great in practice, not all disclosures are created equal: here’s what every home buyer (and seller!) should know about real estate disclosures.

The “Good” about real estate disclosures is that, when done correctly, they give a seller the chance to document any issues before selling to protect against potential future lawsuits. If problems in a home are disclosed and handled properly, it will assist them, or the buyers determine the cost to replace or repair them.

The “Bad” in real estate disclosure refers to severe, costly, and material issues for a buyer to win a lawsuit. There are two categories these issues can fall into: A “patent” defect is clearly visible during the inspection, one that is “well-known” or seen by the untrained eye. A “latent” defect, on the other hand, is hidden or concealed; these may be defects the buyer or seller would not reasonably discover. Latent defects are not visible and are excluded from the errors and omissions insurance provided by home inspection companies.

The “Not Known” on real estate disclosures is the most concerning. Many honest sellers do not know about issues regarding their homes, don’t know of the defects found by inspectors, and aren’t familiar with proper construction and repair techniques. I found a common theme in my research: real estate disclosure lawsuits are time-consuming, stressful, and expensive processes. As the plaintiff, you must prove that the seller knew of the issue and intentionally failed to disclose it. And even if you win the lawsuit, the defendant may be unable to pay the judgment.

Hiring a qualified, licensed, and certified home inspector to inspect a home before the final sale is the best way for a buyer to protect themselves. Home inspectors are trained to spot known patent defects and conditions that may lead to latent defects. Possible hazards like improperly installed or missing roof flashings that allow moisture in, causing wood rot, decay, or a wood-destroying insect infestation could all be identified. This is just one of many ways that a good home inspector can give buyers a clear picture of the home’s condition and help them make an informed and safer decision.

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