Real estate disclosures are documents offered to the buyer by the seller documenting their knowledge of the property. Disclosures include information on such things as hazards, repairs, damages, missing items, as well as HOA information.
Disclosure requirements vary based on state and local laws, but this information is important for the buyer so they can know details about the property’s value that may negatively affect its value. And for the seller, note: Selling a property “As Is” will usually not exempt a seller from disclosures.
Some states require sellers to use a specific disclosure form. Among the items on the form could include disclosures for:
- an unnatural death in the home,
- neighborhood nuisances (from commercial, industrial, or military sources, for example),
- hazards (including toxic waste, asbestos, urea-formaldehyde insulation, radon gas, lead-based paint, and others),
- natural hazards (such as whether the property is located in a flood plain, wetland, or agricultural district),
- HOA governance,
- water damage,
- items that may be missing from the home (like lighting fixtures, appliances, or even wiring and rain gutters).
The state of Virginia, on the other hand, is a bit less formal in its disclosure requirements. Virginia’s Residential Property Disclosure Act governs that sellers must sign a “Residential Property Disclosure Statement,” but the Commonwealth generally goes by the old English common-law concept of “caveat emptor” (“let the buyer beware”). This means, in effect, that the seller shouldn’t outright lie or conceal an issue with the property, and must honestly respond should they be asked about a concern, but that they aren’t expressly obligated to point out their home’s flaws or defects.
Instead, the Residential Property Disclosure Statement claims that the seller “makes no representation” about various issues, including:
- warranties about the condition of the property or its attachments,
- regarding adjacent parcels,
- about whether historic district ordinances affect the property,
- regarding whether the property is protected under the Chesapeake Bay Preservation Act,
- about nearby registered sexual offenders,
- about whether the property is in a dam break inundation zone,
- regarding whether any stormwater detention facilities are on the property,
- about the presence of any wastewater system on the property;
- and represents that there are no undisclosed pending actions under the Uniform Statewide Building Code or zoning violations that have not been fixed.
In effect, the form puts buyers on notice that it is up to them to inspect and investigate the property on their own.
As a buyer, knowing this type of information can help you make a decision on buying a property, As the seller, offering up this information can save you from hassles — including lawsuits — down the line.
Smart buyers will require inspections. Those reading Virginia’s Disclosure forms may also recognize that the state requires very little to be revealed and insist on inspection contingencies in order to close the deal. If in the course of the inspection, a buyer finds that a seller failed to share information that they knew about in advance, it may cause the buyer to void the contract.
In certain circumstances any information that is not found in an inspection, but for which the buyer finds the seller knew of but did not disclose, it may later lead to legal action, so disclosures protect buyers and sellers, and are important revelations during the sales process.
Lastly, it should be noted that there are exceptions where no disclosure statement of any kind is required. No disclosure form is necessary in sales between co-owners or between relatives or divorcing spouses, or in certain tax, bankruptcy, trust, and foreclosure sales.
Disclosures, even for homes sold ‘As Is’ are important for the buyer so they can know details about the property’s value that may negatively affect its value. Alerting the buyer to any known issues, even if not mandated by the state, allows them to decide if they’re willing to deal with any property issues, or if they would prefer to walk away completely. While this might cost the seller the sale, it also protects them from legal hurdles down the road.