Seller disclosure basically means sharing of information by the seller of a property. The idea is that disclosure should be made if the seller is aware of anything that might significantly alter the perception of value – or change the mind of the buyer and convince them to rethink the purchase. Most of us think of this kind of thing as being a moral or ethical choice.
The History of Disclosure Forms
If you are a straightforward and honest seller, for example, then you would naturally want to let the buyer know of any serious issues or problems with your home before they buy it. In fact, that sentiment or code of conduct to “do the right thing” on the part of the seller is what today’s official printed disclosure forms are all about. That’s because pretty much all of the laws and rules that we make and accept as citizens of a shared democratic community are rooted in a common understanding of ethics, justice, and fairness. That’s why we sometimes hear people, especially legal scholars, refer to the “letter of the law” as it relates and ties into the “spirit of the law.” In other ones the laws as they are written are there because before they became encoded into our body of laws and legal documents they were born out of a spirit of justice and a feeling of right versus wrong.
Why We Require Standardized Forms
Of course when large amounts of money are at stake – as they are whenever a piece of real estate changes hands – there can be the temptation to be a little loose with our ethical interpretations. In fact, some people will put aside their ethics or rearrange them in order to accommodate strategies and business dealings that are downright greedy. Some people will behave in a fashion that is totally and intentionally misleading in order to save or make some money.
Whether we like it or not, that’s just a fact of life. So to protect the consumer from being misled or hoodwinked when making a home purchase – so that they don’t wind up buying a pig in a poke or a lemon of a house that was described as a real creampuff by the seller – we have official seller disclosure forms. They are not legal documents in and of themselves, but they do provide solid legal evidence of information that is either shared or knowingly withheld by a home owner who is selling their property.
Almost every jurisdiction has forms that can be provided by a Realtor. In the USA, for example, every state requires real estate brokers to use certain disclosure forms. The same goes for Provinces across Canada. But interestingly enough, most consumers believe that these disclosures are only used to help protect buyers from buying property without enough information. The truth is, though, that disclosure is beneficial to all involved parties, including buyers, sellers, and real estate agents.
Disclosure Documents Overview
Essentially these are forms printed in duplicate or triplicate so that they can be signed and copies can be retained by multiple parties. Each seller disclosure document spells out the details of a particular issue that could represent a potential issue for a buyer.
As an example, a form may relate to lead-based paint which is known to be toxic, especially for young children who may accidentally ingest it if it is present within a home. So a buyer may request a seller disclosure statement and this will state whether or not the seller has any knowledge of the presence of lead-based paint on their property. Both the buyer and seller sign the document.
Later, if such paint is discovered, the buyer has a signed piece of paper where the seller claimed that they knew nothing about it – if that’s how they filled out the form. If it is found that the seller misrepresented their knowledge and intentionally misled the buyer, this form gives the seller’s claim for damages extra legal clout.
But if the seller didn’t know about the lead-based paint and said so on the form, the disclosure can protect them from liability. For them it shows proof that they told the buyer what they knew, and that to the best of their knowledge there wasn’t any paint. Or if the seller was aware of the paint and disclosed that fact, but the buyer proceeded with the purchase, then it is obvious that the responsibility lies with the well-informed buyer who went ahead and bought despite the disclosure.
What Kinds of Issues They Address
There are official, standard kinds of disclosure forms to cover almost everything you can imagine that might detract from the material value of a home and create a liability. Forms cover such things as previous floods or fires in the home, the presence of toxic mold or other environmental hazards, zoning or homeowner’s association regulations, and extreme noise pollution like homes in the path of an airport.
The bottom line is this: whether you are the buyer, the seller, or the Realtor involved in a real estate transactions, formal disclosure is your friend. Obtain the disclosure forms you believe you need, have the sellers sign off on them and the buyer acknowledge receipt in writing, and then look forward to a smoother and less stressful closing. After closing, save copies of the disclosure forms in a safe place along with your other real estate documents, just in case you need them at a later date.