In this video, the part 2 of home seller’s guide, we are going to cover a very important topic, and that is “disclosure”. We are going to discuss the purpose of disclosure, why it is important, and how a poorly written disclosure could cause problems.
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When buyers come to see your property, trying to capture good buyers is only a beginning. Although buyers may make offers, they actually have very limited knowledge about the condition of the property. And this is where disclosure comes in. Disclosure is a way for homebuyers to learn and find out everything there is about a seller’s property. In a typical transaction, there are a lot of disclosure forms and questionnaire that must be filled out by seller. This disclosure is required by law where owners must disclose all known defects or problems that the sellers are aware of.
For sellers, it may seem like a lot hassle, after all there are a lot of forms to fill out, but disclosure really is designed to protect both sellers and buyers to minimize disputes, lawsuits, litigations. There have been countless number of disputes and lawsuits between buyers and sellers because of disclosure issues, especially if sellers intentionally try to cover things up and not telling the truth. By being honest and truthful about material disclosure, it can help you as a seller to stay away from claims and disputes.
Some of these disclosure forms can only be filled out by sellers themselves only. On these type of disclosures, Real estate agents can only help explaining the forms and documents, in case if there is anything sellers don’t understand. Let’s take a look at an example about how a poorly written disclosure can cause a lot of trouble.
A young couple bought a property. During the transaction, the couple inquired about the termite problem. On the disclosure, the seller had a remark saying“termite taken care of.” The couple believed the seller in good faith without further investigation and went through with the transaction. A few months down the road, when the couple began renovation, they accidentally discovered severe termite infestation that already caused substantial structure damage. The couple accused the seller lying and malicious intent to deceive. The seller on the other hand felt innocent because he swore he did take care of it.
So, what was the problem? Turned out that the owner likes to DIY. Instead of hiring professional exterminator, he felt very confident to perform the termite treatment himself. The seller thought he knew what he was doing, but unfortunately the DIY was not done correctly. The problem was not eliminated. On the disclosure the seller simply put “taken care of. There were no other details given. As a result, the couple got very upset with the seller and the whole thing was just a mess.
I cannot go into details about the legal aspects. But rather, let us take a look at the statement made by the seller, which is “Taken care of.” What exactly does taken care of mean? (This is ambiguous)? What exactly was done? What specific termite treatment was performed? (are we talking about fumigation or local treatment? When was the termite first discovered and where? If a professional company was hired to do the treatment, which company was it? Do you the seller have the termite report. If professionally treated, do they have any warranty? What does the warranty cover?
In a typical real estate transaction, there are many potential issues related to disclosures. Anything can go wrong during or after a transaction. In fact, disclosure has to cover not only your own property, but also external elements, that might have impact on your property. For example, bad neighbors. There have been lawsuits because of that. Indeed, it may seem tedious having to fill out all these disclosure forms, but they are very very important. Honesty is the best policy. Full and honest disclosure upfront is the way to go. By providing a thorough, upfront, and proper disclosures, sellers can minimize potential disputes.