Disclose or Not to Disclose…. That is the Question

Sellers statement of property condition - dislcosureMassachusetts is what is called a Caveat Emptor or Buyer Beware state for home buyers

Meaning, buyers are basically on their own and your due diligence falls directly on you.  If you don’t do your homework or ask the right questions and you are basically out of luck. 

The question for home sellers is do you choose to disclose or not to disclose any issues with a Sellers Statement of Property Condition.

Sample of Seller’s Statement of Property Condition (MAR 700)

Sellers Obligation To Disclose

There are two things a seller needs to disclose.  They must disclose whether they have knowledge of lead-based paint and whether the home is on a private or public sewer system. 

Other than that they are not obligated to disclose anything else….. water in the basement, leaky roof, mold in the attic, etc….

But, is also important to know that a seller is obligated, by law, to answer any questions truthfully that are asked directly of them. 

They cannot lie, answer vaguely or hide the fact when asked. 

But as a home buyer if you don’t ask the question all the liability falls back on you, the home buyer. This is why home inspections are so important when buying a home.

Real Estate Agents Are Held to a Higher Standard When it Comes to Disclosure

A seller’s responsibility to disclose is in direct contradiction to the lawful obligation of a real estate agent to disclose….

“any fact, the disclosure of which may have influenced the buyer or prospective buyer not to enter into the transaction.”  

Furthermore, the law state that an agent can’t purposely avoid discovering an issue.  And if a possible issue arises they have to take reasonable steps to discover if the issue really exists.

Realize an agent can only have limited knowledge of a property and they are not contractors.  But say the agent is in the basement and sees water stains that have wicked up the wall a few inches that can’t be ignored. That certainly begs some questions. 

On the other hand termites, damage may go undetected unless inspected by an appropriate professional it is not a reasonable issue for a real estate agent. to detect.

Disclosure laws vary greatly from state to state so it is important to check your state laws about property disclosure.

Real Estate Agents and the Sellers Statement of Property Condition

So what has prompted me to write this article is that I have had several deals back to back recently where sellers/ listing agents were not providing a seller’s Statement of Property Condition.  It seems to be a trend in my area all of a sudden.  

Subsequently, I have had a couple of lawyers prefer their seller clients not to fill one out when their home is listed. 

What is the Sellers Statement of Property Condition?

A Seller’s Statement of Property Condition is a standardized document where a seller is asked for information about title, zoning, systems, utilities and structure of their home.   For example questions like

how old is the furnace, when was it last serviced?

has there been any issues that you are aware of?

or have you had any work done on the house that required permits and did you obtain the permits?

The document is then provided to the buyer to review and sign acknowledging they have received and reviewed the Seller’s Statement of Property Condition.

This form will be required by many brokerages for sellers to fill out as it aids the brokerage in fulfilling their disclosure obligations.  Many brokerages may not list your home otherwise. 

Frankly, you lived in the house, you know the issues or past issues that most agents can’t detect on a walk-through of a home.

It is very important to fill out the disclosure honestly and as accurately as possible.  There is also an opportunity to check off “I don’t know” if you don’t know. 

Often a seller will not be aware if contractors pulled appropriate permits or what the zoning is for their property.  Major issues like termites or mold in the attic go undetected for years by the seller.

As a seller you are not obligated to find out if you have termites or mold just that are you aware of such.

Benefits of the sellers disclosure of Property Condition

So Why Would I Want to Fill Out the Seller’s Statement of Property Condition?

So after reading all of this, as a home seller, you must be wondering why would I want to fill out the Seller’s Statement of Property Condition.  Often a seller can be hesitant to want to share issues with their home, to begin with.

Even though you are not obligated to disclose (legally) there are certainly benefits to disclosing your property’s condition.  And, I would certainly recommend filling one out.

Here are the benefits:

Better Offers

If the Seller’s Statement of Condition is provided to all buyers prior to an offer, you will generally secure better offers. 

The hope is that a buyer will take the condition into consideration when tendering offers.  Buyers will always assume the worst and it takes some guesswork out of the equation.

Say you have a property with many recent updates to the furnace, roof, electric panels etc…. it can add value to your home compared to homes that have these items nearing their serviceable life. 

In this case, a Seller’s Statement of Property Condition is an asset as it highlights the great condition of the property.  It now can become a marketing tool.

Far Less Issues with Home Inspections

By filling out the Seller Statement of Property Condition and having it signed by the buyer prior to the home inspection it becomes hard for a home buyer to come back after the home inspection and try and renegotiate either price or requested repairs after the home inspection

For example… not every window may be looked at, some may have broken seals and one or two may not function properly.  A home inspection will surely reveal that.  A home buyer can’t really take a second bite out of the apple after the inspection if they already knew about it.

Plus when it comes time to negotiate home inspection issues a home buyer is always going to overestimate the cost of repair. 

Most Likely the Home Inspector is Going to Discover The Issues

Lets face it, most home buyers are going to get a home inspection and the home inspector is going to find the issues you did not disclose.  The problem will be now the home buyer will become overwhelmed with a whole slew of issues they weren’t aware of rather than just a few. 

It could cause them to retract their offer under the home inspection contingency.   There is nothing more damaging to a seller than having to come back on the market because of home inspection issues.  Any subsequent buyer will most likely ask why the home came back on the market.  If a buyer’s agent does their due diligence, they are going to ask and you’re obligated to answer.

Buyers Will Shy Away From Homes With No Sellers Statement of Property Condition

The Sellers Statement of Property Condition has been widely accepted by buyers and sellers, most homes for sale will have one available.  If you are not providing one, buyers will become highly suspicious of what you are trying to hide. 

If you were a home buyer and most homes have the statement readily available and when you ask for one and one isn’t available with the explanation “is we do not not fill them out because of liability”….  Your hair is going to stand up on the back of your neck and now your wondering what is so bad about the home that the seller does not want to share.

Homes Have Issues-  What Did You Do to Take Care of It?

Every home is going to have issues somewhere along the way.  So maybe you had water in 2008 because of a quick thaw with the ground frozen or you discovered termites in 2003.

But in most cases, you probably took action to rectify the issue so it wouldn’t happen again.  Water in the basement could have been rectified with gutters, a sump pump or a french drain.  Termite damage would have you treat and any potential damaged repaired.

As a home buyer I would much rather know about a problem and how it was rectified then wonder if the problem is ongoing and unattended to.

As A Listing Agent It Is Easier For Me to Deal With an Issue Upfront

When it comes time for me to list your home, it is easier for me as a listing agent to deal with issues up front then to have them surprise me later in the last hour.   Issues can vary so much but maybe it is a matter of a small repair, or a professional certifying something is working properly.  Or, disclosing up front even gives you time to gather receipts or warranties on issues that you have had repaired.

While a home inspector can easily raise an issue it may not always be clear that you have taken the steps to rectify the issue. 

Non-structural termite damage might arise and the home inspector will probably find it if you did.  But you had the termites treated and the home inspected for structural issues to find it is fine. Boom, done issue resolved!!

Any One Can Sue For Anything

Lawsuits are time consuming, stressful and costly.  Anybody can sue for anything.  Whether right or wrong you can get sued. 

While some agents and lawyers think you may be eliminating liability by not filling out a sellers disclosure, you may actually be avoiding liability by properly filling out the sellers disclosure more often than not. 

Say a buyer tries and sues because they find a little water in the basement after a storm, shortly after moving in.  But, your attorney has a sellers disclosure in hand signed by the buyer) that states you get a small puddle of water in one corner of the basement occasionally in the spring.  Your attorney shoots the property disclosure to the buyers attorney…. guess what, there won’t be an attorney that will want to waste their time in court defending their buyers position.

Sellers Statement of Property Condition for Home Buyers

The minute you become interested in a home you should review the sellers statement of property condition if it is available.  If more questions arise ask them immediately of a seller or the home inspector.  From a liability, standpoint ask and get your answer in writing.  If there is a problem down the road because a seller was not completely honest it is much easier to prove it when it is in writing. 

Also, don’t let the Sellers Statement of Property Condition replace your due diligence.  Verify everything that is important to you.  For example if a seller is making the statement that they have approval for a garage to be built and plans have been drawn and this is a big part of your buying decision, verify it!

When it comes time to do your homework your buyers agent can be invaluable when doing your due diligence (hint- we do it everyday). 

When it comes to buying a home which is likely the most expensive purchase you will ever make, there are no stupid questions.  For example here in Massachusetts even a real estate agent is not obligated to disclose psychological issues of a home, like, a murder, crime, suicide etc….  If you don’t ask it doesn’t have to be volunteered.

Disclose The Use Of Audio Surveillience

Sellers need to be aware of audio surveillance laws in their state.  Some states allow audio surveillance without one party knowing and others only allow it with the full consent of all parties.

Here in Massachusetts, one needs consent from all parties being recorded.  Spy cameras, nanny cams and hidden cameras in recent years have made it so easy to not only record video but audio as well. 

While this does not fall to the Seller’s Statement of Property Condition, you have the obligation to disclose the use of audio surveillance in Massachusetts.

Final Thoughts on Property Disclosure

While the Seller’s Statement of Property Condition is not mandatory for sellers to fill out by the state, it certainly has its benefits.  You would also be hard-pressed to have a brokerage list your home without one completed.  It can provide for a smoother transactions and even possibly give your house some more appeal and value.  If you are concerned about liability, talk to your lawyer about it.  Realize that if you choose not to fill one out, your going to leave many buyers with a bad feeling about your house.

If you decide to fill one out (which again I think you should), take the time to fill it out honestly and accurately.  I will say in the hundreds of listings I have had over the course of 15 years there has never been a problem arising over a Seller’s Statement of Property Condition.

I am always going to say what my fellow Massachusetts REALTOR Bill Gasset says, when in doubt disclose.

If you’re a home buyer carefully review the statement and don’t be afraid to ask questions of your buyer’s agent, home inspector or the seller.  At the end of the day, it is your responsibility to do your due diligence on the property. 

Whether a buyer or a seller make sure you understand disclosure laws for your state.  I cannot tell you the misconception home buyers have about property disclosures.

Other Property Disclosure Resources:

Disclose or Not to Disclose…. That is the Question, was provided by Kevin Vitali of EXIT Group One Real Estate of Tewksbury MA. If you would like to sell your home give me a call at 978-360-0422 and let’s get the process started.

Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford

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