Can a Seller Be Sued For Non-Disclosure?

Yes! If you’re like the 60% of home sellers who sold their properties without disclosing their defects, you can be sued for financial compensation for repairs.

The property’s history and potential issues significantly impact a buyer’s decision. A seller’s disclosure informs the buyer of all the possible defects in the property, maintaining transparency in a home sale. 

What Is A Seller Disclosure?

A seller’s disclosure is a legal document that requires you to disclose information about the property’s condition to buyers. It lists possible title violations, structural defects, and water supply issues that negatively impact the home’s value. 

This document, also known as a property disclosure, allows the buyer to decide whether to purchase the home, flaws and all. Moreover, it may prevent you from being sued by the buyer after they close on the property.

Seller disclosure regulations vary per state. So, it is recommended that you examine the form with your real estate agent or lawyer in accordance with your state’s legislation.

What Should You Include In The Seller’s Disclosure?

The facts required in the disclosure statement differ by state. States with mandatory disclosures will most likely use a standard form that can be received by a buyer’s or seller’s agent or a real estate attorney.

To learn more about what you must disclose to the buyer, read your state’s disclosure requirements.

The state disclosure forms may vary in structure. However, they generally contain:

• Details regarding how the property is occupied.
• Questions about property problems that can be answered with “Yes”, “No,” or “Don’t know.”
• A list of items that vendors must mark off (if applicable). This list may vary based on the state.
• Space to submit more information about the property.

Why Are Seller Disclosures Important?

Seller disclosures promote transparency in a real estate transaction. They help:

• Buyers Make Informed Decisions: Disclosures provide detailed information about the property’s condition, which can spare the buyer any nasty surprises after purchasing the house.
• Protect Sellers: Highlighting all the flaws and defects upfront protects you from lawsuits by the buyer after the sale.
• Negotiate Fairly: The buyer and you can mutually factor in the repair costs or adjust the offer based on the disclosed information.

Types Of Seller Disclosure

Here are some typical disclosures that you have to provide to the prospective buyer:

• Repair History of the Property

Buyers need to know about significant issues and repairs made in various areas of the property. They can direct the home inspectors to pay extra attention to the repaired area.

• Death in the Home

It is not mandatory in most states to declare any past deaths in the house. However, some states require the buyer to be notified of a death if it happened within the past year. For instance, California requires a death in the 3-year recent history of the home to be declared.

On the other hand, Alaska and South Dakota require the death to be disclosed only if it was a murder or suicide.

• HOA Governance

You must declare if your property is governed by the homeowner’s or condominium associations. The HOA imposes fees and rules that the buyer might not find acceptable. 

• Neighborhood Nuisances

Some states may require you to disclose noises, odors, and other unbearable neighborhood conditions. In addition to the sounds, you need to disclose nearby sources of noise, such as farms, airports, military bases, or shooting ranges.

• Liens on the Property

If the property owner fails to pay the lender’s debt, the property is marked with a lien. In such cases, you should get the lien holder’s permission to sell the property. If the lien is not disclosed before the sale, the buyer may lose ownership of the property.

What Is ‘Caveat Emptor’ In Real Estate?

Caveat emptor is a Latin word for “let the buyer beware.” This means that the buyer is ultimately responsible for finding the major defects in the property. It also serves as a warning to the buyer to perform due diligence and inspect the property.

If the property does not meet the buyer’s expectations, it is not entirely the seller’s liability.

What If You Lie In A Disclosure?

Dishonesty in a sale could lead the seller to legal repercussions. The new buyer can take you to court for:

• Breach of Contract

A buyer can initiate a lawsuit for breach of contract with willful misrepresentation. The punishment for lying on the seller’s disclosure includes the repair costs and attorney fees.

• Case of Fraud

The buyer might pursue a fraud claim against you. If the buyer wins, they may also seek punitive damages, often two or three times larger than standard remuneration.

• Rescission of Contract

In some cases where the lie causes the buyer huge losses, courts can order equitable relief in the form of a recission of the contract. Under this, the contract becomes null and void.

Are Seller Disclosures Complicated?

Yes, seller disclosures can be complicated in some states. You must comply with federal, state, and county/city disclosure requirements.

To avoid the problems that come with disclosure paperwork, sellers typically hire a real estate agent and pay a 5%—6% commission. However, many home sellers prefer the FSBO path to selling their property.

Houzeo is one of the flat fee MLS services that helps you list your home FSBO. You save on the 3% listing agent commission, get on the MLS within 24 hours, and get assigned your state’s disclosure forms automatically. All this at just a fraction of what you would spend on a full-service Realtor.