What Should a Buyer Look for When Reviewing Seller Disclosures?
With regard to real estate transactions, seller disclosures lend critical information to the final purchasing decision. Disclosures are designed to bring serious known issues to the buyers’ attention, concerning safety of the property as well as safety of the investment. The sellers’ legal standard for disclosure is anything that might reasonably affect the value or desirability of the property.
The Transfer Disclosure Statement, or TDS, is required within the state of California on most transactions. This form allows for disclosure of a wide range of information regarding the property, from age of the roof and appliances, to deaths on the property, to structural additions and damages. However, many buyers aren’t sure of what they should be looking for, or how to interpret that information.
For example, the TDS disclosure will list the age of the roof. But an age of “ten years” doesn’t tell the buyer much, unless they know to investigate the roofing materials themselves. A roof can last between ten and fifty years, depending upon the type. So, ten years is middle-aged to old for a tar-and-gravel roof, which typically lasts ten to twenty years. But it’s quite young for a clay roof, which has a lifespan of up to fifty years.
The age of a HVAC system will also be listed, but what does this tell you? You might gain some idea of how long the system will last before it needs replacement. But, because an older system might appear to work, but run much less efficiently than a newer system, you might consider this fact when estimating electric bills.
A crack in the wall might be listed, but is this merely cosmetic? In some cases, yes, but in other cases a crack could be a sign of a much larger issue with the foundation. The lesson here is to fully investigate all items listed on disclosures, even if they seem insignificant at the time. Written disclosures are never an adequate substitute for a pre-purchase inspection of the property by a qualified professional. The inspection takes on even more significance in those transactions, for example the purchase of bank-owned property, where the disclosures are minimal.
Many disclosures are much more obvious with regard to their importance. The lead paint disclosure, required in all 50 states, notifies you of the presence of potentially toxic lead paint within the home. In many older homes, the lead paint has been covered and is theoretically no longer a threat, but you need to know about its presence in the event that you schedule renovation work that could expose you and your family.
Sellers must also complete the Natural Hazard Disclosure Report/Statement, which poses questions regarding flood hazard areas, forest fire risks, and earthquake fault zones. The local government also provides information regarding these classifications.
In most transactions today you will also find additional helpful disclosures. As just one example, the Form SPQ (one of the California Association of Realtor® forms commonly used in residential transactions) gives valuable information which supplements and expands upon the information found in the TDS. Your real estate agent should help you obtain as much information about the property you are considering buying as possible.
When reviewing disclosures, it is important to completely investigate each item listed. The seller is under legal obligation to provide accurate information, but interpretation of this information is the responsibility of the buyer. Your job is to decide whether certain items will be too much trouble, too dangerous, or too expensive for you to accept.
We can help you review these disclosures, or evaluate your options when you feel that problems have not been properly disclosed. Call our real estate attorneys for more information on these issues, and we can help you decide how to proceed.