What are property disclosures?
Whether you are a real estate licensee or trying to sell your home yourself, it is important to recognize that real estate law is established by a given state's Department of Regulatory Services. Most states' Department of Regulatory Services also has a Real Estate Commission or similar agency that is charged with real estate licensing and regulation. The important thing to be aware of is that, regardless of what department is responsible for regulating real estate activity in your state, they all exist to "protect the consuming public" with regard to real estate transactions. Since real estate is one of the largest – if not the largest – transaction that many people will ever enter into, and that uninformed or misinformed consumers can potentially suffer irreversible financial injury as a result of their lack of local real estate transaction knowledge, laws continue to be created in order to protect the consumer. Property disclosure laws are a great example of real estate regulatory laws designed to protect the unsophisticated real estate consumer.Click here for your free guide!
Most states have an approved "seller's property disclosure form" that requires the seller to respond to a series of questions designed to assess the physical condition of the property. In Colorado, for example, the form is five pages long and asks 162 questions of a seller regarding the property's "structural condition", "roof", "appliances", "electrical & telecommunications", "mechanical", "water, sewer & other utilities", "other disclosures – improvements", "use, zoning & legal issues", "access, parking, drainage & signage", "water & sewer supply", "environmental conditions", "assessments & liens", "other disclosures – general", "crops, livestock & leases", "noxious weeds" and "other disclosures – land".
How do I complete a property disclosure form?
When filling out a property disclosure form, do so truthfully and to the best of your ability. If you do not know the answer to a given question, then choose the "do not know" response box (if available – if not, write "Do Not Know"). Most real estate agents will tell their seller clients that if they can't stand up in a court of law and attest to their response to a given property disclosure question definitively, that they should check the "do not know" box. That said, be aware that if you only check the "do not know" response boxes that will usually send a red flag to a potential buyer and could have a negative impact on the potential buyer's offering price or even their willingness to make an offer at all. So it's worthwhile to research and give a conclusive answer to as many questions as possible.Classic environmental issues include sewer back-up and basement flooding occurrences, prior fires or other damage, whether the damage has been repaired or not.
Intangible characteristics could include things like the property's existing zoning, legal issues, liens, and any potential property stigmatization issues. Property stigmatization refers to any characteristics of the property that may have a perceived negative impact on the desirability of the property and could include facts regarding known sex offenders living in the neighborhood (Megan's Law), that the house was the scene of a heinous murder, or that the property is haunted. In the state of Colorado, a seller is not required to make such disclosures, and a seller's real estate agent is prohibited from making such disclosures on behalf of their client(s). That said, a seller should look to their own ethics in deciding whether or not to advise potential buyers of any property stigmatization issues that they may think are present in properties they own and are trying to sell.
Finally, please consult with your state department of regulatory agencies, a real estate professional, or an attorney regarding local law and customs in your area before completing your property disclosure form or seller's disclosure document.
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