Without a doubt, if something is going to royally blow up a real estate transaction, it will involve the seller’s disclosure statement. In Texas, and in every state I have ever lived and practiced in, sellers of real estate are required to fill out a form detailing the condition of their property and answering very specific questions. The form varies in length and is typically provided to seller’s by their real estate agent. You can find a lot of helpful information concerning disclosure obligations on the Texas Real Estate Commission’s website.
I have purchased and sold three homes in my life and am always shocked at how informal sellers and, candidly, their realtors, treat the disclosure statement. When preparing this document, I strongly advise all adults who live in the home to sit down review the document together and create a “working copy.” You’ll be surprised at the things you remember but your partner doesn’t and what you remember after you’ve slept on it. In a real estate market as hot as the Austin area is right now, it seems that everyone is rushing to get their property listed and sold and, consequently, rushing through this document. Please take my advice and take it slow.
There disclosure form will ask all sorts of questions, covering everything to whether smoke detectors are installed in the home to whether you regularly use a pest service. You are required, by law, to answer every question truthfully. If you have any questions or concerns about how to answer, that is the time to reach out to your realtor or your lawyer.
The disclosure form also asks about repairs or changes you have made to the property and whether permits were issued as a result. You are also asked to identify any outside third parties who performed the work. As a seller, you are also required to disclose any known defects in the house. This is not the time or place to sugar coat anything. A good realtor will likely be able to overcome any hurdle this might pose and any reasonable and educated buyer know that the is no perfect home. You also have to disclose any defects or problems that have already been fixed. This is often misunderstood in connection with the disclosure process.
If I were to sell my own house right now, I would have to disclosure that I installed a water softener system, a rear deck and some additional outlets in one room. I would also need to provide the names of the contractors I used for all of these projects. It is always a good idea to provide copies of any estimates or contracts to the new buyers, even if the original contractor is no longer in business or the warranty is expired. If you simply can’t remember who performed work in your home, that is okay, but you still need to disclosure what work was done to the extent that you know.
Several years ago, my law firm, litigated a very contested case where the sellers failed to disclose that a major remodel to their home was completed without obtaining any of the required permits. The buyers of the home started experiencing electrical issues and brought it up to some people at a meeting at their children’s school. Unbeknownst to the buyers, the person the spoke to were very good friends with the sellers and told the buyers that the seller’s wife had managed the remodel herself. A quick check with the city confirmed that no permits were issued. After the home was inspected by a licensed electrician, sellers discovered that the electrical work was not done up to code, that the wiring in the newly remodeled areas of their home was unsafe and a fire hazard, and that they needed to rewire nearly the entire home at a cost of over $100,000.
The buyers sued the sellers on the basis that they stated that “no permits were needed” relative to the remodel. The sellers ended up having to pay the buyers back 30% of the sales price in damages. Had the sellers simply answered “no” when asked about obtaining permits on the disclosure form, and fully and accurately disclosed how the remodeled was handled and provided sellers with the names of their contractors, I feel strongly that the case would have resolved very differently.
-Nichole Humes, Esq.