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If you’re asking yourself this question, then chances are you know about something wrong with your home and are debating whether or not to mention it in your Seller’s Disclosure Statement. The short answer is this: you should always disclose any issues with your home that you know about when selling it.
Disclaimer – The information in this post is intended for general informational purposes only and not to provide legal advice.
What is a Seller’s Disclosure and why are you required to have one?
The Texas Property Code requires that most home sellers fill out a Seller’s Disclosure form. The purpose of the form is to disclose any issues with the house you are selling that you are aware of and give the potential buyers information and a historical account of your home. If a seller who is required to provide a Seller’s Disclosure fails to do so within the specified timeframe in the sales contract, the buyer can terminate the sale without any financial ramifications.
The official statute
You’ll find the Texas Property Code, Title 2. Conveyances, Chapter 5. Conveyances, Subchapter A. General Provisions documentation here. In short, typical residential owner-occupants must always fill out a seller’s disclosure when listing their home for sale.
Sec 5.008 – Sellers’s Disclosure of Property Condition. (a) – A seller of residential real property comprising not more than one dwelling unit located in this state shall give to the purchaser of the property a written notice as prescribed by this section or a written notice substantially similar to the notice prescribed by this section which contains, at a minimum, all of the items in the notice prescribed by this section.
The official forms
There are two different Seller’s Disclosures in use by sellers. One is the standard Texas Real Estate Commission – TREC – Seller’s Disclosure form located here. The other is a bit more in-depth and is from the Texas Association of Realtors – TAR – and is only available for use to its member agents. Sellers should always fill out whichever form they use themselves.
Do all sellers have to fill out a disclosure?
While there are several exceptions to having to fill out a Seller’s Disclosure, standard owner occupants always need to fill one out. Additionally, landlords are not exempt and must fill out a Seller’s Disclosure. The below passage from the Texas Property Code lists those cases exempt from needing to provide a Seller’s Disclosure.
Sec 5.008 (e) This section does not apply to a transfer:
(1) pursuant to a court order or foreclosure sale;
(2) by a trustee in bankruptcy;
(3) to a mortgagee by a mortgagor or successor in interest, or to a beneficiary of a deed of trust by a trustor or successor in interest;
(4) by a mortgagee or a beneficiary under a deed of trust who has acquired the real property at a sale conducted pursuant to a power of sale under a deed of trust or a sale pursuant to a court ordered foreclosure or has acquired the real property by a deed in lieu of foreclosure;
(5) by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust;
(6) from one co-owner to one or more other co-owners;
(7) made to a spouse or to a person or persons in the lineal line of consanguinity of one or more of the transferors;
(8) between spouses resulting from a decree of dissolution of marriage or a decree of legal separation or from a property settlement agreement incidental to such a decree;
(9) to or from any governmental entity;
(10) of a new residence of not more than one dwelling unit which has not previously been occupied for residential purposes; or
(11) of real property where the value of any dwelling does not exceed five percent of the value of the property.
Is there anything you don’t have to disclose?
Sec 5.008 of the Texas Property Code is below. In short, you don’t have to disclose a death on the property unrelated to the condition of the property, HIV status of any occupants of the property, and won’t be held responsible for any conditions that you are truly unaware of.
Sec 5.008 (c) A seller or seller’s agent shall have no duty to make a disclosure or release information related to whether a death by natural causes, suicide, or accident unrelated to the condition of the property occurred on the property or whether a previous occupant had, may have had, has, or may have AIDS, HIV related illnesses, or HIV infection.
Sec 5.008 (d) The notice shall be completed to the best of seller’s belief and knowledge as of the date the notice is completed and signed by the seller. If the information required by the notice is unknown to the seller, the seller shall indicate that fact on the notice, and by that act is in compliance with this section.
But isn’t it on the home inspector find any issues?
Yes and no. The inspector can only inspect what they have access to at the time of inspection. If you have a window that leaks water into the home every time it rains, the inspector has no way to discern that if he inspects the home on a sunny day. Remember, the Seller’s Disclosure is for you to disclose what you know is wrong with the home. The inspector is there to inspect the home for issues or problems a homeowner or buyer wouldn’t be able to discern with an average person’s knowledge.
An example of how failing to disclose can come back to bite you later
Let’s use an example scenario. You saw some water spots on the ceiling in a bedroom. You called a roofer who told you there was a small hole in the shingles that was causing water to enter the ceiling when you had heavy rains. He suggests you fix it to prevent it from getting worse, but it’s a big expense, so you decide to wait.
Six months later you decide to list your home. There hasn’t been another leak, so you paint over the spot on the ceiling and don’t mention the issue in the seller’s disclosure. Six months after closing, a massive storm hits and that small hole had apparently gotten bigger over the last year, and the rain causes a considerable amount of water damage to the bedroom ceiling.
The new owners happen to call the same roofer you did a year before. The roofer remembers coming out and tells the new homeowners you knew there was a small leak and must not have ever repaired it. Given that there were no water marks on the ceiling when the homeowners closed, they now know you covered up the issue.
Potential legal ramifications of failure to disclose
In Texas, the Seller’s Disclosure survives closing, which means that if you failed to disclose something you knew of, the buyer could hold you responsible for it even after they close on the home. In severe cases, this could result in the buyer filing a lawsuit against the seller. This potential for legal issues is why being honest in disclosure is always the best policy.
What about small items?
Every house has some issues – many of them small. If a drawer sticks or there is a small hole in the drywall, it would be easiest to simply fix those items before listing your home for sale. Small items can add up and create a feeling of “this is going to be a hassle” with buyers, so it’s best to fix them before you list. If in doubt about whether or not you should disclose an item, you should err on the side of disclosing it.
What if my house has a big problem or issue I know will affect its sale?
Every home has issues and having something wrong with your home isn’t necessarily going to prevent someone from buying it – especially small ones. But what if your home has a big issue, like a leaking roof or foundation issues you’ll need to disclose? You have a few options.
You can repair the issue before listing the home for sale, but this often means cash out of pocket some homeowners can’t or don’t want to spend. You can lower the list price of your home to compensate for repairs a future seller will need to make, but your home having issues could cause the sales process to drag out while you wait for an occupant buyer willing to tackle the repairs in exchange for the reduced price.
Or you can sell your home to a professional House Buyer who will purchase the home as-is – even if the issue is something catastrophic like a fire damaged or flooded home – close quickly, and do any needed repairs themselves. If you live in the Katy or Houston, Texas area, we’d be happy to give you a free, no-obligation offer for your home. You can request one here.