Real Estate Disclosure Tips
Many realtors and sellers view disclosures as a thorn in their side. Why badmouth the property they’re trying to sell? Why not say as little as possible and see if the buyer discovers issues on their own? Here’s why: non-disclosure can lead to major problems during escrow. You could lose the buyer, be forced to renegotiate the price, or have to put the property back on the market. Non-disclosure can also lead to litigation months or even years after the sale. Here are five real estate disclosure tips to help you make more money and avoid potential problems.
1. Order a building report
Each municipality has a building department that keeps records on every property. For a small fee, they provide building reports that contain valuable information about a home, such as the building’s history, permits issued, closed permits, violations, zoning information and sometimes landmark or historic status.
Buyers or their banks will likely request this report. When they see open permits or violations, they’ll most likely ask you to fix them, request a credit, or walk away.
Be prepared by obtaining a building report early in the selling process. If there are issues to address, take care of them before you list the property. Potential buyers will then see a clean report, which will inspire confidence—not only in the property, but in you, too.
2. Get an inspection done before listing
Why pay to have your home inspected if you plan to sell? Because, ultimately, you can make more money. A home for sale at a great price gets a buyer in the door to make an offer. But that buyer will have his or her inspection regardless. If the buyer discovers, say, dry rot in the garage, he will either walk away or ask for money. And if you lose the buyer, the property goes back on the market with a ‘stain.’ Everyone will ask what happened to the first deal, and you’ll likely be forced to disclose this new, known issue. However, if you credit the buyer, your ultimate net proceeds will be lower than if you had priced the work into the asking price and let buyers know about the issue up front.
3. It’s OK to be the bearer of bad news
Provide buyers with disclosure documents before they make an offer. Let them know you recently replaced the roof, completed some electric work without a permit, or once had a window leak, which you fixed by replacing some flashing. When you reveal these issues, the buyer knows she’s working with a fair, honest seller. And the buyer may pay more for that piece of mind.
4. Be up front with your agent
The listing agent is the only person who sees, meets and knows every member of the transaction. They should know as much about your home as possible before taking the listing. Knowing about defects helps the agent advise you on market price and strategy.
5. Get buyer sign-off on disclosures
To avoid post-sale legal hassles, document any issues in writing. Get the buyers to sign off on all reports, inspections and disclosures. This is especially important with known issues or big-ticket disclosure items.
No one likes surprises and you, the seller, ultimately lose when you don’t properly disclose information about your property. Think of the buyer as your customer and treat them well. You’ll be better off in the long run.