When you sell your house, you are legally required to disclose anything that might influence the value a buyer would place on your property. It’s best to mention everything you can think of, no matter how mundane. If it doesn’t affect the buyer’s desire to purchase the property (or the terms of the purchase), then it doesn’t matter that you made the disclosure. If it does affect the buyer’s desire to purchase the property, then you were legally mandated to disclose the information.
If I say, “Disclose everything,” you could probably come up with a dozen things to mention, but if you’re like most people, you’d miss some important items. For example, it can be hard to remember problems that were fixed years ago. This is where the Seller Property Questionnaire (SPQ) comes in handy. It prompts you to think of potential disclosures that don’t pop to mind—the items you’d otherwise overlook.
The SPQ isn’t required by law, but if your REALTOR uses the standard forms from the California Association of REALTORS, the questionnaire is required by contract. Even if the SPQ isn’t required, the information it helps reveal is.
The reason to disclose current problems is obvious. The reason to disclose old issues is because you never know if there might be a ripple effect that could affect things in the future. For example, you should disclose that you painted over a stain in the bedroom ceiling from a leak in the roof, even though you replaced the roof and haven’t had a problem since. By disclosing the old leak, you’re protecting yourself against unanticipated problems like mold in the attic you may know nothing about.
Note: even if you sell your property “as-is,” you must complete all disclosures. “As-is” simply means you don’t plan to fix anything—it doesn’t give you a pass on disclosures. There are a few times when the rules for disclosure are much less demanding, for example when a property is being inherited or when someone acquires a property at a foreclosure auction. Even in those cases, sellers must disclose anything they know or should reasonably have known that would affect the value of the property.
The best time for disclosures is right up front, ideally before a buyer submits an offer. By contract, the SPQ must be delivered within seven days of an offer. I recommend making a list of disclosures the day the property is listed for sale and sharing that list with anyone who is even thinking about writing an offer on the property.
When buyers are informed from the start, they won’t get halfway through the transaction only to discover something they don’t like, causing you to lose weeks of actively marketing your property to others. Also, late disclosures give buyers a reason to renegotiate the terms of a purchase, after the shine of falling in love with the house has worn off a bit.
No matter what, you must share disclosures before the close of escrow, or you open yourself up to a buyer who could later insist on compensation for an undisclosed issue or worse, a buyer who decides they no longer want the house and demand rescinding the sale altogether. Sometimes buyers get so mad about a lack of disclosure, they charge the seller with deliberate concealment. Often the anger that accompanies an after-close discovery aggravates a situation that could have been easily resolved prior to the close of escrow.
Imagine having purchased another home with the proceeds from this sale, only to find out you have to return the buyer’s money and take your old house back. It’s rare, but it happens. To avoid this, I recommend starting a file the day escrow closes on the purchase of your new home. Put everything in that file: receipts for repairs and new appliances, notes about who did the work, owner’s manuals and warranties, etc. Then when it’s time to sell, copy the whole file and hand it over to the buyer as soon as practical.
If you have questions about property management or real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 50 years. The opinions expressed here are his and do not necessarily represent his affiliated organizations.
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