What Is a Disclosure, and What Should You Share?
Before you put your home on the real estate market, put yourself in the buyer’s shoes. They’re about to make one of the largest purchasing decisions most of us will ever make in our lifetime. Before they do, they’re going to want to know everything about the condition of the property. Small things like squeaky doors, peeled paint, and finicky light switches may not be a huge deal to you, but the little things can add up.
And if your home has bigger problems, like structural issues, water damage, or pests, it can drive buyers away from a sale — especially if you don’t disclose them first.
Your goal should be to make the best impression possible for your potential buyers. In this article, we’ll help you do just that. We’ll explore what disclosures are, how to identify your home’s problem areas, what you should disclose, and why.
What Is a Disclosure?
A seller’s disclosure statement (a.k.a. a disclosure statement, disclosure documents, or a property disclosure) is a legal document that details any known defects or issues about your home.
Disclosures and Home Inspections: How Are They Related?
Both disclosures and home inspections provide key information buyers need before completing a real estate transaction. However, they are not the same thing:
- Disclosures divulge information regarding the house’s condition and any known issues in the home itself. A disclosure also includes information on the home's history, like if someone died in the home, and intel on the surrounding neighborhood, like if there is an extremely loud neighbor.
- Home inspections involve having a professional conduct a thorough examination of your home to identify any potential problems or deficiencies. You will then fix these problems and/or disclose them.
We strongly recommend working with a third-party home inspector. If you have a real estate agent (which you don’t need when using Aalto's self-service real estate platform), make sure their brokerage doesn’t have any financial ties to the inspector they recommend. If so, their inspection report may not reflect the full truth.
How to Identify Your Home’s Problem Areas
Hiring inspectors is an easy and effective way to get over any attachment and help identify some overlooked items. At a minimum, we recommend a home inspection.
Home inspections will help you identify potential issues with a property that aren’t always visible to the naked eye.
Prospective buyers are almost always going to request to have a home inspection done before finalizing a real estate transaction. Research reveals that 86% of buyers discovered at least one issue that needs to be fixed during their inspections.
As a home seller, getting a home inspection will help you get ahead of things so that your buyers’ inspection returns with minimal notes.
During your home’s inspection, the inspector walks through the property and examines the structural elements they can access, like your roof, attic, basement, garage, and crawl spaces. They also usually inspect your:
- Walls, ceilings, and floors
- Doors and windows
- HVAC system
- Plumbing and electrical systems
- Water heater
A general home inspection will cost between $300-$500, depending on your home’s size, location, and unique fixtures. When you get your home inspection report, your inspector may suggest additional inspections for other things. For example, if your home was built before 1978, you might want to get it inspected for lead-based paint, which can cause numerous illnesses in children and adults.
They may also recommend inspections for:
- Septic issues
- Water damage
It’s important to note that some cities have resale inspection requirements where a city building inspector will look for health and safety issues, unpermitted work, and other city/county requirements for sewer lateral conditions or vegetation management requirements.
The Pros and Cons of Getting Your Home Inspected Before Listing
While you should get your home inspected before a prospective buyer does, it does come with its own complications. Here are the advantages and disadvantages worth noting.
In addition to getting ahead of repairs and building trust with the buyer, here are the advantages of getting your home inspected first:
- Faster closing process: Prospective buyers will almost always want a third party to inspect the home before closing on the deal. However, suppose your home inspector already caught everything, and you made the repairs ahead of time. In that case, you shouldn’t have to worry about their home inspector catching something that could significantly impede the sale’s progress.
- You can save money: By taking a proactive approach to repairs, you could save a lot of money compared to if the buyer finds a major issue you were unaware of or left out of your property disclosure statement. When buyers request repairs, they may negotiate a lower sale price or impose a tight deadline that forces you to pay a premium for repairs. If you find the issues yourself, you can take the time to shop around for the best deal and get the repairs done on your schedule, not theirs.
- You can boost your listing price: Every home improvement you make, whether it’s a necessary repair or a desirable renovation, can add value to your home before listing it. This is particularly true for costly repairs like roofs, foundational issues, and HVAC upgrades. Even the little things can mean a lot in the eyes of a buyer, like repairing faulty blinds or having long-term warranties on new appliances.
These aren’t reasons to skip an inspection. But here’s what to know before calling up an inspector:
- The cost of cutting corners: You have to disclose what you’ve repaired and why. If you cut corners instead of repairing something correctly, the home inspector will likely catch it. Whether you cut corners or fail to disclose an issue entirely, it may result in the request for additional inspection, spurn trust issues, and could even tank a deal.
- It’s an added cost: In the grand scheme of things, a home inspection costs nothing compared to what you’ll sell your home for. It’ll cost you $300-$500 compared to the six or seven figures that make up your home’s list price. However, if more inspections are needed, they will take away a little more from your bottom line. This isn’t a substantial “con” (especially since you’ll likely save money by completing the repairs on your own time and not the buyers’), but it’s still worth mentioning.
- More work for you: Home selling can already be stressful, especially in a buyer’s market. If you’re in a seller’s market where buyers are getting into bidding wars and offering way over asking, you’re less likely to have to negotiate repairs. However, even though there’s a chance you can get away with it, that doesn’t mean you should.
What Should You Disclose When Selling a Home?
Full disclosure (get it?), if you have to ask your realtor or real estate attorney whether or not to disclose, it should probably be disclosed.
A significant number of disputes that arise after the sale stem from non-disclosure items. As the home seller, one of your goals should be to give the buyer a chance to write the cleanest offer with as few contingencies as possible. Disclosing all pertinent information and inspections upfront shows a buyer you have nothing to hide, creating a much smoother real estate transaction.
Buyers today expect to see inspections upfront, so come prepared with a seller’s disclosure form that, at a minimum, meets the requirements of the state’s disclosure laws.
Buyers can contact their local city planning office to review the home inspections and disclosures on file. As a seller, you can make their lives — and your real estate transaction — easier by ensuring that all of this information is up to date. While you should provide this information beforehand, if the buyer is doing their due diligence and wants to check to see if anything is missing, seeing that these records match what you send them will provide peace of mind.
Check your state's laws regarding disclosures. California state law requires sellers to provide homebuyers with a Transfer Disclosure Statement and a Natural Hazard Disclosure statement. The latter provides information based on zoning and information from the EPA (Environmental Protection Agency) about any known natural hazards that may affect the property, such as floods, fires, and earthquakes.
In addition to state, sellers must also abide by the federal laws regarding disclosures. For example, the lead-based paint disclosure must be included if your residence was built before 1978. This disclosure contains information about the presence of lead-based paint and/or lead-based paint hazards in the property, which can be damaging to both adults and children.
Think Beyond the Property
Sellers should share any material information about living in the home and the neighborhood. For example, does one of your neighbors throw a barbecue party every Sunday? Is the neighborhood extremely pet-friendly? Is it near one of the best schools in the city? These things may not be important to you but they could influence someone’s homebuying decision.
Conversely, if your neighbor’s dogs bark all through the night, you should disclose it to avoid a potential dispute after the sale.
How Aalto Can Help With Disclosures
At Aalto, we believe that clear and transparent communication pays off. You should put peace of mind and profits over headaches and litigation, so take those necessary steps to prepare your home for the best possible result.
Are you ready to take control of your home sale, but still want some help along the way? Whether you are negotiating concessions or want to navigate the seller’s disclosure, we’re here to help make your real estate transaction less daunting. Sign up with Aalto today.
Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.