Home Purchase Agreements: Why So Many Disclosures?

When you’re considering making an offer on a home, you want to make sure that behind that fresh coat of paint and beautifully staged living room there aren’t creeping issues like black mold or a leaky roof.

That’s why your real estate agent will provide a document containing disclosures either before you make an offer or in some markets after your offer has been accepted.

A disclosure package is a legal declaration of any problems the home might have, such as pest infestation, water damage, or risk of natural disasters—anything that might affect the value of the property. Both you and the seller will sign off on the disclosure documents.

Exactly what must be disclosed by law varies from state to state. But it’s in the seller's best interest to disclose anything that might cause issues in the future. If they don’t, it could be grounds for a lawsuit.

Be sure to read through your disclosure package thoroughly, and have a list of non-negotiables, or at least items that are red flags for you. Maybe you highly value peace and quiet, or have an extremely sensitive nose—make sure the home you want to buy isn’t directly underneath a flight path or near a plant that creates an unpleasant odor.

It’s also a good idea to research and understand the disclosure laws in your state so you know what your sellers are (and aren’t) required to disclose. Here are some of the most common disclosures you can expect to see.

Hazards
The seller should let potential buyers know if the home is in a floodplain, in a tornado corridor, or in an earthquake zone, just to name a few examples. Others include any toxic substances that might be in or near the home, including asbestos, radon gas, lead-based paint, or if the home was ever used as a meth lab.

Neighborhood nuisances
Noise from a nightclub, smells from a nearby plant, shooting ranges, airports, and any other potential nuisances in the area should be disclosed.

Repairs
As a buyer you need to know what has been repaired in the home and why. Your inspector can take a close look at those areas. And you’ll want to know if any repairs might indicate larger structural issues with the home.

Homeowners association information
You’ll want to know not only if there’s a homeowners association fee, but also whether the association has discussed paying for future repairs or updates to the property. The seller should provide you with recent meeting notes so you don’t get hit with an unexpected large bill.

Water damage
Water damage may not be immediately noticeable during an inspection so it’s important for sellers to let you know if water entered a crawl space or basement, if there’s been a leaky roof, or a plumbing issue.

Death on the property
Most states do not require a seller to disclose when someone has died of natural causes in a home. But they may require disclosure when someone has died as a result of an accident related to the home—for example, if a safety issue with a swimming pool or an unstable structure led to someone’s death. Even if the safety issue has been fixed, in most cases it should still be disclosed.

Other potential disclosures
Sellers should also disclose if they’re taking certain appliances with them when they leave, like the refrigerator or stove. Things like ongoing litigation, drainage problems, non-permitted renovations, and anything else that might cost buyers significant money or inconvenience somewhere down the road are also important to disclose.

While different states require different disclosures, one disclosure is federally mandated: Any residence built before 1978 must disclose that it may have been painted with lead-based paint, and the potential hazards associated with it.

A disclosure package can be lengthy and complicated. But it’s important to read through it carefully so you understand exactly what you're getting into when you buy a home.

Sources: Investopedia, Realtor.com, Zillow, Nolo