If you’re a property investor and you’re looking to sell your property, you might want to learn a bit about property disclosures, as certain disclosures are mandated by federal and state law when you’re selling a property.
To give you a general idea here are some of the disclosures that are recommended and required. Please check what additional disclosures may be required for the area you are in or looking to invest in.
Among all the paperwork that must be signed when buying or selling a home is a document concerning lead-based paints. Federal law requires disclosure of any hazardous lead-based paint that the property may have been painted with before 1978. You can go to the EPA’s website and download a pamphlet entitled, “Protect Your Family From Lead In Your Home”. Give this to the buyer so they can read about the topic. According to Federal law, the buyer has the right to test for lead-based paint within a certain amount of time.
Take some time to learn your state’s disclosures, as they do vary depending on the state. If you’re not sure where to find your state disclosures, try www.findlaw.com. Common state disclosures include asbestos, radon, mold, whether or not the home is in a flood zone, and other various safety issues. For example, if you live in California, the state requires disclosure of “seismic hazards” to inform potential buyers of possible earthquake havens. There are also some states that require disclosure of sex offenders, know as Megan’s Law. Therefore, come to know your particular state requirements.
Common Law Disclosures
Common Law Disclosures require you as the seller to disclose any information about the home, such as defects, that a buyer would have no way of knowing. For example, if the home is infested with bed bugs, this must be disclosed to the buyer, as they may not be able to see the bugs at the showing. Misrepresentation by the seller can result in common law fraud, so be sure to be honest about disclosure.
Chances are your realtor will give you a property disclosure form to fill out that will go to the buyer. This disclosure is usually around four pages asking many questions about the home. It may not be mandatory in each state, but is recommended.
“As Is” Disclosures
Selling a property “as is” is not a substitute for full disclosure, as you still need to be in tune with federal, state, and common law disclosures. If you’re not fully honest with disclosures, you could be setting yourself up for a lawsuit or the buyers can simply back out of the deal.
Essentially, it’s important that as a seller, you understand a bit about property disclosures and be truthful as you work with them. This will protect you from any lawsuits or problems down the road. In our Foreclosure Investing Mastery course I have created custom disclosures specifically for investors that should help you immensely as well. Lastly, remember to always check which disclosures you need before you move forward in the process, this way you can make deliberate choices and know what to expect ahead of time.