Sellers often approach disclosures with dread. Agents need to counsel them about the many benefits of disclosure, from building mutual trust to offering legal protection.

As of early summer 2021, the real estate market is moving fast, and inventory is low. It’s a classic seller’s market. According to the National Association of Realtors (NAR), the median single-family home price in the U.S. rose 18.4 percent to $334,500 compared to the previous year.

Both the percentage increase and the price are historic highs, and reflect the massive demand for housing throughout the country. Sellers in this market often receive multiple offers well above the asking price. With this dynamic, sellers and agents alike might not follow certain standard processes, such as those regarding disclosures.

While disclosing your home listing’s defects is not only the ethical and professional way to conduct business, it can also benefit sellers financially. It enables them to avoid costly legal disputes, especially since most homeowner’s policies will not cover nondisclosure lawsuits as omission is not usually “accidental.”

Overdisclosing can disarm buyers with the seller’s honesty and attention to detail, putting them more at ease to put in a bid that could potentially be $100,000 over the asking price. It would be advantageous for agents to reduce their seller’s disclosure fears by detailing how disclosure streamlines a sale and prevents future problems.

Frequent disclosure omissions

Sellers and agents should always consider any “material known facts” about the property that might adjust its perceived value. If the answer is “yes,” then the issues must appear on disclosures. And for state-specific information, agents should always understand the latest requirements. 

Unfortunately, homeowners are frequently aware of defects and problems they want to omit. This is common for defects such as slow plumbing leaks that might remain hidden for months or even years until the new homeowner discovers a big problem.

However, a known issue requires full disclosure. Here are some of the frequently undisclosed issues: 

  • Sewer line backups. Whether they’re caused by tree roots, broken or old pipes, or poor design, sewer line problems are a headache for new buyers.  
  • Age of the roof or condition issues. Sellers should transparently share the age of their home’s roof (if known) and detail any known problems such as holes or damaged shingles/tiles.
  • Cracks in the walls or the foundation that can suggest structural problems.
  • Current pest issues such as rats in the attic, widespread termite damage or other related problems.
  • Plumbing leaks or water-damaged areas.
  • Appliances are a frequent sticking point for home sales. One option for sellers is to omit the appliances from the sale, and then sell them separately. If the appliances are staying, then sellers should disclose every problem, no matter how minor. It’s often better to sell the home without appliances included, and then state they’ll remain for the owner but without any guarantees to their working condition. 

When it comes to any of the above issues, it’s in the seller’s interest to disclose them. A reasonable buyer won’t pass on a home because there was past water damage from a burst pipe. However, if they find evidence of undisclosed damage, then they might rescind their bid or turn to legal remedies.  

Disclosing unpermitted work 

Homeowners must disclose unpermitted work — even in cases where the quality of the work is fantastic and would pass a code inspection. The seller’s agent needs to ensure any unpermitted construction that increased a property’s bedrooms, bathrooms or square footage is not listed on the MLS description.

It can note the existence of this space, but the listed size of the home should reflect what’s also recorded with the city assessor. A proactive step for sellers is to update the city about the new square footage before the house goes on the market.

Additional property taxes will come with this update, but it’s a best practice for transparency and building trust with buyers willing to pay top dollar. 

The disclosures should state the work done without permits, and the agent should encourage buyers to perform their own inspections to review the work. Sellers should also refrain from stating unpermitted work is “up to code,” even if the contractor did perform code-compliant construction. 

Removing the fear of disclosure to build trust 

Sellers (even those in a friendly market) often approach disclosures with dread. They worry if they divulge everything that’s wrong with their home, they won’t attract any buyers. Agents can counsel their sellers about disclosure’s benefits, including building mutual trust and offering legal protection.

Buyers in a competitive market are unlikely swayed by a few leaky faucets or an aging roof. They instead will appreciate transparency and attention to detail with full disclosure and move forward with an offer that satisfies all sides of the equation.  

Jenny Usaj is the Employing Broker and Owner of Usaj Realty, a Denver, CO real estate brokerage. Jenny is a member of the Denver Metro Association of Realtors Market Trends Committee.   

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