A Property Disclosure Statement is a document a seller uses to protect themselves from lawsuits for the sale of a property. It allows sellers to outline a property’s history and existing condition.
A buyer can then consider the property disclosure statement and determine if they want to address any listed issues.
- What is a Property Disclosure Statement?
- What Is the Purpose of a Property Disclosure Statement?
- Property Disclosure Statements by State
- When Is a Property Disclosure Statement Required?
- Who Fills Out the Property Disclosure Statement?
- What Disclosures Does the Property Disclosure Statement Require?
- How To Write a Property Disclosure Statement
- Frequently Asked Questions
- Property Disclosure Statement Sample
What is a Property Disclosure Statement?
A property disclosure agreement helps sellers inform buyers what issues or damage may plague for sale properties.
Most states require sellers to complete property disclosure statements, sometimes referred to as property condition disclosure agreements, to ensure that the sale of a property is as transparent as possible.
Sellers can refer to these documents if a buyer attempts to contest damage found after a sale.
What Is the Purpose of a Property Disclosure Statement?
Property disclosure statements serve one purpose for a buyer and another for the seller.
Buyers can refer to property disclosure statements to learn more about what repairs a property requires upon purchase. Buyers can subsequently use property disclosure statements to argue that a property’s listed price doesn’t consider the property’s flaws.
You must submit property disclosure statements to interested buyers if you’re selling a property.
If someone buys your property and returns it, insisting that you didn’t disclose the breadth of existing damage, you can refer to your property disclosure statement to protect yourself in court.
You can work with a real estate attorney to ensure your property disclosure statement is as comprehensive as possible (note that California has specific rules for filling out property disclosure statements, and agents may not fill out these forms for sellers).
Property Disclosure Statements by State
Certain states operate on a caveat emptor or “let the buyer beware” policy.
These states are rare but include:
- Alabama
- Arkansas
- Georgia
- Massachusetts
- North Dakota
- Virginia
- West Virginia
- Wyoming
Alternatively, some states require you to complete residential property disclosure statements or allow you to limit the information on your disclosure statements otherwise.
You can work with a real estate agent or an attorney to determine what information must appear on a property disclosure statement in your state.
Is a Property Disclosure Statement Required?
Most states require sellers to provide buyers with some version of a property disclosure statement.
These states include:
- Alaska
- Arizona
- California
- Colorado
- Connecticut
- Delaware
- District of Columbia (Washington D.C.)
- Florida
- Georgia (under certain conditions)
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts (under certain conditions)
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota (under certain conditions)
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina (under certain conditions)
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia (under certain conditions)
- Washington
- Wisconsin
California requires sellers to complete a Real Estate Transfer Disclosure Statement, and real estate agents may not fill out this form for the seller.
South Carolina is also a unique state in that both the buyer and the seller can agree ahead of time and in writing not to complete a disclosure statement.
Tennessee has a similar policy. Unless both parties agree to waive, sellers are required to provide buyers with a property disclosure statement.
When Is a Property Disclosure Statement Required?
Unless a seller and buyer live in a “buyer beware” state or in a state where the statement is waivable, sellers must submit a property disclosure statement to parties interested in purchasing their property.
Failure to submit a property disclosure statement to an interested party can cause the seller to face potential legal action.
Who Fills Out the Property Disclosure Statement?
The property seller is expected to fill out and complete the property disclosure statement.
Property sellers in California must fill out the transfer disclosure statement in writing and remember that real estate agents cannot offer legal advice regarding the form.
What Disclosures Does the Property Disclosure Statement Require?
When composing a property disclosure statement, you’re expected to include information about a property’s:
- Known mechanical and electrical defects
- Known structural defects
- Health and safety hazards
- Water, sewer, plumbing, heating and cooling systems
- History of flooding and pests
- History of legal issues
You can also include information about neighborhood noise, nearby sex offenders, zoning disputes, or HOA requirements. However, your property disclosure statement is different from a home inspection report.
You are not expected to do pre-inspections.
Similarly, your disclosure shouldn’t require any investigation. You are only required to submit information about conditions you’re aware of during a sale.
How To Write a Property Disclosure Statement
It’s important to know what information a property disclosure statement contains.
With that in mind, sellers writing a property disclosure statement should include the following:
Opening Statements
A property disclosure’s opening statement includes the seller’s name and the address of the property in question.
Ownership Information
The ownership section of a property disclosure statement details the type of property up for sale, the year the property was constructed, and the length of time the current seller has owned the property.
Property Information
The following sections of a property disclosure statement detail the property’s features. These sections should include the following:
- Water: Is the water source private or public? Have there been problems with the water supply in the past? Does the property come with a water treatment system? Is there a fire sprinkler system on site, and has it been maintained?
- Sewage: Does the property connect to a public sewage system or a septic tank? Have there been problems with this connection before?
- Heating: Does the property run on oil, natural gas, electricity, or propane? Does the heating unit serve every room?
- Air conditioning: What kind of air conditioning unit does the property have? Has the system been maintained over time?
- Hot water: How does the property heat its water? How old are the applicable hot water units?
- Foundation: What kind of foundation does the property have? Has it been maintained?
- Basement/crawlspace/cellar: What additional space does the property have? Have those spaces leaked or experienced high degrees of moisture in the past?
- Roof: What is the roof made of, and when was it last replaced? Has the roof leaked or experienced moisture damage in the past?
- Plumbing system: Is the property’s plumbing operational? Are there issues with the current plumbing setup?
- Insulation: Are the exterior walls, ceiling/attic, floor, and other areas of the property insulated?
- Fire: Does the property have working fireplaces, chimneys, or woodstoves?
- Structural systems: What supports does the property have in place, if any?
Problem Areas
These sections of the property condition disclosure statement specifically touch on what problems a property may have experienced.
These can include:
- Insects and other infestations
- Carbon monoxide leaks
- The presence of hazardous or regulated materials
- Zoning violations
- Exterior drainage and standing water
- Flooding
- Property restrictions
- Murder/suicides
- Illegal drugs or a history of criminal activity
- Material defects
Additional Information
Most property condition disclosure statements also require sellers to disclose whether or not they’ve improved the property during their tenure as owner.
Sellers can also include information about a property’s mineral rights and any additional disclosures in this section.
Signatures
Finally, sellers complete the property condition disclosure statements with their signatures, and interested buyers sign to acknowledge receipt.
Frequently Asked Questions
What are the consequences of lying on a property disclosure statement?
Buyers who discover that a seller overlooked damage in their property disclosure statement may have the right to void a real estate purchase agreement. Buyers can alternatively pursue a real estate purchase agreement amendment, depending on their circumstances. If you’ve already sold your property, a wronged buyer may choose to take you to court over an alleged oversight. However, buyers have to uphold a substantial burden of proof. Sellers, after all, aren’t required to conduct inspections before creating a property disclosure statement. Sellers who can argue a lack of knowledge about conditions on a sold property may be able to avoid a civil lawsuit altogether. If you’re concerned about missing apparent damage when writing your property disclosure statement, bring a real estate attorney to walk through the property with you. You are not expected to hire an inspector when writing your property disclosure statement. But an attorney can help you identify obvious damage the average buyer might have issues with.
What about earnest money deposits and property disclosure statements?
Buyers interested in a property can use earnest money to express their intent to purchase it. Earnest money is not the same thing as a down payment. Even so, if a buyer discovers that a seller did not mention certain defects in a property disclosure statement, they may demand that the seller return their earnest money
What about buyer beware and property disclosure statements?
The term “buyer beware” refers to a policy upheld in states mentioned above that generally do not hold sellers accountable for property disclosure statement oversights.
These states don’t punish sellers who overlook a property’s defects before selling that property. Buyers must contend with these defects without the ability to hold the original seller accountable for giving incomplete information.
That said, “buyer beware” only happens once a seller concludes a sale in any of the states mentioned above.
If a buyer brings in an expert before closing and discovers damage not listed on a property disclosure statement, that buyer can negotiate the price.
Property Disclosure Statement Sample
Below is an example of what a property disclosure statement looks like. Use our document builder to create a property disclosure statement online easily.
