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What Sellers Must Know About Disclosure Laws: Must-Know Tips for FSBO Disclosures

Authored By: 
Andrew Goodwin
One topic that many FSBO sellers and buyers alike are confused about is disclosures of property issues when making a transaction. Of course, people on different sides of the equation probably feel different ways in terms of what should be disclosed and what doesn't need to be.
 
However, it's crucial that you understand exactly what is legally required, so that if you're selling, you don't run afoul of the law, and if you're buying, you get what you're entitled to. Right here, you'll find a quick list of the top must know tips when it comes to for sale by owner disclosures.

Personal Knowledge

FSBO disclosure rules begin with the concept of personal knowledge. The general minimum amount of disclosures which are required will be anything that you have personal knowledge of, and which affects the value or desirability of the home.
 
This means that from big issues to perhaps even small features of a home or neighborhood, if you know about it, and it could affect value or desirability, you have to disclose. In many states, this means that FSBO sellers do not need to hire their own inspectors or evaluators to uncover new issues.

No Loopholes

This doesn't mean though that you can turn a blind eye to what would be a blatant problem. If there's something that by all means you should know of, but don't disclose and claim ignorance of, you can still be held liable by courts. Additionally, it's better to be safe than sorry, and err on the side of caution.
 
For example, in one case, a FSBO seller had placed a large television in front of a huge foundation problem in one room of their home. Whether or not they did this purposefully, this was still something they should have known about either way, and they were liable for those repairs.
 
Basic "ignorance" on your part, as in you didn't know something but should have, can lead to liability. Disclosure laws for real estate have a much lower line set in terms of proving "guilty" than legal fraud cases, for example. The burden of proof will be for you to prove your innocence really, and not the other way around.

Stricter States

On top of this baseline of for sale by owner disclosures, many states also have stricter and more specific laws and regulations as well. For example, in Texas, specific rulings have decreed that "A seller of real estate is under a duty to disclose material facts that would not be discoverable by the exercise of ordinary care and diligence on the part of the purchaser, or that a reasonable investigation and inquiry would not uncover.”
 
This means that you do need to thoroughly inspect your own home to uncover major issues which basic due diligence on behalf of the buyer wouldn't find. California is another state known for their strict FSBO disclosure legislation. Their disclosure musts include natural disaster risk and history, specific property repairs and even small neighborhood nuisances such as a loud barking dog.

Lead Paint

If you're home was built before 1978, you have to disclose the usage of lead based paint and related hazards in your home's history. This is according to the Residential Lead-Based Paint Hazard Reduction Act of 1992 (Title X). Certain other documentation must also be issued, and buyers must be given ten days to test the house for lead.

Termites

Termites are a major issue for all FSBO disclosures, and this is not something that you'll be able to avoid, as you can and will be held liable as this is an issue which carries major consequences and greatly affects home value. If you've had termites in the past, you have to disclose that. It's also then in your best interest to then have another check prior to selling the home, so sellers can see that the problem has been resolved.
 
In one case, a Chicago inspector went to the same home twice in a six month period with different buyers. The first time, they alerted the sellers to the terrible termite problem. The second time, it wasn't fixed, but instead they just threw up some dry wall to cover up the situation! Those buyers never went through with the deal - but somebody else did - and the original sellers would have to deal with a major court case down the road with that information.

Repairs

Major repairs that you've made to the home should be disclosed with FSBO sales. This includes issues such as roof repairs, major property damage due to flooding, heating and air conditioning problems, and more. Water damage and mold are some of the biggest liability issues after termites when it comes to for sale by owner lawsuits.
 
When you disclose new problems though, this does not mean that you have to repair them. The buyers can take that on for themselves, however, major repairs that are required will lead to lowered values and selling prices.
 
Ultimately, if you're an FSBO seller, you should do your part and be as honest and open as possible. If you're a buyer, do your due diligence as well, and know that you have some protections helping you, but you're not guaranteed disclosure of everything that could be an issue. On both sides, it's better to have everything on the table for both parties to know upfront.

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