The financial stakes are high when it comes to buying and selling houses, and some sellers can't resist the temptation to stretch the truth about their home's merits. They may also withhold the truth about their home's problems.
In more than half of the states in the U.S., sellers are asked to complete a disclosure or disclaimer form that lists known problems or conditions in their home. Depending on where you live, it might be called a property disclosure statement or a seller property information statement. But there is no standard or uniform national disclosure form. Depending on the state, the seller answers questions about a whole range of issues, including ownership, zoning, current or pending historical designation, possible environmental contamination and structural matters.
The form is supposed to be filled out accurately, but sellers are on their honors. Sellers' liabilities are limited, and the forms can be vague about known versus unknown conditions -- and real estate agents' contracts also limit their liability, saying that responsibility to disclose rests with the seller.
What all this means is that the onus is on the buyer to make sure that the disclosure form is telling the whole truth. Sometimes new owners will discover a major defect in their house and then try to sue the previous owner for not disclosing the problem. Suing - or being sued - can cost thousands of dollars in legal fees and the outcome is never guaranteed. Because the whole process of disclosure is so filled with pitfalls, if it's not required by a particular state, some lawyers recommend not filling out the form at all when it's time to sell your home.
On the flip side, as a buyer, don't always trust disclosure forms. Make sure for yourself that the house you're buying is a good bet and worth the money.
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