Full Disclosure: Is Honesty the Best Policy?

When listing a home for sale, is the seller obligated to give specific reasons for selling, even if they're negatives? What if snakes, alligators or stray golf balls sometimes wind up in your back yard, or noxious odors drift by when the wind blows in a certain direction?

What if the noise from a nearby freeway always seems too loud for comfort? Are there plans for a new shopping mall that promises to bring not only more retail outlets but incessant traffic jams as well?

Does an owner have to tell the real estate agent or potential buyers? As with most legal questions, it is best to check with your real estate agent or legal counsel to see what fits your specific situation. 

Disclosure Laws Vary

What if the city has enacted regulations that would prevent a new owner from adding a pool or a garden shed? 

Just how much information is too much to share?

While it is true that what is considered undesirable, offensive or detrimental in one person's eyes may be a plus in someone else's view, the general rule in most states is that real estate faults, including some subjective nuisances, should be disclosed. However, in practice, there are wide variances in requirements and interpretation.

There has been a general move in some states to move "away from the 'let the buyer beware' motto of yesteryear towards a seller's disclosure to 'tell all'," according to attorney Christopher A. Combs. The discussion centers around the obligation to be honest about "nasty neighbors" even if the information might have a negative effect on a potential sale. What is true in one area, however, may not be required practice in another locale.

Real Estate Ethics and the Law

While most potential problems, and even subsequent court cases, between seller and buyer stem from property defects and not from nuisance claims, it is wise for sellers to be aware of their state requirements regarding full disclosure. A knowledgeable real estate agent can be your best friend, helping you navigate the sometimes muddy waters of property disclosure, legal requirements and ethical considerations. 

Property disclosures, required in most states, are designed to alert buyers to known defects. Sellers are typically not required to verify the extent of any defect, but are rather charged with noting items or situations of which they have personal knowledge. 

Your real estate agent also has an obligation, in many states, to disclose "adverse material facts" that they may observe, or that you discuss with them. They typically do not have an obligation to review or confirm the seller's disclosure form. However, if you ask your agent about the need to list a specific condition, perhaps a previous water leak that had been repaired and is unlikely to occur again, know that not mentioning it might become problematic. 

If you have questions, discuss your concerns with your professional real estate agent and/or an attorney. Seek satisfactory answers so that you don't become liable for supplying incomplete or misleading information. While it is not the seller's duty to protect a potential buyer, it is your responsibility and your agent's duty to be forthcoming with information that is pertinent and truthful.

It may also be helpful to supply more information than is required if, for example, you have written reports of yearly termite inspections, or if you had a radon test performed.

Making the Sale

Property disclosures serve a dual purpose: First, the standard form is designed to offer an overview of the home's general condition, and the specific answers are intended to focus attention on potential areas of concern or necessary repair items. The disclosure form can be viewed as a sort of insurance policy for both parties to the transaction. It's a report card of performance and specific corrective action during a specific time period. It's also a fair assessment of expected future condition, both short and long term. 

It is incumbent on the buyer to request additional information, to schedule any desired independent inspections -- of the roof or air conditioning system, for instance -- or to determine that there are no immediate concerns. 

Depending on specific circumstances, including the age of the home and the number of years the owner has occupied it, vague answers or claims of "don't know" in too many areas on the property disclosure might constitute a red flag to a buyer.

Selling a home depends on a number of factors, including location and neighborhood ambience, physical condition, curb appeal, interior space, price, and evidence of ongoing maintenance and care. Although it can seem like "too much information," the best way to sell your home might be to "tell all," even if it includes "the good, the bad and the ugly."

Full disclosure should not be a stumbling block on your way to a successful sale.

And, as a reminder, if you have any questions about seller's disclosure laws in your area, please consult with a knowledgeable attorney.