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What is in seller disclosure agreements?

On Behalf of | Sep 14, 2021 | Real Estate |

Buyers will often bring in an inspector to go over a home or commercial property. They are looking for engineering flaws, evidence of damage, flooding, infestation, or other details that adversely impact the property’s value. Nevertheless, the seller of residential property will fill out a property condition disclosure statement in New York and New Jersey unless it is a case where the property is “as is.”

The rules vary from state to state, but the seller fills out the statement in the spirit of full disclosure. They must divulge defects to the best of their knowledge, and the information must reflect the property’s condition. While it can be helpful, the seller or their agent need not do their own expert inspection to determine if there are flaws they were not aware of.

Examples of what to include

Each property is different, but there are some common issues that buyers will encounter:

  • Engineering: There could be cracks in the foundation, leaking, old HVAC that does not work correctly, or details not up to present-day building codes.
  • Hidden issues: This could be flooding on the property when it rains a certain amount, a leaky roof, or a dry creek that overflows in the spring.
  • Environmental standards: The property could be on an old industrial site where toxic chemicals were used, or the building may contain radon or asbestos.
  • Memberships: There may be mandatory membership in a neighborhood association, home-owners association or a co-op.
  • Special assessments: If the property is part of an association, an ongoing or pending assessment could significantly increase the dues.

Grounds for legal action

Failure to include information or mislead the buyer puts the transaction at risk. The two sides can negotiate a solution before the sale if something arises during the inspection. Still, failure to include required information on the property condition agreement is grounds for legal action. The buyer may seek to recoup the loss in value once they identify the misinformation or defect, particularly if the purchase was recent.