Follow these tips to spot potential red flags on a seller disclosure report.
The seller disclosure report is a great asset for buyers. Without it, you might not know about the rat infestation, the pesky problem of the foundation breaking apart, whether the place was once a meth lab, or that the last resident was murdered there.
But unless you’re in the real estate business, you probably don’t read disclosures regularly, which means you could miss something important.
Each state differs in what it requires sellers to disclose. In fact, there’s only one disclosure the federal government requires: whether there’s any lead-based paint on the property, and that applies only to structures built before 1978.
Here’s how to read between the lines of a disclosure report to know what to look out for and why.
How old’s the roof?
You see on the disclosure statement that the roof’s 8 years old, but that doesn’t tell you much — unless you know the typical life span of a roof and whether life span depends on roofing material.
Roofs can last anywhere between 10 and 50 years. “The traditional tar-and-gravel roofs typically have a much shorter life span than almost any other roof material,” says Michael Thompson, an Oakland, CA, real estate agent.
Tar-and-gravel roofs usually last 10 to 20 years. The popular composition shingle roofs usually last about 20 years, and the clay roofs that you see on Spanish-Mediterranean homes can last for 50 years or more.
Crawl space vs. cement slab
A home inspector can easily identify any issues by going into a crawl space … after the spiders are out of the way, that is. “[A crawl space] also makes it easier to make repairs or upgrades by allowing access,” says Jonathan Macias, an El Segundo, CA, real estate agent.
Cement slabs don’t have possible mold or critter problems — the drawback is that tree roots or shifting soil could damage them, which is costly to fix. Slabs also need to be removed to repair broken or leaking pipes.
Replacing plumbing is a major expense. Note the age and type of your pipes. Brass, copper, and galvanized steel can last 80 to 100 years. But polybutylene or lead pipes? Translation: trouble. They need to be replaced.
The HVAC and water heater
The disclosure statement tells you how old the HVAC system and water heater are, but what’s the rule of thumb on when they’ll probably need replacing?
“Water heaters don’t really need to be replaced until they leak or fail,” says Hand. But when they do fail, Murphy’s law says it’ll happen in the middle of the night when you’re sound asleep or, even worse, out of town. Meanwhile, water’s flooding the area.
Gas water heaters usually last 10 years, and electric ones, 15. If the disclosure shows the water heater is that age or older, consider that it probably needs replacing.
“HVAC systems can last 15 to 20 years if properly cared for,” says Hand. This requires regular cleaning of filters, lines, and ducts. “Look for a service record on the unit, or ask for records from the homeowner,” she says.
But even if the HVAC is working, “a 15-year-old system is running 40% less efficient than a new system, costing you much more on your bill,” says Carlyn Neuman.
Cracks in the wall
If you see this on the disclosure report, hope for the best but prepare for the worst. “[The cracks] could be structural,” says Macias. Consider calling in a structural engineer to investigate.
If the report is marked “yes” for animal damage, let someone else examine the house if you don’t have a strong stomach. You might find a dead rat in a trap.
That could be, by the way, what the seller means by “controlling the rat problem.” You, however, probably interpret “controlling” to mean sealing the house properly to prevent the nasty critters from entering in the first place!
Also, if you don’t see a termite guarantee, ask the seller to include one.
Additional explanations or further disclosure
Whatever you do, don’t skip over the “additional comments” part. “If something is out of the ordinary, there will be further information to explain the situation,” says Hand. She explains that some items that could appear in this section are pending liens, restrictions, or easements.
Those could be deal breakers for you. Pending liens could tie up the property for some time, and restrictions or easements could limit what you can do with the home.
Disclosures don’t necessarily tell all
The seller disclosure statement represents the beginning of your research into a house. Your next step is to “keep your eyes open for things that just don’t seem right, like a wall out of place, stucco that has been disturbed, or strange additions,” says Macias.
Hand says to get a CLUE. And, no, she’s not being insulting. She means a comprehensive loss underwriting exchange, which tells you a home’s history, such as prior damage. Most home insurance companies put claims in the CLUE database.
Knowing how to read the seller disclosure is important, but it’s no substitute for having the property evaluated by a qualified home inspector.
Have you used info from a seller disclosure to uncover potential problems in a home? Share your experiences in the comments below!
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