To disclose or not to disclose — that is the question. Actually, that isn’t the question. There should be no question in a seller’s mind whether to disclose an item or not. The short answer: If you’re aware of an issue, disclose it.
But first let’s talk about what exactly a disclosure is, and why, as a seller, it can be your best friend.
What is a disclosure?
A disclosure, in terms of real estate, is an opportunity for a seller to legally communicate any known property issues to prospective buyers.
Makes sense, right? A prospective buyer is ponying up some serious cash to buy a new home, and knowing its history and issues plays a key role in the selection process.
No pain, all gain?
Historically speaking, disclosing property flaws has been viewed by sellers as a pain point. (No surprise there.) Telling prospective buyers all the individual items “wrong” with a property goes against the natural inclination to display the property in the best light.
However, rather than view the disclosure process as an unpleasant task, sellers should eventually come to embrace the process.
Here are three reasons why there’s no need to be afraid to disclose your heart out.
1. Avoid potential legal action
Disclosure documents are a seller’s opportunity to tell all and paint an accurate picture of the property for sale. They also are a vehicle to protect yourself legally from any issues that may arise down the road. The more thorough the information, the better your protection.
Julie Sears, a recent seller in the Seattle market, experienced this firsthand. After accurately disclosing a leaky window in the living room and agreeing to a price reduction, she was surprised to be contacted by her broker after closing.
“The new homeowner was upset about water damage from a recent heavy thunderstorm and was seeking compensation for repairs,” says Sears. “Since I had disclosed the issue upfront, I was protected from any legal action regardless of the subsequent damage.”
This is a perfect example of the legal protection a seller can expect when accurately disclosing issues.
2. Give a sense of security
A disclosure statement that is barely filled in sends a message to the buyer — and it’s not reassuring: the seller is either uninformed about the property or unwilling to provide information.
Make it a point to sit down and thoroughly fill out your disclosure statement. Use this opportunity to convey your knowledge about the property to the buyer.
Accurate information provides the buyer a sense of security and demonstrates that you are upfront and thorough.
“Remember that no property is completely perfect. Revealing your property’s potential flaws will not drive away every potential buyer. The disclosure statement simply allows you to enter fair negotiations with buyers,” says FSSK, a Minneapolis law firm that specializes in real estate.
Disclosing flaws places them squarely on the table, allowing both parties to either work through them together or walk away. Whichever occurs, it gets you one step closer to finding a buyer and closing the deal.
3. Gain commitment
Closing a home purchase transaction is rife with small hurdles. Clearing each one is a victory as you proceed through escrow and nearer to the closing date.
Deliver your disclosure statement early in the process — preferably when you return a copy of the executed contract to the buyer. Overcoming this hurdle early places you that much closer to concluding a successful transaction.
If the buyer will not sign off on the disclosures and would like to terminate the agreement, it’s best to know this early so you both can move on.
Let’s be honest: all properties have flaws. But if you can embrace the process and work with prospective buyers to fairly negotiate, you’ll be able to close the deal more quickly and protect yourself from future headaches.
Both you and your karma will be glad you did.