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How To Review A Seller Disclosure Report

woman trying to understand seller disclosure form
Follow these tips to spot potential red flags on a seller disclosure report.

Without a seller disclosure report, you might not know about the rat or termite infestation that’s causing your new home’s foundation to break apart. This report can save you heartache and money if you double-check it. But unless you’re in the real estate business, you probably don’t read disclosures regularly, and that means you could miss something important.

Each state differs in what it requires sellers to disclose. In fact, only one disclosure is required by the federal government: whether there’s any lead-based paint on the property, and that applies only to structures built before 1978. Read between the lines of a disclosure report with these tips that let you know what to look out for and why.

How old is your roof?

You see on the disclosure statement that the roof is 8 years old, but that doesn’t tell you much — unless you know the typical life span of a roof or 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- and Mediterranean-style homes can last over 50 years.

Crawl space versus cement slab

“There are mixed opinions as to which is better and why,” says Carlyn Neuman, a Florida attorney and real estate broker. One plus of having a crawl space? A home inspector can easily identify any issues by examining it — after the spiders are out of the way. “[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.

But adequate ventilation is important; otherwise, you might be dealing with mold. And “all ventilation areas should be covered with screens to keep the critters out,” says Rachael Hand, a broker in Lafayette, CA. Cement slabs, on the other hand, help you avoid possible mold or critter problems, but if tree roots or soil damages the slabs, it may cost you a pretty penny. Slabs also need to be removed to repair broken or leaking pipes.

Plumbing and pipes

Replacing your 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. These materials need to be replaced.

The HVAC and water heater

The disclosure statement can tell 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 need to be replaced until they leak or fail,” says Hand. 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.

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 monthly 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. Call in a structural engineer to look for foundation issues; a thorough inspection should be all you need to know whether you’re dealing with normal settling issues or something more ominous.

Animal damage

If the report is marked “yes” for animal damage, make sure it’s being dealt with properly. When you’re looking to buy, a few pest traps won’t suffice. You should probably interpret the seller’s claims of “handling it” to mean sealing the house properly to prevent the nasty critters from entering in the first place, or hiring an exterminator. Also, if you don’t see a termite guarantee, ask the seller to include one.

Additional explanations or further disclosure

Be sure you don’t just glance 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 include pending liens, restrictions, or easements. Those could be deal breakers for you. Pending liens can tie up the property for some time, and restrictions or easements limit what you can do with the home.

Disclosures don’t necessarily tell all

The seller disclosure statement represents the first steps in your home research. Go with your gut and take note of suspicions along the way. 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, it’s not an insult. CLUE is 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 a seller disclosure to uncover a home’s potential problems? Share your experiences in the comments below!