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Could You Spot These 8 Red Flags On A Seller Disclosure Report?

red flags disclosure statement
Keep an eye out for these eight big (and small) things.

Buying a home is a little like falling in love. When you first start dating, you’re smitten. Which also means you’re more likely to overlook some critical flaws that might otherwise slowly crack away at your relationship down the road, potentially leading to heartbreak. Such is the case when buying a home. Sometimes you’re simply too enamored of your soon-to-be abode, so you overlook some major red flags during the process, including some that are spelled out for you in a seller disclosure statement.

“By law, sellers must disclose all they know about the property,” explains Ken Baer, a real estate agent with Willis Allen Real Estate in San Diego, CA. “But the buyers have an obligation to themselves to reach a level of comfort in what those disclosures reveal.” Here are eight red flags in a seller disclosure statement that you shouldn’t turn a blind eye to when buying a home.

1. Notes or lack of details about the roof

It’s not a hard and fast rule that you should dig deeper into what a seller or inspector means when they say “small roof leak” or “a few roof tiles missing.” But in the case of Liane Jamason’s friend, she should’ve heeded the warning a bit more. “When the inspector showed up to my friend’s home, he got up on a ladder, looked at the roof for maybe 30 seconds, and put into the report ‘five or so cracked roof tiles — recommend reviewing with licensed roofer,’” says Jamason, a broker associate with Jamason Realty Group in St. Petersburg, FL. “Three days after closing, the entire kitchen roof caved in. The buyers called a roofer, who said they had more like 50 to 100 cracked roof tiles. They were livid and wanted to sue, but the home inspector covered his butt with that clause about seeking the help of a licensed roofer and they had no recourse.”

2. Any structure-related items

“If the problems are structural in nature or unable to be fixed, it may be best to walk away,” advises Jamason. So if you’re faced with exterior wall cracks, sagging rooflines, or significant cracks in the foundation, and your inspector points them out or the seller mentions them in the seller disclosure form, seek guidance from your real estate agent and seriously rethink purchasing the home.

3. The dreaded “no representation” or “unknown”

It’s not necessarily a sign to run away from a home, but if a seller marks an item such as the basement or windows on the seller disclosure statement as “no representation” — a move that’s allowed in states like North Carolina — then you’ll most definitely want an inspector to look more closely at that area. What does it mean? Sellers can opt to put “no representation” on an area of the home in their statement to avoid disclosing the conditions or characteristics of an area of the property, even if they know of issues. It’s sneaky, but it can protect the seller from potential litigation from the buyer down the road.

“I’ve had a couple of examples in the past where the disclosures were marked ‘no representation’ and the seller wouldn’t give a reason,” says Keith Thompson, a real estate broker with Berkshire Hathaway HomeServices Carolinas Realty in Charlotte, NC. “In those cases, there were additional irregularities that led my clients to move on to another property.”

4. Mentions of previous flood damage

In hurricane-prone areas like South Florida where Jamason resides, flood damage happens more often than in other areas of the country. Flood damage can wreak havoc on a home’s foundation (see “Any structure-related items” above) and cause mold issues, among other things. That’s why when Jamason sees a seller disclose that the home has had flood damage, no matter how small, she advises her clients to be wary.

5. Any liens on the property

Although issues regarding liens — when a legal right to the property is held by a creditor or some other party aside from the seller — should pop up during the title search, be extra leery if a seller discloses one in their statement. “Liens on a property can be scary,” says Justin Udy, a real estate agent with Century 21 Everest Realty Group in Midvale, UT. “Depending on the lien and lien type, it could completely stop the sale. Be sure to consult your title company, real estate attorney, and the agent representing the other side to get clarity around the issue and time frames it could take to clear the title. In our experience, liens can be removed, but it typically takes twice as long as anticipated, and a buyer should be prepared for delays.”

6. Any easements or land-use restrictions

If you buy a home planning to build an addition or make major renovations, you may discover after the sale closes that existing easements on the property forbid adding permanent structures in the exact spot you were hoping to make your new master suite. Yikes! “Easements and land restrictions can affect the value of a property,” explains Udy. “In these scenarios, a buyer should get a title report giving a detailed description of the easement. In addition, a survey would be prudent to identify landmarks, how it affects the property, and if it is of no harm or affects the future marketability or value of the property.”

7. Failure to get proper permits for additions or improvements

Heed this warning, friends: “Failure to get permits is a huge red flag,” warns Udy. “A buyer needs to expect what they inspect. Without permits, a buyer has no idea if the work was completed by inexperienced and unqualified homeowners or a true craftsman. In these scenarios, we recommend a thorough home inspection by a licensed home inspector of the work completed. In addition, a thorough review of seller’s disclosures to understand with clarity the scope of work completed. After review, we now have an idea if we need to call in the pros to do a second, more thorough inspection.” To really cover yourself, Udy recommends requesting a copy of the invoices from the work performed. “If they provide invoices from licensed contractors that did the work, that is helpful and can be adequate. If they produce a pile of receipts from the hardware store, then the property may be unsafe, and a DIY project that you should walk away from.”

8. Lead paint or asbestos

Don’t automatically rule out buying a home if a seller discloses that the home has (or had) asbestos or lead-based paint. In fact, “lead-based paint and asbestos sound worse than they actually are,” says Udy. “It is better to be cautious and do your homework before correcting, removing, or remodeling these types of homes, though. Talk to your local home inspector about evaluating and testing the property and reviewing your local health department requirements. Once you know the safe measurements in your area, you can do the proper testing for these items and learn how to properly dispose of these items safely. By knowing the costs and health regulations, you can factor in the cost of removal or remediation and factor that into your offers.”

What seller disclosure phrases have raised a red flag for you? Share in the comments!