Disclosures Required of Sellers of Real Estate

Sellers should be aware that buyers can, and do, sue their sellers over undisclosed defect in real property. Identifying what the seller needs to say about their property so that the seller does not have to deal with post-closing lawsuits and complaints from buyers is an essential part of any sales effort.

Effective January 1, 1995, most sellers of residential real property in Washington must complete a required form of Real Property Transfer Disclosure Statement. Sellers of vacant land do not have to use the form. Personal Representatives of estates are exempt from completing the form; this makes sense because Personal Representatives usually do not have enough information to complete a disclosure statement.

Sellers do not have to provide a disclosure statement if the buyer waives receipt of a disclosure statement. However, the buyer then has a right to rescind the earnest money agreement until closing occurs unless the buyer also waives the right to rescind the earnest money agreement. A seller who does not live in the property, such as a guardian of an estate, can usually negotiate such double waivers with buyers. Sellers who live in the property will find it much harder to sell real estate without completing the disclosure statement.

The disclosure statement is a series of questions about the seller's property, including issues related to title, water, sewer and septic systems, structural conditions, electrical and plumbing systems, appliances, heating and cooling systems, homeowners' associations, soil conditions, susceptibility to flooding, and hazardous or toxic substances, including underground storage tanks. Each question is answered "yes," "no," or "don't know."

The problem for sellers is that they are often tempted to answer "yes" or "no" when the answer really is "don't know." For example, it is impossible to know whether there are encroachments onto the seller's property from the neighboring property or encroachments onto the neighboring property from the seller's property without a survey. Sellers who give wrong answers on the disclosure statement are given some limited protection, but the wrong answer can subject the seller to legal liability to the buyer.

Even if no disclosure statement is being provided, the seller has a duty to disclose material defects about the property known to the seller that are not obvious to the buyer. Common examples are termites or other pest infestations and asbestos insulation. Material defects are defects which most buyers would consider important. If the seller thinks a particular fact might be important to the buyer, it probably is important and should be disclosed.