The market is hot for home sales right now, which has a lot of sellers thinking about selling without a real estate broker to save on commissions. If you are among them, you should know about the disclosures you are required to make to your buyer – there are requirements under both federal and Washington state law.
If your home was built before 1978, it was most likely painted with lead-based paint. Because of the well-established health problems caused by lead in the blood, particularly in children, the U.S. Department of Housing and Urban Development (HUD) established a regulation requiring that sellers and landlords disclose the potential for lead-based paint in housing units built before 1978. The HUD regulations require delivery of a completed form (available here) and an explanatory brochure (available here). These requirements apply even if your home has been completely repainted one or more times since 1978.
The seller is also required to notify the buyer of the buyer’s right to a 10-day inspection period (it’s mentioned in the disclosure form). The buyer is permitted to waive the inspection period, but in most home sales the buyer gets a general inspection period and contingency anyway. Normally, the 10-day inspection period required by the lead paint rule runs at the same time as the buyer’s general inspection period, so it doesn’t add any extra time to the process.
Failure to provide the disclosure form and brochure can result in significant cost to the seller who knows about the rule. HUD can impose monetary penalties, although that is more likely to happen with a landlord who is repeatedly failing to give disclosures in a pre-1978 apartment building than it is with a one-time sale by a homeowner. The greater risk to a home seller is a lawsuit by your buyer. The lead paint rule not only makes a seller who knowingly fails to comply with the rule liable to the buyer for damages, but also allows the buyer to collect up to triple the actual damages, plus attorney’s fees and costs.
Washington’s Seller Disclosure Statement
Almost all real estate sales in Washington State require a seller disclosure statement to be given to the buyer. Home sales, including condominium units, are included in the types of sales requiring a seller disclosure statement. The statute imposing the disclosure requirement sets out the basic format for the disclosure statement.
The buyer has the right to rescind (i.e. cancel) the purchase and sale agreement within 3 business days after receiving the seller disclosure statement. Because of this, it is often best for the seller to give the disclosure statement to the buyer very early in the process – even before the parties sign a purchase and sale agreement. It is critical from the seller’s standpoint to get a receipt signed by the buyer acknowledging the buyer’s receipt of the seller disclosure form – the receipt can resolve any arguments about when the 3 business day period should have started and ended. If the buyer doesn’t take action within 3 business days of receipt of the seller disclosure statement, the buyer is deemed to have approved and accepted the seller disclosure statement.
The seller has an obligation to amend the seller disclosure statement and give it to the buyer again if the seller learns of inaccurate information in the seller disclosure statement before closing of the sale, unless: 1) the source of the information is the buyer or someone working on behalf of the buyer, such as a home inspector; or, 2) at least 3 days prior to closing the seller makes any repairs or other corrective action required to cause the seller disclosure statement to be accurate again. It is important to note that if the seller learns of inaccurate information in the seller disclosure statement from the buyer or buyer’s inspector, and that buyer does not buy the home, the seller must correct the seller disclosure statement before giving it to a subsequent potential buyer.
The seller disclosure statement does not create warranty obligations on the part of the seller. A seller who makes an error, inaccuracy or omission in a seller disclosure statement is not liable to their buyer unless the seller had actual knowledge of the error, inaccuracy or omission. Also, the seller disclosure statement does not become part of the purchase and sale agreement between the buyer and seller – so misstatements do not constitute breach of contract by the seller. The most common dispute between buyers and sellers relating to information given through a seller disclosure statement is an allegation of fraud or negligent misrepresentation.
Common Misconceptions About Seller Disclosure Duties
There are two common misconceptions about seller disclosure duties. Many people think the seller is required to disclose, a) the presence of registered sex offenders near the home, and/or b) whether someone died or was murdered in the home. Both of these are incorrect. With regard to registered sex offenders, Washington’s statutory seller disclosure statement includes a notice that information is available from local law enforcement, but the seller is not required to disclose the presence of any offenders in the area. With regard to deaths or murders in the home, there is no such disclosure requirement in Washington. Of course, as a seller, you are free to disclose anything you wish to your buyer beyond the statutory minimums.
The disclosures required of sellers can seem daunting at first, but they really boil down to providing a pair of form documents, filled out to the best of the seller’s knowledge. Compliance is far easier and preferable to the potential downsides of failing to give the disclosures to your buyer.
Please keep in mind that, while the HUD lead-based paint disclosure requirement is nationwide, the seller disclosure statement information given above only applies to Washington. Other states may have different requirements from Washington, so check your local laws if you are selling property outside of Washington.