The Importance of Property Disclosure

First, a bit about disclosure law in Oregon. Our State has a property disclosure law that requires a person selling a house to tell what they know about the house, and in particular, any known defects. To accomplish this there is a 5-page form that sellers complete and then give to their buyer. Once the buyer and/or the buyer’s Realtor receive this form a clock starts ticking. The buyer has 5 business days to simply change their mind. They get their earnest money back and have no need to provide any justification. Think of it as being like the 3-day lemon law when you buy a car. Same thing. You can wake up one morning in the disclosure period and simply not want to buy the house. There are exemptions made for bank foreclosures, trustees, and essentially parties who have control of the property but no knowledge of the material condition of the property. There is also the possibility, very, very slim, that a seller would refuse to complete the disclosure form. They can actually do this. However, this means that the disclosure period does not end and a buyer can terminate with no cause at any time. What person selling a home would want to leave such an open ended way for a buyer to terminate? Also, what buyer would want to buy a house from a person who won’t tell them what they know? Even if a person selling a home refused to fill out the form, it does not relieve them of their legal obligation to tell what they know.

For Sellers
Property disclosure is probably the single most important thing you are going to do when selling a house. Tell what you know. It is that simple. I recommend that you over disclose as opposed to under disclose. So if the kitchen sink leaked and you fixed it, tell about it. During the home inspection the home inspector will find the water stains, now dry, underneath the kitchen sink. If you haven’t told about it, it will create an element of distrust for your buyer who will want to know “how come they didn’t mention that?”

To fully disclose you will need additional pages. There is a form for this, or you can simply write it out, sign it, and have it attached to the disclosure form.

Don’t be afraid of disclosing. At the time the buyer receives the disclosure form, they have just experienced the excitement of getting their offer accepted. They are usually happy and ready to learn about their new home. They are mentally in a place where they will take news in a good way. This will probably not be the case a week or two into the transaction when the buyer is also coping with all that they learned in the home inspection.

Tell what you know. It is your most important responsibility and it is also the place that you are mostly likely to get into trouble if you don’t tell what you know. This knowledge is to the best of your ability on the day that you fill out the form. If you don’t know the answer to a question, that’s OK. You are not expected to go out and find the answer. It also means that after completing the form, if you do learn new information, you should amend the document to keep it current.

For Buyers
The disclosure period is a wonderful opportunity to allow yourself to take a deep breath and make certain that this is the house that you want to buy. It takes some of the pressure off when you make you offer, particularly in a really tight seller’s market. You can go into your offer knowing you’ll have this cooling offer period. Bear in mind that those exemptions are out there for properties like bank foreclosures.

When you receive the seller’s disclosure statement, you have a right to expect it to be completely filled out, with no unanswered questions, and with explanation for anything the seller tells you that raises concerns. If the roof has leaked, and the seller checked the box “yes”, but then says nothing more, you have the right to ask for a better explanation. I have sent property disclosure forms back to the listing Realtor and refused to accept them that were poorly completed. Doing this forces the seller to give it another go and to do so more thoroughly. That is an unusual step to take, but it may be necessary.

Ask questions. Even with a good explanation, perhaps you don’t have a full picture. It’s OK to ask for receipts or contact information for a contractor. The more knowledge you have, the better.

In General
Both buyers and sellers benefit from thorough property disclosure. We are lucky to live in a state that requires it.

Please let us know if you have any questions,