For Sale by Owner News and Articles
When Should You Give Disclosures To Buyers?
By Robert Irwin
Many "by owner" sellers wonder when they should give their disclosures to buyers. Should they present them as soon as they have someone who's really interested? Or should they wait and disclose them after the buyer has signed a purchase agreement
Disclosures, as most sellers know, are an important part of selling a home in today's market. Most states mandate that sellers disclose any known defects to buyers. And even if your state doesn't, it's usually a good idea to do so anyway. The reasoning here is that if you know your house has a defect and you conceal it, after the sale when the buyer inevitably finds out about the problem and gets mad because it was hidden, you could be the target of a lawsuit. On the other had, if you reveal the problem up front and the buyer goes ahead with the purchase anyhow, the buyer has much weaker footing to later come back and demand anything from you.
DISCLOSURES IMPACT PRICE
The problem with disclosures is that they can lower the value of your property. For example, your home may look perfectly sound. But, you know that the roof is old and leaky. A new inexpensive roof, which is what your home really needs, could cost upwards of $7,500. However, if the seller doesn't know about the leaky roof (perhaps because you're selling in the summertime), you're probably going to get a higher price than if the seller does know about it. Therefore, the temptation is not to tell and to save money. However, as we've noted above, doing so can haunt you when after the sale the leaky roof is discovered and the seller now wants you to pay for a more expensive $15,000 roof.
TIMING IS IMPORTANT
Disclosures are inevitable. But when should you give them to the buyer? There's a strong argument for getting them out there as soon as possible to help save your deal. The reason is that in many cases, buyers have a right to refuse to go through with a purchase until they've seen your disclosures.
In California, for example, which has some of the toughest disclosure laws in the country, a seller may give the buyer a written disclosure statement any time. However, the buyer has three full days to rescind the deal by refusing to approve the disclosures for any reason. Thus, if you give the buyer your disclosures after the purchase agreement has been signed, the buyer still has three full days to back out and get his deposit back.
In purchasing property some shrewd buyers have taken advantage of this California state law to make deals and then continue shopping around, knowing they have a full three days to back out without penalty.
As a consequence, wise sellers sometimes give the disclosure statement to the buyer even before the deal is made! As soon as an interested buyer is found, the seller presents the disclosures (of course getting the buyer to sign when they were received).
Yes, this could sour the deal when the potential buyer sees what problems the home has. But, those problems are going to have to be revealed sometime, anyhow. And usually it's better to get them out in the open earlier rather than later.
By owner websites often have links to services that will help you obtain the disclosure forms that are necessary for you to present to buyers in your state.
Robert Irwin is the most prolific real estate writer in America having produced over 100 published books in the field. His TIPS & TRAPS McGraw-Hill series has sold well over a million copies and his FOR SALE BY OWNER KIT and FIND IT, BUY IT, FIX IT and other books have been strong sellers for Dearborn.
In addition Irwin writes a regular real estate column for The Wall Street Journal online and is introducing a new weekly column forOwners.com.
Irwin has sold his own property "by owner" and during over 30 years in the business has been a broker and consultant to lenders, agents, buyers and sellers.
He can be reached through his website RobertIrwin.com.