3 reasons sellers shouldn't fear disclosures

There is no reason for sellers to stress about accurately and completely filling out disclosure statements

To disclose or not to disclose — that is the question. Actually, that isn’t the question. 

There should be no question in a seller’s mind whether to disclose an item or not. The short answer: If you’re aware of an issue, disclose it.

But first let’s talk about what exactly a disclosure is, and why, as a seller, it can be your best friend.

What is a disclosure?

A disclosure, in terms of real estate, is an opportunity for a seller to legally communicate any known property issues to prospective buyers.

Makes sense, right? A prospective buyer is ponying up some serious cash to buy a new home, and knowing its history and issues plays a key role in the selection process.

No pain, all gain?

Historically speaking, disclosing property flaws has been viewed by sellers as a pain point. (No surprise there.) Telling prospective buyers all the individual items “wrong” with a property goes against the natural inclination to display the property in the best light.

However, rather than view the disclosure process as an unpleasant task, sellers should eventually come to embrace the process.

Here are three reasons why there’s no need to be afraid to disclose your heart out.

1. Avoid potential legal action

Disclosure documents are a seller’s opportunity to tell all and paint an accurate picture of the property for sale. They also are a vehicle to protect yourself legally from any issues that may arise down the road. The more thorough the information, the better your protection.

Julie Sears, a recent seller in the Seattle market, experienced this firsthand. After accurately disclosing a leaky window in the living room and agreeing to a price reduction, she was surprised to be contacted by her broker after closing.

“The new homeowner was upset about water damage from a recent heavy thunderstorm and was seeking compensation for repairs,” says Sears. “Since I had disclosed the issue upfront, I was protected from any legal action regardless of the subsequent damage.”

This is a perfect example of the legal protection a seller can expect when accurately disclosing issues.

2. Give a sense of security

A disclosure statement that is barely filled in sends a message to the buyer — and it’s not reassuring: the seller is either uninformed about the property or unwilling to provide information.

Make it a point to sit down and thoroughly fill out your disclosure statement. Use this opportunity to convey your knowledge about the property to the buyer.

Accurate information provides the buyer a sense of security and demonstrates that you are upfront and thorough.

“Remember that no property is completely perfect. Revealing your property’s potential flaws will not drive away every potential buyer. The disclosure statement simply allows you to enter fair negotiations with buyers,” says FSSK, a Minneapolis law firm that specializes in real estate.

Disclosing flaws places them squarely on the table, allowing both parties to either work through them together or walk away. Whichever occurs, it gets you one step closer to finding a buyer and closing the deal.

3. Gain commitment

Closing a home purchase transaction is rife with small hurdles. Clearing each one is a victory as you proceed through escrow and nearer to the closing date.

Deliver your disclosure statement early in the process — preferably when you return a copy of the executed contract to the buyer. Overcoming this hurdle early places you that much closer to concluding a successful transaction.

If the buyer will not sign off on the disclosures and would like to terminate the agreement, it’s best to know this early so you both can move on.

Let’s be honest: all properties have flaws. But if you can embrace the process and work with prospective buyers to fairly negotiate, you’ll be able to close the deal more quickly and protect yourself from future headaches.

Both you and your karma will be glad you did.

A Short Guide to Real Estate Lingo and Acronyms

Real estate ads are usually full of acronyms and terms that are unfamiliar to first-time buyers. Here's a cheat sheet to let you in on the lingo.

 

4B/2B -- four bedrooms and two bathrooms. "Bedroom" usually means a sleeping area with a window and a closet, but the definition varies in different places. A "full bathroom" is a room with a toilet, a sink and a bathtub. A "three-quarter bathroom" has a toilet, a sink and a shower. A "half bathroom" or powder room has only a toilet and a sink.

 

assum. fin. -- assumable financing 

closing costs -- the entire package of miscellaneous expenses paid by the buyer and the seller when the real estate deal closes. These costs include the brokerage commission, mortgage-related fees, escrow or attorney's settlement charges, transfer taxes, recording fees, title insurance and so on. Closing costs are generally paid through escrow. 

CMA -- comparative market analysis or competitive market analysis. A CMA is a report that shows prices of homes that are comparable to a subject home and that were recently sold, are currently on the market or were on the market, but not sold within the listing period.

contingency -- a provision of an agreement that keeps the agreement from being fully legally binding until a certain condition is met. One example is a buyer's contractual right to obtain a professional home inspection before purchasing the home. 

dk -- deck 

expansion pot'l -- expansion potential mean that there's extra space on the lot or the possibility of adding a room or even an upper level, subject to local zoning restrictions. 

fab pentrm -- fabulous pentroom, a room on top (but under the roof) that has great views 

FDR -- formal dining room 

fixture -- anything of value that is permanently attached to or a part of real property. (Real estate is legally called "real property," while movables are called "personal property.") Examples of fixtures include installed wall-to-wall carpeting, light fixtures, window coverings, landscaping and so on. Fixtures are a frequent subject of buyer and seller disputes. When in doubt, get it in writing.

frplc, fplc, FP -- fireplace 

gar -- garage (garden is usually abbrevated as "gard.") 

grmet kit -- gourmet kitchen 

HDW, HWF, Hdwd -- hardwood floors

hi ceils -- high ceilings

in-law potential -- potential for a separate apartment, subject to local zoning restrictions 

large E-2 plan -- this is one of several floorplans available in a specific building 

listing -- an agreement between a real estate broker and a home owner that allows the broker to market and arrange for the sale of the owner's home. The word "listing" is also used to refer to the for-sale home itself. A home being sold by the owner without a real estate agent isn't a "listing."

lo dues -- low homeowner's association dues. But find out how "low" the dues are compared to other dues in the area. 

lock box -- locked key-holding device affixed to a for-sale home so real estate professionals can gain entry into the home after obtaining permission from the listing agent 

lsd pkg. -- leased parking area. May come with additional cost. 

MLS -- Multiple Listing Service. An MLS is an organization that collects, compiles and distributes information about homes listed for sale by its members, who are real estate brokers. Membership isn't open to the general public, although selected MLS data may be sold to real estate listings Web sites. MLSs are local or regional. There is no MLS covering the whole country. 

nr bst schls -- near the best schools 

pot'l -- potential

pvt -- private 

pwdr rm -- half bathroom or powder room

REALTOR® -- a real estate broker or sales associate who is a member of the National Association of REALTORS®. Not all real estate agents are REALTORS®.

title insurance -- an insurance policy that protects a lender's or owner's interest in real property from assorted types of unexpected or fraudulent claims of ownership. It's customary for the buyer to pay for the lender's title insurance policy. 

upr -- upper floor