As part of the “checks and balances” in a real estate transaction, real estate disclosures help frame the process and play a role in most real estate deals.
What real estate disclosures are
A disclosure is, in simplest terms, a form completed by the seller(s) regarding their knowledge about specific information mentioned on the form. Some states, such as California, require many more disclosures to be filled out than Illinois does. In one way or another, they are required in just about every state. They are either signed at the time of an offer, or during the attorney review period.
Real Property Disclosure
This is the most detailed of the disclosures, asking 22 total questions about the seller’s knowledge on potentially negative aspects of the home.
As the disclosure states: “a ‘material defect’ means a condition that would have a substantial adverse effect on the value of the residential real property or that would significantly impair the health or safety of future occupants of the residential real property unless the seller reasonably believes that the condition has been corrected.”
I always defer to a real estate attorney for any ‘grey area’ questions about what should be disclosed or not. As a general rule though, most agents (including me) will suggest that anything a seller has the knowledge of or has been officially notified about regarding a potentially negative condition should disclose it on the form. If they have rectified something (what had previously been a concern and have not seen it reappear), it’s always best to mention what was done and that it hasn’t returned, but that is best determined by their attorney.
Lead-Based Paint Disclosure
Lead had been used in paint that was sold to the general public. It became known in the 1970s that lead can cause all sorts of debilitating health issues, and as of 1978, it was outlawed. This nationwide disclosure has the seller state if they are aware of or have tested for lead paint. There is also a pamphlet explaining the form that must accompany it as well.
A potential buyer does have the right to do a lead-based paint test during a real estate transaction at their own expense.
If you’re not familiar with it, “Radon, a Class‑A human carcinogen, is the leading cause of lung cancer in non-smokers and the second leading cause overall”, as stated by this disclosure. Buyers are also allowed to test for radon should they so choose, and there as mitigation solutions available that will alleviate the issue in most cases.
Real estate disclosures are there to let buyers know what the seller has stated they are aware of. In the unlikely event that the seller is lying about what they know, buyers can potentially take legal action should it be proven a seller was acting dishonestly.
Bottom line, sellers just need to tell the truth on the disclosures, dating the forms to confirm. Buyers simply sign to acknowledge they have seen and understand them. Neither seller nor buyer is required to proactively test for these potential concerns.
On the lead-based paint and radon disclosures, agents for both the seller and buyer are also required to sign. Separately but worth noting, when businesses are involved in a transaction, such as a relocation company, they may mandate that tests be done.
I’m not gonna lie to you — real estate disclosures are not the most glamorous part of real estate. That said, they serve an important purpose that can benefit and protect the participants in a real estate transaction. Fortunately, while representing a seller, I have not known of any that have actively lied on their disclosure. When representing a buyer, there have been a few situations where the seller was very likely either lying or “stretching the truth”. It’s rare but impossible to say that it never happens.
Note: Licensed agents are always required to act in their client’s best interests, with one exception: when the agent knows that their own client is lying, which is a violation of the Code of Ethics Requirement that they agreed to uphold as a licensed real estate broker.