The Chicago Real Estate Minute

Real Estate Disclosures

4 minute read

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.

Radon Disclosure

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.

Actions Required

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.

Final Word

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.

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