In most states, the law requires sellers to fill out paperwork regarding their knowledge of the property they intend to sell. Many agents and sellers see disclosures as a thorn in their side. Why would they badmouth their property or listing? Why not say as little as possible and see if the buyer discovers any issues on their own?
This is a penny-wise and pound-foolish mentality. Non-disclosure can lead to major headaches during escrow. You could lose the buyer, be forced to renegotiate the price or have to put the property back on the market. Non-disclosure can also lead to litigation months or even years after the sale.
Self-disclosing, pre-inspections and putting it all out there prior to a buyer making an offer helps to usher the sale along and make the process simpler. It’s smart business, and ultimately saves time and money.
If handled well, disclosures and calling out known issues helps inform your pricing and marketing strategy. Here are five tips to use disclosure to your advantage.
Order a building report
Each municipality has a building department that keeps records on every property. For a small fee, they provide building reports that contain valuable information about the home, such as the building’s history, permits issued, closed permits, violations, zoning information and sometimes landmark or historic status.
Buyers or their banks will likely request this report. When they see open permits or violations, you better believe they are going to ask you to cure them, request a credit or walk away.
Be prepared by ordering a building report early in the selling process. If you have issues to address, you can take care of them before you list the property. The potential buyer will then see a clean report, which will inspire confidence — not only in the property, but also in you as a seller.
Have inspections done prior to listing your home
Most sellers balk at this idea. Why pay to have the home inspected if you plan to sell?
The answer is so that you can ultimately make more money. A home listed for sale at a great price gets a buyer in the door to make an offer, but that buyer will have his or her inspection regardless. It they find dry rot in the garage, they will either walk away from the deal or ask you for money.
If you lose the buyer, the property goes back on the market with a stain on the listing. Everyone will ask what happened to the first deal, and you will likely be forced to disclose this new, known issue.
If you credit the buyer, your ultimate net proceeds will be lower than if you had priced the termite work into the asking price and let buyers know about the issue up front.