Long, small-print disclosure forms are simply a part of American life. We are given disclosures for everything from toothpaste to field trips to parking lots and gyms – even concert tickets and carpet cleanings come with disclosures and waiver forms. Disclosures are such a universal element of American commerce, they are virtually a rite of passage into adulthood. A person shouldn’t be able to move to the grown-up table at Christmas dinner until they’ve signed their first liability waiver!
But the disclosures you will receive in the course of buying a home trump all others, in terms of volume, importance, complexity and potential for confusion.
Here are a handful of best practices for smartly reviewing and using your home purchase disclosures for maximum lemon-avoiding, decision-boosting impact:
1. Read disclosures from start to finish. In most cases, buyers will receive several types of disclosures, all in one packet or at different times, in different bunches:
disclosures from the various real estate brokerages and agents involved,
boilerplate form disclosures that may be signed by the seller or agent(s), but are just forms and
disclosures that the seller has actually filled in or completed with information about that particular home.
Given how busy we all are, and the fact that many of us have fallen into the habit of just signing such forms by rote in our regular lives, it can be very tempting to simply sign all the boilerplate forms without much of a glance at their content, and to give little more than a cursory skim to the property-specific disclosures.
Do whatever it takes to resist this temptation in the course of this particular transaction of buying a home. Brace yourself, grab a cup (or a pot) of coffee, refuse to succumb to the eye-glazing boredom that may arise and read all of the disclosures you receive, from start to finish.
Even the boilerplate forms may contain some truly important information about (a) your own duties in the course of the transaction, (b) the duties the various agents owe you – and what they are not responsible to do, and (c) the realm of inspection options that may be available to you that you may not have even known about. For instance, agents are not inspectors, and you cannot and should not rely on them to educate you about the condition of a home. However, I’ve heard from many, many buyers who wrongly believed that they could – and did, to their detriment.
Another frequently expressed post-purchase complaint is that the buyer had absolutely no idea it was even possible to obtain specialty inspections like a sewer line inspection, pool inspection or soil tests. Are these special inspections always relevant or necessary? Of course not – except when they are. That’s why it’s so important to know what is possible, so that you can exercise your duty to yourself as a smart home buyer to get the information you need while you can still use it to make decisions that will stand the test of time. Often, it is the very forms that seem skippable that contain this information.
2. Read disclosures as a first step to understanding the property. Do not approach your review of disclosures expecting them to provide 100 percent of the information you’ll need to finalize your decisions about whether and on what terms to move forward with the transaction. At best, the sellers can only tell you what they know. And it is absolutely possible, even probable, that a home will have some issues that are not yet symptomatic or that the sellers are otherwise not aware of.
The sellers’ disclosures should give you information about past and present improvements to and problems with the property that are within the realm of the current seller’s knowledge. But if you are buying a home that is owned by a bank, an estate or trust, a landlord, an investment company or a government entity, chances are good that the seller might not even be aware of recent or present issues with the property. And even if you are fortunate enough to be buying from a seller who provides detailed disclosures including copious warranty paperwork, contractor receipts and details – down to every last light bulb receipt – past owners may have modified the home in ways the current seller is unaware of.
Your best bet is to look at the disclosures you receive as a single piece of the puzzle of understanding the property and how it will or won’t fulfill your needs and expectations. The rest of that puzzle includes additional information, such as:
your own visual and sensory intake on multiple trips to the home at various times of day and different days of the week
the reports of the inspectors, engineers and appraisers that evaluate the home during the course of your transaction
your Q+A with any of these professionals, as necessary and
your own investigations, like visitng City Hall regarding past building permits, or around the neighborhood, if it makes sense.
3. Read disclosures sooner than later, ideally before inspections. You might receive disclosures before you even make an offer, or you may not receive them until after you’re in contract to buy the place. It seems sensible and efficient to wait until after inspections are done and read all the disclosures and inspection reports in one fell swoop.
But my advice is the exact opposite: make every effort to read and review them as soon as you can – ideally, before you have your first home, roof, pest or other inspection. In fact, your disclosure review may give you some direction about which inspections you need to obtain!
I suggest you make every effort to read the disclosures to look for flags about areas you can ask your inspectors to investigate more deeply or even walk you through or point out to you, live and onsite, during the inspection. You lose the ability to get your inspectors’ real-time, expert input and answers to your own personal questions on subjects such as whether a repair was done right or how serious a cracked wall is if you don’t read about those items until after your inspections have taken place.
So, read them early, highlight things you want your inspectors to pursue further, and take the highlighted disclosures and your questions about them with you to your inspections (which, as you may have guessed, I recommend that you personally attend).
4. Read disclosures at a dedicated time, take notes and include your agent in your follow-up plan. Feeling rushed and overwhelmed at the sheer number of pages of disclosures is a major reason buyers fail to fully read disclosure forms until it’s too late. The best practice is to block out a couple of hours, grab a coffee or a snack and sit down with the pile of disclosures, your spouse or other co-buyer(s), a highlighter and a note pad – digital or otherwise.
This way, you can explore the documents fully without time pressures, and capture all your questions and concerns as you go. Then, make sure you get on your agent’s calendar for a follow-up call or meeting as soon after your disclosure review as possible, to go over your questions and create a plan for obtaining any additional information you need from the sellers, inspectors or even your own investigations.
5. Read disclosures in the context of your contract. Keep the particular circumstances of your home sale transaction and your contract in mind as you approach your review of disclosures. Again, if your home is being sold by an entity versus an individual, expect to receive little or no property-specific information from the disclosures (be pleasantly surprised if you do get some!) and be very exhaustive as you obtain inspections and do your own informational digging into the property’s past. It never hurts to Google the address or ask the neighbors what they can tell you about the home’s history.
Just be thoughtful about what you know about the sellers and the transaction’s terms, and talk
with your agent about how this context may impact the level and type of disclosures you receive. For instance, if you know that the home has been a vacation or rental property, you should also know that the owners may not have the same level of awareness of creaks and cracks that someone who lived there every day might possess.
Or, if you’re buying a home ‘as-is,’ make sure you’re comfortable with every single crack and issue that the sellers disclose or that you’re okay taking the needed repairs on at the agreed-upon purchase price. (Except in caveat emptor (buyer beware) states like Alabama, Arkansas and Virginia, even as-is sales still require the seller to disclose issues they know about which would affect a reasonable buyer’s decisions about the home. Talk with your agent or attorney to understand the full implications of an ‘as-is’ clause for your disclosure rights, in your own transaction.)