Updated October 05, 2023
A property disclosure statement is a required document in most states, one completed by the seller to inform the buyer of any material defects or information by law to be mentioned. The statement will also identify if the property is located in any special zoning, such as a flood plain or near a military base, or if the property was ever used for an illegal use such as a meth lab. Once completed, the statement must be delivered to the buyer before or at the time an offer is placed.
Attaching to a Purchase Agreement
The property disclosure statement is commonly attached to a purchase agreement after it’s completed and signed by both the buyer and seller.
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Property Disclosure Statements (By State)
Required in most States that details the condition of the property. In most states, the seller is required to report any structural or material defects in the property (e.g. leaking roof, flooding, etc.).
Depending on the state, the seller may be held liable for any statements or claims made or not made.
How the Property Disclosure Works (5 steps)
Before two (2) parties can enter into a purchase agreement, a statement must be completed by the seller to convey any current issues in a form known as the property disclosure.
The seller should go around the property looking for any material defects such as leaking, fractures, electrical malfunctions, or any other type of issue that should be made known. In some states, the seller can be considered liable if they are aware of an issue that is unreported.
1. Download the Correct Property Disclosure Statement
Download either the blank property disclosure statement or the State-specific version. It’s recommended to use the State-specific version as that allows the seller to complete the exact questions that may be required in the particular State.
2. Inspect the Property
It’s best to take a personal tour of the property and take a look at everything. This means all exterior and interior walls, ceilings, bathrooms, roofs, attic, basement, and anywhere else that should be checked to ensure there is no leaking or other issues on the property. Unless the property is located in a Buyer Beware State, the seller is liable for any unreported issues.
The buyer will most likely hire a home inspector that will locate any problems with the house anyway, although it looks much better on the seller if they are identified beforehand.
3. Sign and Send to the Buyer
After it’s complete it should be signed by the seller and sent to the buyer. Upon the buyer obtaining possession of the property disclosure and reviewing, they will sign the document accepting they have received it. If there has been a purchase agreement already authorized, it should be attached and made part of the agreement.
Earnest Money
If the buyer makes an earnest money deposit and finds a material defect that was not mentioned in the property disclosure, the buyer may be entitled to have their earnest money returned. In States that are not Buyer Beware, the seller is required to report any structural or material defects in the property (e.g. leaking roof, flooding, etc.).
Buyer Beware
Buyer beware is a term that is used to describe states that do not hold the seller responsible for not mentioning material defects at the time of sale. In addition, buyers who choose to purchase in a buyer beware state will be subject to purchasing the property on an “as-is, where-is” basis. Therefore, if there are any material defects found on the property after the closing has occurred, liability rests fully on the new owner.
Buyer Beware States – Alabama, Arkansas, Colorado, Florida, Indiana, Massachusetts, Missouri, Montana, New Hampshire, New Jersey, Virginia, West Virginia, and Wyoming.