Triangle Area Real Estate News & Information

If you are planning on buying or selling a home in North Carolina, you are required to sign a disclosure statement that in theory details all known problems with the house. The disclosure statement must be on the form provided by the state. No other disclosure form is allowed.

The form can look a little intimidating, but it’s not that hard to fill out. And the items are the same ones you would want to know about if you were buying the home. There are 31 questions on the current form, with an additional six questions if your home is part of a homeowners association or under other governing documents.

Some of the questions require you to fill in information. Others ask about any known problems. For those questions, you check “Yes” if you know of a problem with the item, “No” if there is no problem or if you don’t know of a problem with the item. Lastly because North Carolina is a “Caveat Emptor” or Buyer Beware state, a Seller may choose to answer the question “No Representation” if you do not want to say whether or not there is a problem. For any “Yes” answer, you will need to provide additional information.

What Kind Of Information Is In A Disclosure Statement?

So, what do you have to disclose? You must disclose any and all of the following items:

• Problems with the structure – foundation, slab, fireplaces, walls, floors, windows (including screens), doors, ceilings, attached garage, patio, deck, etc.
• Roof leaks, or water seepage, leaks, dampness, or standing water in the basement, crawlspace, or slab.
• Problems with the home’s electrical system, plumbing system (pipes, fixtures, water heater), furnace, or air conditioner.
• Problems with the water supply (water quality, quantity, or pressure), or sewage disposal system (sewer or septic).
• Problem with central vacuum, pool, spa, hot tub, attic fan, exhaust fan, ceiling fans, sump pump, irrigation system, TV cable wiring or satellite dish, garage door openers, gas logs, or other systems.
• Problems with any appliances that will be sold with the house (range/oven, hood/fan, attached microwave, dishwasher, disposal, etc.).
• Present infestation or damage from past infestation of wood-destroying insects (termites, carpenter ants, etc.) that has not been repaired.
• Problem with drainage or grading of the property.
• Violations of zoning ordinances, restrictive covenants, land use restrictions, or building codes (including failure to get permits for changes or improvements).
• Hazardous substances such as asbestos, formaldehyde, radon gas, methane gas, and lead-based paint.
• Underground storage tanks (such as gas tanks), contaminated soil or water, or any environmentally hazardous condition.
• Odor, smoke, noise, etc. from nearby commercial, industrial, or military sources which affect the property.
• Easements, shared driveways, or other encroachments from or on the property.
• Lawsuits, foreclosures, bankruptcies, leases, rental agreements, judgments, tax liens, proposed assessments, mechanics’ liens, etc. that could affect the title to the property.
• Flood hazard, or if the property is located in a federally-designated flood hazard area.
• If the property abuts or joins a private road, and if there is a homeowners association or maintenance agreement dealing with the maintenance of the road.
• If the property is part of a homeowners association, the HOA fees, the services provided by the HOA, any fees or special assessments due the HOA, any HOA fee to transfer the property, and any unsatisfied debts against or pending lawsuits against the HOA.

What Should Homebuyers Look For?

Honestly my advice to Buyers is to sign it and forget it. The truth is while most Sellers don’t intentionally lie on the form, I know based on more than 25 years of experience that most Sellers truly know surprisingly little about their homes and it may be one in a thousand that really knows about the two most significant problem areas: the foundation/crawlspace and the attic/roof. If an item is marked “Yes” on the disclosure statement, the seller should provide receipts if they are indicating that it was repaired.

Regardless of what’s written on the Seller’s Disclosure Statement, Buyers must assume responsibility for having the home thoroughly inspected by quality inspectors (See Home Inspections The Good The Bad and The Ugly for more details.) It all starts with a good home inspection and then, based on what a Buyer learns from this, it may be necessary to have some additional inspections by other professionals such as a structural engineer, a mold / moisture specialist, a radon testing company, or others. All buyers should also have a wood destroying insect inspection, and if the home has a well or septic tank, then both of these should be inspected. Just as with any profession, not all inspectors are created equal, and this isn’t the place to look for a bargain price; you want the best inspection you can get.

Penalties Of Failing To Disclose Information

If you do not provide the disclosure statement to the buyer by the time the buyer makes the offer, the buyer may, under certain circumstances, cancel the contract. The buyer has from three days following receipt of the disclosure statement or three days following the date of the contract, whichever occurs first, to cancel the contract. But in no case can the buyer cancel the contract after the settlement date or the date the buyer occupies the property, whichever occurs first.

If you indicated on the disclosure statement that you did not know about a problem, and it later turns out that you did, you may be liable for making an intentional misstatement. The buyer could sue you for defects that are discovered after closing. So, it is important to fill out the disclosure statement accurately. If something occurs after you have submitted the statement to the buyer, you should prepare an amended statement and give it to the buyer immediately.

Some people feel that the easy way out on the disclosure statement is to just check “No representation” for each item. Doing so will indicate that you are making no comment about whether a problem exists, and you can’t be held liable for any misstatement later on. While that is true, Sellers need to realize that this may also raise red flags with the buyer and the buyer’s agent. Buyers will not be willing to take the risk that there is something materially wrong with the property. Hidden problems are a big concern for buyers.

If you are considering buying or selling a home soon, give us a call at 919-659-5173 or send us a message online. My partner Andrew Palumbo and I both have extensive real estate and construction experience.