8 Red Flags to Look for in Seller Disclosures

It’s easy to fall in love at first sight when looking for your dream home. But if you fail to thoroughly look over the seller’s disclosure statement, you might end up paying for expensive repairs and having to solve many types of problems affecting your property. Here are eight common “red flags” to look for in seller disclosures, along with some considerations and warnings.

What is a Seller’s Disclosure Statement?

You’ve probably heard of the term “seller’s disclosure statement” but may not understand what it means. Put simply, this refers to a seller’s legal obligation to disclose or reveal any known defects or problems regarding the property or home that they’re selling. In other words, seller disclosures are true assessments of the condition of a property.

Red Flags in Seller Disclosures

1. Land Use Restrictions

One of the main red flags to look for in a seller’s disclosure is restrictions on land use. Sometimes, people who buy properties want to use their land for various types of projects. However, they need to be sure there aren’t any land restrictions or previous easements.

For example, if you’re considering building a structure, such as a storage shed, or planning to make an addition to your new property, you may have some land restrictions that would prevent you from doing this. Make sure you get a detailed memo regarding any restrictions or easements that would stand in the way of your project.

2. Foundation Issues

A seller’s disclosure statement noting any problems concerning the foundation of a home is a serious red flag. When walking through a home, check for wall cracks, sagging floors, and other conditions suggesting possible foundation issues. One area where I’ve noted foundation reports requiring repairs up to $150,000 or more is Foster City. This is an area that’s built on a landfill and is susceptible to liquefaction.

3. Flood and Drainage Issues

Be sure you know about any flood damage that your new home has experienced before signing the papers. Flood damage can be so severe that it can create mold infestation. Also, keep in mind that some areas are more prone to flooding. Those areas may be more likely to have tropical storms and/or hurricanes. Thus, check to see if your property has had a history of flooding.

4. Boundary Problems

Look to see if there are any problems on seller disclosures about boundaries, because this can affect you. A common example is a neighbor who claims your seller’s fence is on their property. For common areas, such as a dock or a driveway, check the areas in addition to possible maintenance agreements that are shared with other homeowners.

5. Special Assessments for Condos

If you’re buying a condo, note any special assessments. These are levies or unplanned payments imposed by a condo board on condo owners when unanticipated costs develop, affecting a budget. It would be expensive repairs that need to be done when there are insufficient funds in a reserve.

6. Liens on Property

Check to see if there are any liens on the property. Liens on a property can easily stop a real estate transaction. That’s why you need to consult with a real estate lawyer, along with the realtor who represents the other side, to understand the issues. Additionally, find out how much time it may take to clear the title. Although it’s possible to remove liens, it usually takes a lot of time.

7. The Roof

Find out everything possible about the roof of the house. If seller disclosures don’t have any information regarding the roof, conduct your own research. Any mention of a “small leak” should be addressed by having a home inspector examine the roof. Roof replacement is extremely expensive and is not the responsibility of a buyer.

8. Asbestos

Finding a note in a seller’s disclosure statement of asbestos is another big red flag. On the other hand, this doesn’t have to be a deal breaker. Contact a licensed home inspector who can assess the severity of the condition. In some cases, this issue can be repaired.

Other Considerations and Warnings

• For hillside properties, it’s recommended to have a soil engineer assess the site for stability as well as drainage.
• If seller disclosures have subjective statements that include descriptions using terms such as “insignificant,” “slight,” or “small,” be leery because there’s a possibility that such statements might not be completely disclosing the extent of the problem. Therefore, they need to be noted as areas to be inspected.
• Consider that seller disclosures are not meant to replace the need for property inspections.
• Besides protecting home buyers, a seller’s disclosure statement is also important for sellers. When sellers don’t reveal problems with a property, they’re in violation of the law and could face lawsuits.

When working with buyers before an offer is submitted, I thoroughly review the seller’s disclosure package, which includes the inspection reports, HOA documents (when applicable) as well as the HOA rules, budget, and reserves. Are you planning to buy or sell a home in the greater San Francisco Bay area? Contact us and set up an appointment.