Open briefcase with a file stamped confidential insideWhat is Disclosure?

First of all, a disclosure is a part of the purchase and sale contract that gives the Seller the chance to tell you about any defects he may know about his property. Why would he ever want to do that? Well, because it's the law. It's illegal for the seller to hide defects from the buyer. Yet there are some things that the seller doesn't have to tell you, some things that you may really want to know.

Do you have to tell if you have ghosts in the attic?

Well, I will start with the silly stuff, like is the house haunted? That's a grey area in disclosure.

The courts tend to rule that if the buyer thinks that something is detrimental then it is detrimental. Yet what if the rumor is that the house is haunted but the seller doesn't believe it? Is he still required to tell you a story he doesn't believe at all? It would be like me telling you that there was something wrong with the house because it was built while Mercury was in retrograde, if I don't believe in astrology. There was a case in New York where a seller was sued for not revealing that the house was haunted, and lost. Part of the case hinged on the fact that the seller published a story in Reader's Digest about the haunted house, so that proved that the seller believed it.

How about a grisly crime, do you have to tell?

But if you take it a little further, there is something a little more serious that the Seller is not required to tell you in Georgia. That is if the home "was the site of a homicide or other felony (including rape) or the site of a suicide." The argument behind this rule is that these types of events do not affect the physical condition of the property. The effect is more psychological. But here is the twist: The Seller or the listing agent does not have to reveal the information, but if the seller or the agent knows about such information, and is asked, he (or she) is required to answer truthfully. This is an important point. They are not required to reveal the information but are required to answer truthfully if asked.

What if there was a diseased person living in the house?

What else does the seller not have to tell you? Well if the home was occupied by someone with a disease "which has been determined by medical evidence as being highly unlikely to be transmitted through the occupancy of a dwelling" which includes aids, the seller or agent is not required to tell you about that either. Here is another twist: They are not allowed to tell you if the house was occupied by someone with aids. It falls within the jurisdiction of fair housing law, since aids has been ruled to be a handicap. How do they answer? They should tell you that they are not allowed to answer that question.

How about criminal activity in the neighborhood?

It goes on.... What about sexual predators or pedophiles in the neighborhood? The lawyers that write the Realtor's contracts in Georgia have actually added a paragraph warning the buyers that if they have concerns they have to go to the website and do their own research. If the seller doesn't have to tell you about felonies committed in their own house they definitely don't have to tell you about felonies committed by their neighbors in other parts of the world.

What does this mean to you, the prospective buyer?

What does this mean to the buyer? Do your own research. Call the local precinct and get the crime records for the area. Go to the web and search the sexual predator database. Talk to the neighbors. Find out if there are ghosts, noisy neighbors or suspected drug dealers on the street. Don't wait until after you close on the house to find out why you might not want it!

What about the question "Was any work done without necessary permits"?

I have seen people try to lie on this question or simply refuse to provide a disclosure at all. I can tell you that I have listed property for many investor house flippers over the years who did not get all the necessary permits and followed my advice and were truthful about it. You want to guess what happened? If you guessed that they sold the house with no problems, you guessed right. It means the buyer needs to get a CABO certified inspector and take a careful look at the work.

What does this mean to you, the prospective seller?

There are a lot of sellers that don't understand that the disclosure is there to protect THEM. If you are honest (cough) and disclose that you didn't get a permit when you added that bathroom, it actually protects you from a hidden defects lawsuit later when the buyer goes to the city website and looks up whether or not you actually got a permit. A lot of dumb a$$ed investors think refusing to give a disclosure protects them somehow. They are very wrong about that. The law is against HIDDEN defects. If you refuse to provide a disclosure after you bought, gutted and renovated a house and someone finds out later that you didn't pull necessary permits most courts would call that a defect and rule against you. Not providing a disclosure could be considered (by the judge) to be hiding the defect. Then you might have to pay for a new permitted bathroom to be installed. I have personally witnessed several examples of this playing out in court. One Seller had to pay $20,000 to re-waterproof the basement  after the new homeowner called Trotter Waterproofing when the finished basement leaked and they said "This house again? We were there last year." 

Disclosure: I am not a lawyer and I have never played one on TV. All of the information in this blog post is simply my opinion. If you have any questions, please seek the advice of a real estate attorney. 

Dan Connolly