What you need to know about seller disclosures

Although a thorough home inspection can be telling of your home's condition, as a seller, you are still obligated to be transparent about the state of your property.

Real estate disclosure statements are forms that list issues that you've had with the home while you were living there. They can apply for both state and federal regulations. These forms note major and minor issues, such as whether there was ever asbestos in the property, you had noisy neighbors or mold was discovered in the walls. Disclosures are to be written accurately and completely so that your buyers have a clear idea of what to expect with the property they're purchasing.

The appearance and requirements of these forms can vary from state to state - California has the strictest process - and your selling agent will provide them. You are typically only liable for reporting information about the property relating to the time that you lived in the home up until you sign the disclosure. If you have knowledge about the house prior to your time there, you can include that information as well. Essentially, you have to list any factors that could lower the home's value or the next owner's ability to fully enjoy the property.

Seller benefits

Although disclosures primarily serve to inform the buyers, they also provide legal protection for the sellers, which is why it is important you provide an accurate account. These forms are legal documents that can be used in court. If you omit anything, that can work in the buyer's favor in the event of a lawsuit. The consequences can be even more severe if you intentionally lie. Conversely, the forms can defeat a lawsuit if the new owner claims you sold the home under false pretenses by showing that your disclosure proves otherwise.

The forms do allow you to check a box stating that you don't know the response to a certain question, but you should only do so if you truly are unaware of the answer. If you check this box too often, buyers can become suspicious.

Things to list on a disclosure

There are many aspects of your home's history that should be shown on your disclosure statement. Here are a few popular items:

• Crime and paranormal activity: If your property has a known reputation for being the site of a gruesome murder or supernatural occurrences, you need to include that information in the disclosure. The same is true if your home used to house a meth lab.
• Insect infestations: These critters aren't always a visible nuisance, but they can be an issue for buyers. Rather than having the new owners conduct a pest inspection and find out on their own that the house used to have an insect infestation, tell them in the disclosure and avoid a legal battle.
• Natural hazards: If you live on a flood plain, in an area prone to tornados or a location with frequent earthquakes, you need to tell the future homeowner.
• Mold: As with insects, the new homeowners can find out about mold and water damage. If you're unsure whether this is an issue in your home or suspect it could be, have a thorough mold inspection prior to listing your property.
• Lead: Some older homes still have lead paint, a fact that needs to be disclosed if your house fits this criterion. The 1992 Real Estate Disclosure and Notification Rule, a federal regulation, requires that all homes built prior to 1978 provide this information. Again, if you're unsure, consider a professional opinion and order a lead inspection.