What can be hidden in a perfectly-staged home?
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When selling your home, it’s natural to want to present the property in the most favorable light possible. However, don’t let this zest for perfection lead to concealing potential problems with the home. Hiding any issues from the potential seller can have negative consequences — up to and including potential buyers walking away from the purchasing process.
“While it is a buyer’s responsibility to do their due diligence on a home, sellers are required to disclose any issues associated with the home that they are aware of,” says Tyler Forte, CEO at Felix Homes in Nashville, Tennessee.
And if you try to hide these issues when filling out the property condition disclosure statement, he warns that you could be opening yourself up to potential litigation down the road. “Even if it doesn’t turn into a lawsuit, you will immediately lose all trust with a buyer if they find out you lied or failed to disclose something,” he says.
Forte tells me that fortunately, he’s never been directly involved in litigation — but he has heard horror stories, and in many cases, the threat of litigation arises if a seller tries to hide something substantial.
Below, I’ll discuss types of issues that sellers may try to hide, provide real world examples, and then discuss the possible ramifications of trying to conceal problems with a home that’s on the market.
Examples Of Home Issues You Shouldn’t Try To Conceal
As a seller, there are a variety of problems that you shouldn’t attempt to hide from potential buyers.
Structural Issues
“Any significant structural problems with the foundation, walls, roof, or other structural components should be disclosed,” says Patrick Roach, president and managing broker at Southwestern Real Estate in Wheaton, Illinois. Not only could these problems be costly to repair, but they could affect the safety and integrity of the home.
Water Damage Or Leaks
Roach says you should also disclose any type of past water damage, leaks, or plumbing problems. “Water damage can lead to mold growth, rot, and other issues that can affect the health and safety of occupants,” he explains.
Pest Infestations
“Whether it’s termites, rodents, or other pests, it’s crucial to disclose any ongoing or previous pest infestations,” Roach says. “Buyers will want to know if there has been damage or if there is an ongoing risk that needs to be addressed.”
Electrical Problems
Disclose any problems that you know about and provide information regarding repairs and maintenance. “Faulty electrical systems can be hazardous and inconvenient for homeowners,” Roach explains.
Environmental Hazards
Buyers also have the right to know if there are any potential health hazards associated with the home. “If your property is located in an area with known environmental hazards, such as radon, asbestos, lead-based paint, or underground storage tanks, it is essential to disclose this information,” Roach says.
Previous Insurance Claims Or Damage
If you have made insurance claims for damage to your home in the past, buyers should be privy to this information as well. “They may want to review the history of claims and repairs before making a decision,” Roach explains.
Legal Or Permit Issues
“Disclose any legal or permit problems associated with the property, such as unpermitted additions or renovations, property line disputes, or zoning violations,” Roach says. Buyers have a right to know if they could inherit potential legal or compliance issues associated with the property.
Consequences Of Trying To Conceal Issues
If the seller is caught trying to hide problems with the home, this could result in a variety of negative consequences.
Loss Of Trust
Adie Kriegstein, founder and licensed real estate salesperson at NYC Experience in New York, tells me that transparency and honesty are crucial in any real estate transaction. “Potential buyers rely on accurate information to make informed decisions about the property they are considering purchasing,” she explains. And if you conceal the problem, you’re compromising that trust.
On the flip side, you may have the upper hand by revealing the problems. “By disclosing issues upfront, sellers can be in control of negotiations and it will prevent buyers from backing out after the inspection uncovers these issues,” says Katrina Rosendary, realtor associate with Brown Harris Stevens in Miami. She says this level of transparency allows both parties to factor potential expenses in the decision-making process.
Disputes Or Termination
You only get one chance to make a great first impression. But if that first impression isn’t good, you’ll be viewed unfavorably throughout the process. “Concealing problems can lead to a higher probability of future disputes or conflicts,” Kriegstein says. Potential buyers may be wondering what else you’re trying to hide.
Joe Hafner, owner and broker at Hafner Real Estate in Murfreesboro, Tennessee, agrees. “If it’s an issue that will be uncovered by a home inspection, buyers are much less likely to walk away from a contract if they know about a problem before making an offer than when they get surprised by the issue as part of their home inspection,” he says.
Here’s a real-world example. Rosendary tells me that Florida gets a lot of rain. So water damage and leaks, or cracks in the home’s foundation are common. She advised the seller of a home that was vacant for several years to invest in a home inspection — this way, any problems could be addressed sooner, rather than later.
“The seller decided against the inspection, and the buyer’s inspection revealed a roof leak and foundation crack,” Rosendary explains. “The repair costs were higher than anticipated by both seller and buyer, making negotiations difficult, and ultimately caused the contract to be canceled.”
Unnecessary Delays
Concealment can also stop you from closing on time. In another example, one of Rosendary’s clients wanted to purchase an older home that he planned to renovate and occupy. “The owner never disclosed that there were polybutylene pipes in the property, and sure enough they were found during inspection,” she says. Polybutylene pipes can be found in homes 30 years or older in Florida, and are no longer acceptable by U.S. building codes. Rosendary says outdated pipes, in general, can be a huge unexpected repair cost.
Her client spent weeks negotiating with the seller, before the latter finally agreed to credit the repair cost at closing. “The closing was delayed more than a month while the seller incurred the cost of the repair,” she explains. “Had the seller addressed that issue sooner, they would have likely netted more at closing and avoided paying another month of expenses.”
A Lower Selling Price Or Damaged Reputation
The market value of your property is based on a variety of factors. However, Kriegstein says that concealing problems could lead to a lower selling price — or deter potential buyers. “Moreover, word-of-mouth spreads quickly, and if buyers feel misled, it can create a negative reputation for your property, making it challenging to sell to future buyers,” she says.
Violation Of Legal Obligations
Failing to disclose problems with the property could also violate your legal obligation. “Laws and regulations vary by jurisdiction, but in many places, sellers are legally obligated to disclose any known material defects or issues with the property,” Kriegstein says. Failure to comply with these requirements can lead to legal consequences and financial liabilities.
For example, if a home was constructed using asbestos and the seller fails to disclose this, Forte says they could potentially face a lawsuit down the road. “The same can be said for issues with a home’s foundation, or if part of the home — including a fence or driveway — was built over the property line by accident,” he says.
In fact, that’s why Hafner says the property condition disclosure is actually your get-out-of-jail-free card. “If the seller has already disclosed all known defects on the form, they are protected from any repercussions if the buyer gets frustrated with those problems after the sale,” he explains. “Once the buyers sign the form, they acknowledge all issues outlined in the document have been disclosed.”
Taking A Proactive Approach
It’s not always the case that sellers are intentionally trying to conceal problems. “First-time sellers may not be aware of their legal obligation to disclose certain information about the property to potential buyers,” says Nicole Beauchamp, associate real estate broker at Sotheby’s International Realty. However, this is one first-time home seller mistake that can have long-lasting implications. (Conversely, it’s also a rookie homebuyer mistake to waive a home inspection.)
“Working with your team, you can avoid these pitfalls, and that’s why it is important for first-time home sellers to do their research, work with a reputable real estate agent, and be willing to be flexible and transparent throughout the selling process,” Beauchamp says.
Also, Hafner believes it might be a good idea to hire a home inspector to pre-inspect your home to discover any unknown issues. “Then repair everything discovered in the inspection report, as this allows you to demonstrate to potential buyers that you have gone above and beyond to get your home in top shape, making it more desirable than homes without a pre-inspection,” he says.
Even if you don’t plan to put your home on the market in the foreseeable future, Tim Tracy at Groundworks believes it’s important to have regular home inspections. “Ignorance is not always bliss, especially when it comes to your home, and what begins as a seemingly minor problem can quickly turn into a major problem,” he says.
For example, Tracy points to foundation and water problems as two of the biggest insurance risks. “If an inspector finds signs of damage, your home may be deemed uninsurable,” he explains.
Tracy warns that homeowners/sellers also need to understand how the environment impacts a home. “With more extreme weather patterns continuing to affect areas across the country, our homes are being hit hard,” he explains. “Homeowners are dealing with soil changes under the home, which can move very quickly with the combination of weather systems and moisture.”
One question Tracy frequently is asked is: How long will it take for a problem with the home to get worse? “My answer is that nature doesn’t have a timeline, so it’s essential for homeowners to invest in the long-term health of their home and protect their biggest asset,” he says. “Inspections will help you spot problems and tackle them before they become more significant and expensive; home inspections only take a few hours and average around $350, which is a lot less than a full foundation repair system.”
