The Seller’s Disclosure

The duty to warn and a seller’s disclosure address different legal concerns but the types of potential hazards they cover can overlap considerably.  While a duty to warn is designed to prevent physical injury (and subsequent legal action and damages), a seller’s disclosure is designed primarily to address a home’s value, both its selling price and its resale value.

There are six general categories that should be included in all seller’s disclosures, as they can significantly affect a home’s price:

  1. termite/wood-destroying organism infestation;
  2. mold and/or damage due to moisture intrusion;
  3. lead-based paint;
  4. natural hazards;
  5. general repairs; and
  6. infamous or notorious past.

Again, these disclosures cover items that the homeowner/seller either knows about or should know about, and the breadth of these categories may vary by state.

Home Appraisal

An appraisal is an unbiased professional opinion of a home’s value. Appraisals are almost always used in purchase and sale transactions and commonly used in refinance transactions. In a purchase and sale transaction, an appraisal is used to determine whether the home’s contract price is appropriate given the home’s condition, location and features. In a refinance, it assures the lender that it isn’t handing the borrower more money than the home is worth.

Lenders want to make sure that homeowners are not overborrowing for a property because the home serves as collateral for the mortgage. If the borrower should default on the mortgage and go into foreclosure, the lender will recoup the money it lent by selling the home. The appraisal helps the bank protect itself against lending more than it might be able to recover in this worst-case scenario.