If you are planning to list your home in New York, it's important to understand the state's evolving laws regarding disclosure statements. In a region that used to act as a caveat emptor or “let the buyer beware,” recent laws have changed what a seller must disclose to a buyer before they agree to a purchase.
Disclosure statements vary throughout the United States, even at a city or county level in some regions. The purpose is to protect a home buyer from buying a home with pertinent defects without knowledge. They can also save sellers from future legal battles by revealing issues that negatively impact a property's value.
Today, New York has in place a variety of laws holding home sellers responsible for what they disclose. The role of an expert real estate agent is vast and acts as a great companion to keep you free from legal ramifications by explaining the state's disclosure laws. Their knowledge will reveal what you are and are not legally obligated to disclose.
Here is a guide about what home sellers need to know about disclosing before a real estate transaction in New York.
History of New Regulations
New York traditionally followed the protocol that it was the buyer's responsibility to perform thorough inspections before purchasing a property. However, in 2002, the state made changes to its laws by adopting the Property Condition Disclosure Act.
Before the new regulations, courts usually refused buyers who discovered defects in a property unless a seller acted with fraudulent methods or prevented them from inspecting the home to find issues.
Modern real estate transactions require a seller to document a form to reveal, to the best of their knowledge, common problems in the home that may cause damage to the property's value. Here is an example of the PCDA.
Don't let commission fees stop you from hiring a real estate agent to walk you through the guidelines of the current regulations. A local Clever Agent is an expert on the disclosure requirements in New York and works for a flat $3,000 or 1% of a sale valued over $350,000.
Are All Sellers Required to Disclose?
While it's in your best interest to inform a buyer of potential problems that can lead to property value degradation, there are a few exemptions for some sellers.
The law states that disclosures are necessary when properties are “one to four family dwellings used or occupied, or intended to be used or occupied” are sold. This may exclude many sellers since condominium units and apartment complexes are not considered “residential real estate,” which require disclosure.
The state also provides home sellers a way out from disclosure by paying a credit of $500 to the home buyer at closing.
While sellers who fit these exclusions may be enticed to withhold information about a property, keep in mind, you may still be held liable if a court decides you intentionally misled a buyer.
What Must Be Disclosed?
The PCDA features 48 questions that a seller must answer truthfully. They include factors regarding:
- General Information - ownership information, age of the structure, and an average cost of utilities;
- Environmental - history of radon testing, if the location is within a floodplain, and if the property has been exposed to toxic substances, whether leaked or spilled;
- Structural Elements - Damage caused by water, smoke, fire or insects, and roofing integrity; and
- Mechanical Systems - Performance issue within the water system and quality, drainage complications, and flooding issues.
At a federal level, every home seller in the United States listing a home built before 1978 is required to disclose the presence of lead paint. If you aren't sure, it's a good idea to get the property inspected before going to market. If it passes, you will be granted certification that you can pass along to buyers to speed up the process once a sale is being negotiated.
When filling out the disclosure, be as honest and forthcoming as possible to protect your home sale from rescission and becoming the subject of a lawsuit.
When is the Disclosure Due?
In New York, sellers must complete and sign their disclosure statement deliver it to a home buyer before a purchase contract is official. In most cases, a buyer will hire an appraiser and inspector to ensure the property is free from other defects.
If these inspections reveal more problems or you become aware of an inaccuracy, you have the opportunity to update the document. Once the final closing process is complete, a home seller is no longer obligated to revise the initial statement.
What are the Penalties for Not Disclosing?
You have already been informed of the $500 penalty paid to the buyer if a disclosure is not made. However, this small fee doesn't fully protect a seller for defects that are discovered after the sale is complete.
Home sellers who are dishonest in their disclosures or who choose to forego drafting the document can be liable to the buyer for a “willful failure to perform.” New York legislation typically leans in favor of home buyers if they feel a seller made efforts to prevent the buyer from learning about a defect that couldn't be discovered during a typical inspection.
This act is often considered fraudulent behavior and is punished by holding a seller responsible for paying expenses to the buyer, for damages caused by the defect.
What's the Best Course to Navigate Disclosure Statements in New York?
Following disclosure statements laws in New York is best navigated under the expert hand of a local real estate agent. The laws are in place to protect a buyer from making a poor investment and to ensure a seller has fully disclosed their knowledge of the property, according to the law.
You may be hesitant to unveil problems with the home if you feel it will decrease the value. However, the implications associated with being dishonest during a sale can lead to serious legal battles.
If you're ready to put your home on the market in New York, fill out this simple form to be connected with an expert from the Clever Partner Agent who can answer all your questions about what should and shouldn't be disclosed about your property.