Real estate disclosure laws vary from state-to-state, but the principles are for the most part universal: sellers must disclose information about their home to prospective purchasers BEFORE a prospective purchaser may make an offer to purchase that home. Most states have standardized forms which sellers are required to use for this specific purpose. Michigan, the state in which my company operates, requires every seller of a home to complete the following disclosure statements:

• Seller’s Disclosure Statement

• Lead Based Paint Disclosure Statement

Sellers’ Disclosure Statement

As the name implies, the Seller’s Disclosure Statement is intended to disclose information about the condition of the property of which the current owner is aware. Experience shows that the five most common defects in residential properties are as follows:

• Bad foundation

• Worn roof

• Poor water drainage

• Inadequate systems (electrical, plumbing, heating and cooling, etc.)

Accordingly, particular attention should be paid to these specific topics when reviewing the Seller’s Disclosure Statement.

Other important points relating to this document are as follows:

• The items disclosed on the Seller’s Disclosure Statement should be carefully analyzed and taken into consideration BEFORE determining what price to offer on a home, not AFTER. An unwritten rule of price negotiation is that if an item in properly disclosed on the Seller’s Disclosure Statement, a seller will almost never allow that item to be used by a purchaser as “leverage” in negotiating a lower sales price AFTER the initial offer has been made. The most common example of this is a purchaser seeking to renegotiate a lower price after the inspection has been performed. As an illustration, assume a buyer has an inspection and the resulting inspection report states something like “roof is significantly worn and will need to be replaced within five years.” Assuming this condition was properly disclosed by the seller on the Seller’s Disclosure Statement, the purchaser will be fighting an uphill battle in attempting to renegotiate a lower price based upon the “discovery” of this worn roof. The seller’s very reasonable position will almost always be: “I properly disclosed that before you made your offer. You should have taken this factor into consideration when you determined the initial price you were willing to offer”

• Sellers complete this disclosure with varying degrees of honesty and candor. I always advise my sellers to complete this disclosure as honestly and as completely as possible, as I never want a prospective purchaser to have doubts about the homeowner’s integrity. However, I know from experience that not all people think this way. Which is why I place limited reliance on this disclosure. It is ONLY A GUIDE. I - and by extension, my clients - never assume it is all-inclusive. Which is precisely why I insist that my clients have both a complete “contractor’s inspection” AND a radon test. THESE are the actions that you simply must take to protect yourself

Lead Based Paint Disclosure Statement

The Lead Based Paint Disclosure Statement is intended to inform a prospective purchaser about the potential existence of lead based paint in a home. Specifically, the homeowner is required to disclose whether they are (1) aware of lead based paint in the home, and (2) in possession of any records or reports relating to any lead based paint testing that has been performed. This disclosure is only applicable to homes built prior to 1978. Experience has shown that very few homeowners actually test for the presence lead based paint, and accordingly this disclosure typically yields no information of benefit to a prospective purchaser.

I hope this helps further your understanding of real estate disclosures. For a more detailed discussion of real estate disclosures please visit the Professional One Real Estate website. Remember to ALWAYS review these in advance of making an offer on any home. Also, remember to factor into your offer pricing decision whatever it is that you learn from reading these disclosures. Good luck, and happy house hunting!

Michael McClure is the founder of Professional One Real Estate, a brokerage located in Plymouth, Michigan. After graduating from Michigan State University with a degree in accounting, McClure worked as a Certified Public Accountant for Price Waterhouse for nearly a decade. After leaving accounting in 1991, he began selling real estate. To date, he and his partner, RE/MAX Hall of Fame Member Phyllis Lemon, have cumulative lifetime sales of approximately $500M.

McClure also volunteers on the Professional Standards Committee (a self-governing body of the local association of realtors that acts in a judge-and-jury-like fashion regarding ethics complaints and arbitration disputes) of Western Wayne Oakland County Association of Realtors. He sat for and passed the State of Michigan’s Associate Real Estate Broker’s examination in December 1996. McClure and his team have developed one of Metro Detroit’s top ranking real estate websites http://www.professionalone.com.