Disclosing all known defects about your home, no matter how trivial, is your best defense against any potential legal problems down the road. In some cases what you must disclose is outlined by the state, in other cases disclosure requirements are specified as those defects to your property that a buyer can reasonably expect you to be aware of, particularly if you live in the house.
Seller disclosure obligations vary from state to state, so it's best to work with a Realtor who can guide you through the disclosure process. While it's critically important that to make your best effort to fully disclose everything you know about the property, just because you're selling your house doesn't make you and all of your personal information an open book. Check with your Realtor to learn about the type of information that isn't considered to be a material fact.
Generally most state-mandated disclosure laws require that you provide to the best of your knowledge written disclosure of all known material facts that may affect a homebuyer's decision to buy the property, including those facts that may affect the price they are willing to pay for the property . A material fact can include a fact about the house, its condition and or any related legal issues that could negatively impact the property's value.
Common problems and defects include information about the general condition of the home, physical defects (a basement that's prone to flooding or a leaky roof), legal problems (whether the new bathroom is up to code and permitted), pest or fungus damage, and relevant environmental or seismic hazards. Items you're likely to find on the required disclosure form include:
Structural issues, including code violations or a cracked foundation.
Geological issues, including whether the home is situated in an area prone to flooding, landslides or earthquakes, or if the home is built on expansive or shifting soil.
Environmental issues, including whether the home is situated near an airport, landfill, or some other undesirable facility; any mold or mildew problems.
Operating condition of any built-in appliances or other appliances included in the sale.
The overall conditions of the property's plumbing and electrical systems, age of roof and its components, and any other major systems including sewer and septic
Information about homeowners insurance claims that have been filed within the past five years.
Leave nothing out and mitigate the potential for post-closing issues that could blow-up into an expensive lawsuit. Being completely honest about any potential or current problems may motivate the homebuyer to ask for a price reduction, an allowance for repairs or that the actual repairs are completed prior to settlement. While no home seller wants to deal with these issues, it's unlikely that any seller can avoid providing some negative disclosure information because no house is perfect or without problems.
Consider obtaining a pre-sale home inspection. The extra set of eyes will provide you with more information about your property's condition, and presenting the homebuyer with an inspection report in addition to your disclosure forms will strengthen your position as an informed and cooperative home seller who's made the best effort possible to fulfill disclosure requirements.