What Seller’s Disclosure Rules Mean for You and Your Clients

Caveat emptor may have been the norm in residential real estate long ago, but today a buyer-beware approach would land sellers and their agents in hot water. Seller’s disclosure rules exist to ensure that sellers don’t ignore or hide material information about a property that buyers might want to factor into their decisions. Disclosures also help sellers steer clear of accusations down the road that they were concealing details that buyers would have wanted to know. Here are some frequent questions regarding seller’s disclosure laws.

Texas REALTORS® and TREC have seller’s disclosure notices. Can my seller use either form?

Yes, both forms comply with Texas statutory requirements related to seller’s disclosure.

The TREC form is essentially a copy of the statutory minimum information required in Section 5.008 of the Texas Property Code. The Texas REALTORS® Seller’s Disclosure Notice (TXR 1406) has added provisions that provide more information for buyers and is designed to serve as a risk-reduction tool for sellers.

If the sellers learn of new information about their property after providing the seller’s disclosure notice, do the sellers have a duty to provide the new information to the buyers under the current contract?

Yes, sellers are required by law to disclose any known material information about the property’s condition—even if those conditions are revealed after the completion of the seller’s disclosure notice. While the Texas Property Code does not create a continuing duty or obligation to update the Seller’s Disclosure Notice, if information in the notice is no longer true, the seller may have a common-law duty to correct any misstatements or false impressions. The Texas REALTORS® Update to Seller’s Disclosure Notice (TXR 1418) form can be used to provide the newly discovered property information to prospective buyers.

My buyer wants to purchase a residential property owned by an investor who hasn’t seen the property in years. The owner refuses to fill out a seller’s disclosure notice, except to note he has no knowledge of the property’s condition. Is this sufficient disclosure?

The property code does not offer an exception to the seller’s disclosure requirement because a seller hasn’t seen or lived in the property. After all, knowledge of the property can come from sources other than a visual examination, such as complaints from tenants or reports from property managers. The seller is required to complete the disclosure to the best of the seller’s knowledge and belief as of the date of completing and signing the disclosure. However, if the seller legitimately does not know the answer to a question on the disclosure, the seller can mark that question unknown and still fulfill the obligations under the property code.

Failing to provide a completed seller’s disclosure notice to the buyer may entitle the buyer to certain remedies, like terminating the contract.

A buyer should never rely upon the information provided by a seller concerning the condition of the property, even in a situation in which a completed seller’s disclosure notice has been provided. A buyer should always have an inspection done to satisfy the buyer’s own concerns about the condition of the property.

A buyer interested in purchasing a property is refusing to sign the seller’s disclosure notice. Can the buyer do that?

The signature of a buyer on any seller’s disclosure notice only acknowledges receipt of that notice by the buyer. The Seller’s Disclosure Notice is just that, a notice—it is not a contract and should not be listed as an addendum to the contract.

While there is no statutory mandate that buyers must sign the notice, buyers should cooperate by signing the receipt portion of the notice when they receive the notice. Such a signature could be helpful should a question later arise concerning whether the buyer received this notice or another seller’s disclosure notice provided by a seller containing different information. In any event, if a buyer refuses to sign the receipt for the notice, the broker could note on a copy of the notice the date that the notice was provided to the buyer and that the buyer would not sign the receipt. That noted copy could be retained in the broker’s file as evidence of compliance by the broker in furnishing a copy of the notice to the buyer.

My buyer’s option period has ended, and it’s eight days from closing. My client still hasn’t received the seller’s disclosure notice and asked me if he can terminate the contract. Can he?

Yes. The One to Four Family Residential Contract (Resale) provides that if the notice is not received, the buyer can terminate at any time prior to closing and the earnest money will be refunded.

My buyers just had an inspection done on a property. The listing agent of the property told me neither he nor the seller wants to receive a copy of the inspection report. Do I or the buyers have to comply with this request?

No. Despite the request, it is up to your buyers whether they would like to send a copy of the inspection report to the listing agent or seller. A listing agent or seller who receives an inspection report is charged with knowledge of the information in the report, even if the listing agent or seller doesn’t open it. If the report reveals material defects, the seller and the listing agent are obligated to disclose those defects to subsequent potential buyers.

My seller told me that a murder occurred at her property before she owned it. Does she have to disclose this information to buyers?

Yes. According to the Texas Property Code, sellers aren’t required to disclose deaths on the property that resulted from natural causes, suicide, or an accident unrelated to the property’s condition. However, murder does not fall into these categories.
Your seller can use the Texas REALTORS® Seller’s Disclosure Notice, which includes a question about deaths other than those caused by natural causes, suicide, or an accident unrelated to the property’s condition, and provides space for the seller to explain her answer. A seller may want to voluntarily disclose any death on the property since a buyer may learn the information from another source.

My seller client knows that his next-door neighbor has applied with the city to change his property’s zoning. Should the seller disclose this information to potential buyers?

The seller and the seller’s agent are required to disclose known material facts about the property. Because the zoning change could be something a buyer would want to know before deciding to purchase the property, it’s a good idea for the seller to disclose what he knows about the potential zoning change. Whether a potential zoning change—or any fact a seller knows about the property—is a material fact that requires disclosure would ultimately be up to a court to determine.

You may want to inform the seller that, as the seller’s agent, you are also required to disclose known material facts about the property.

Is the owner of a duplex required to provide a seller’s disclosure notice when listing his property?

No. The seller’s disclosure-notice requirements in the Texas Property Code only apply to sellers of residential property comprising “not more than one dwelling unit.” However, a seller must still disclose known material defects concerning the property. Therefore, it’s a good idea for the owner of a duplex to provide the notice for each side of the duplex.

Any seller should review the seller’s disclosure notice and consider the advantages of disclosing information about the property’s condition before an offer is made. The notice can be a significant risk-reduction tool.

Does a landlord have to provide a seller’s disclosure notice to a tenant entering into a lease?

No. The section of the Texas Property Code that requires the notice does not apply to any lease transaction.

Do the seller’s disclosure notice requirements apply to a relocation company?

Yes. A relocation company that has title to the property is not exempt from the notice requirements. Listing agents should suggest that the relocation company fill out the notice and attach the notice that they received from their employee along with any inspection reports that they have concerning the property.

My client inherited his mother’s estate after she passed away, and now he’s planning to sell the house she owned. He hasn’t lived in the property, so he has no idea if there are any existing issues. Is he still required to furnish a seller’s disclosure notice to potential buyers?

Yes. Although certain types of sellers, like administrators or executors of an estate, are not required to provide a seller’s disclosure notice to prospective buyers, the exemption does not apply to heirs. An heir must provide a completed seller’s disclosure notice, but may answer unknown if the heir does not have knowledge of information required by the notice. Failure to provide a completed seller’s disclosure notice may entitle the buyer to certain remedies, like terminating the contract.