Contact 2: Decoding real estate disclosure statements

HILLSBORO, Mo. – Paula French’s daughter closed on a home in Hillsboro, Missouri in December.

“We didn’t know that the well wasn’t part of the normal inspection,” French said.

It’s a lesson her family regretfully learned the hard way.

“They took a shower, did some wash. Started to clean the house because they just moved in and, of course, there’s no water,” French said. “After you waited a little bit, you’d get a little bit more water, but not much.”

French said a company they hired found their well was shallow and had a low-yield. Drilling a new well and installing a new system would cost more than $10,000. French shared the seller’s disclosure statement with FOX 2. In it, the previous owners answered a series of questions about the well.

“They checked the ‘NO’ box, like nothing has ever been wrong. I then started making phone calls. Because I’m thinking they had to have somebody come look at this before,” French said.

She spoke with the president of a local well drilling company. She gave us a copy of a letter he wrote to her, detailing his meeting with the previous owners. The letter mentions low water issues and interest in possibly drilling a new well. But when it came time to confirm the job, he said they told him they were no longer having issues with the well and were selling the home.

Contact 2’s Mike Colombo asked the previous owners if they felt any of the information they knew about the well was worth sharing in that disclosure agreement.

“No, I did not. Because there is not an issue,” the previous owner said. “There are not any defects. They did not recommend any service be done. There’s nothing wrong with the drinking water. I am 100{28ab41d673507bfe0daf970418d2e81f9476b3e139564442359ad7402c370b16} fine with what I put on the disclosure. There’s not an issue with it.”

Richard Coughlin, a St. Louis-based real estate attorney, said the problem is non-disclosure.

“I tell people when they ask what you disclose in a disclosure statement, my response is: Put down anything that you would want to know if you were buying that house,” Coughlin said.

“…In St. Louis, there is a disclosure statement that’s prepared by the St. Louis Association of realtors, and it’s pretty comprehensive.”

Disclosure statements are a standard part of home sales. For sellers, it’s their chance to disclose specific issues with systems or components of a home.

The form instructs sellers to be truthful about the condition of the property. Full disclosure is their best protection against future charges they concealed a problem.

The form warns of potential legal consequences if a seller fails to disclose information about a “persistent pattern of a problem not completely remedied.” It also advises sellers to disclose problems that would negatively impact the value of the property or affect a buyer’s decision to buy.

Disclosure statements warn buyers that just because a seller says they’re not aware of problems with the property it does not mean issues don’t exist. What sellers disclose is not a “warranty” of the condition of the property. The disclosure recommends buyers to make their offer conditional on the findings of a professional home inspection.

So how are disclosure disputes handled in the courts?

“The complaints are usually made under the Missouri Merchandising Practices Act,”
Coughlin said. “Sometimes you can actually be awarded attorney’s fees as well as damages.”

French believes the low water issues should have been disclosed. She’s consulted with attorneys and is considering filing a lawsuit.

“They should have to pay for this,” she said.

For sellers, the more transparent you are, the more protected you will be from claims that you failed to disclose defects. For home buyers, do your homework. Understand the limitations of disclosure statements and educate yourself on what typical home inspections cover. Additional inspections might cost extra upfront but could save you money down the road.