Ultimate Guide to Seller’s Property Disclosures for Real Estate Investors

When you’re buying a property, one of the key documents you’ll encounter is the Seller’s Property Disclosure (SPD).

It’s important to remember that the exact format and requirements for the SPD can vary depending on your market.

Your real estate agent will guide you through the specific version used in your area and help you understand what’s expected when it comes to seller disclosures.

What is a Seller’s Property Disclosure?

A Seller’s Property Disclosure (SPD) is a document prepared by the seller to share what they know about the property’s condition. It provides buyers with insights into any known issues or repairs, helping you make a more informed decision about the property. We’ll dive into the details of the SPD below.

However, not all sellers provide this document. Some sellers might give you one that simply has a line through it, with a note stating, “did not live in property.” There are a few common reasons why this might happen:

• Investment Property – The seller might not have lived in the property because it was an investment, so they claim limited knowledge.
• Inherited Property – A seller who inherited the property may not be familiar with its history.
• Flipped Property – A house flipper might not have lived in the property long enough to know all the details.
• Legal Advice – Some sellers are advised by their attorney not to fill one out, believing it could expose them to more liability.

Interestingly, some attorneys argue the opposite—that filling out the disclosure may actually reduce risk. By disclosing known facts, sellers demonstrate transparency and avoid claims of withholding important information. It’s highly unlikely a seller has no knowledge of the property they owned, whether they lived in it or not. After all, even an absentee owner knows about major issues like leaks, renovations, or tenant complaints.

Important Legal Consequences: Talk to Your Attorney or CPA

While the Seller’s Property Disclosure (SPD) strongly encourages both parties to consult legal or tax counsel before signing, it’s common for most buyers and sellers to proceed without actually doing so—unless something unusual stands out.

Many buyers simply review the SPD themselves which describes the condition of the property. However, if there’s something on the disclosure that seems out of the ordinary—like an environmental hazard, major structural issues, or complicated legal claims on the property—seeking legal or tax advice becomes important.

When in doubt, get legal and tax advice.

But in most straightforward transactions, buyers and sellers often handle the review of this form on their own without involving an attorney or CPA.

Why the Seller, Not the Agent, Fills Out the Disclosure

The Seller’s Property Disclosure (SPD) is a document that the seller, not the real estate agent, is responsible for completing.

In fact, the form often explicitly states:

“THIS DISCLOSURE SHOULD BE COMPLETED BY SELLER NOT BY BROKER.”

The reason for this is simple—the seller has direct knowledge of the property that the real estate agent does not. The SPD serves as a risk-reduction tool for the seller, giving them the chance to disclose everything they know about the property. By being upfront about any issues, the seller can help avoid future claims from the buyer, who might otherwise accuse them of withholding important information after the sale.

The real estate agent’s role here is to facilitate the process, but the responsibility of providing accurate information lies squarely with the seller. This ensures that the disclosure reflects what the seller knows about the property, protecting them from potential legal disputes later on.

Current Actual Knowledge

The Seller’s Property Disclosure (SPD) is intended to reflect the current actual knowledge of the seller at the time it is completed.

The form usually includes language like:

“Seller states that the information contained in this Disclosure is correct to Seller’s CURRENT ACTUAL KNOWLEDGE as of this Date. Any changes will be disclosed by Seller to Buyer promptly after discovery.”

This means the seller must disclose what they know about the property as of the day they sign the form. If the seller learns new information after submitting the SPD—such as material facts uncovered in an Inspection Report provided by the buyer—they are expected to update the disclosure if the buyer terminates the contract and the property goes back on the market.

For example, if you, as the buyer, provide the seller with an Inspection Report that reveals issues with the foundation, and then decide to walk away from the deal, the seller now has documented knowledge of the foundation problem. Emails between the seller and their agent discussing the Inspection Report, or the inspection objection, serve as proof that the seller is aware of the issue. This can actually strengthen your negotiating position, as the seller can’t simply ignore the problem and hope the next buyer won’t find out. Once the seller knows about the issue, they’re legally obligated to disclose it to future buyers, or they could face legal consequences. This puts the seller in a position where they either need to address the issue or negotiate a better deal with you, knowing they can’t hide the problem from the next buyer. We will explain the potential legal liabilities for failing to disclose in the next section.

Legal Liability

If a seller fails to disclose a known material defect, they are opening themselves up to potential legal consequences.

The Seller’s Property Disclosure (SPD) explicitly warns sellers about this:

“Seller’s failure to disclose a known material defect may result in legal liability.”

Just in case there’s any confusion about what happens if a seller withholds important information, the form makes it clear—there could be significant repercussions.

Legal liability can arise if a seller knowingly hides or fails to disclose a material fact about the property that a reasonable buyer would consider important. For example, if the seller is aware of structural issues, environmental hazards, or water damage and does not disclose these defects, the buyer could potentially sue for damages after discovering the problem post-sale.

In these cases, the buyer could claim that they were misled or that the seller acted in bad faith. If a court finds that the seller intentionally failed to disclose a known issue, the seller may be required to compensate the buyer for the costs of repairs, decrease in property value, or even additional damages. In some cases, it could lead to a rescission of the contract, meaning the sale is undone entirely.

To avoid this legal liability, it’s crucial for sellers to disclose any known material defects upfront, ensuring transparency and protecting themselves from future claims.

Not Just What’s Listed on the Seller’s Property Disclosure Form

The Seller’s Property Disclosure (SPD) is a valuable tool, but it doesn’t cover every possible issue that could affect a property. Just because a specific item isn’t listed on the form doesn’t mean the seller is off the hook for disclosing it.

In fact, the SPD typically includes a statement like:

“If Seller has knowledge of an adverse material fact affecting the Property or occupants it must be disclosed whether there is a specific item on this Disclosure or not.”

This means that sellers are required to disclose any adverse material facts they know about, even if the issue doesn’t have a dedicated section on the form. For example, if the seller knows about a serious plumbing issue, but there’s no section on the SPD specifically asking about that problem, the seller is still legally obligated to share that information with the buyer.

It’s not enough to rely solely on the checklist provided in the SPD; sellers must disclose everything they know that could materially affect the value or safety of the property.

Real Estate Agents Must Disclose Too

Real estate agents are also required to disclose any adverse material facts they know about the property. It’s not just the seller’s responsibility—real estate agents must disclose any adverse material facts they are aware of too.

For example, if the seller asks their agent, “Do I need to disclose that ___?” the agent is now aware of the potential issue. If that information is considered an adverse material fact, the agent is legally required to disclose it to you, even if the seller chooses not to. Once the agent has knowledge of an adverse material fact, they must ensure it’s communicated to the buyer, keeping the transaction transparent and fair.

That brings us to the question: what exactly is an “Adverse Material Fact,” and what must a real estate agent disclose? We’ll cover that in the next section.

Adverse Material Facts

When representing clients in a real estate transaction, a real estate agent has an important responsibility: to disclose known adverse material facts. But what exactly does that mean?

Adverse material facts refer to information that significantly impacts the value, desirability, or condition of a property and is unfavorable to one of the parties involved in the transaction. These are facts that, had they been known, might have influenced a buyer’s decision or a seller’s position in negotiations.

During the transaction, agents for either side may become aware of information about the property that could affect the outcome. For instance, an agent might discover that the property has undergone multiple roof repairs, has been struck by lightning several times, or that one of the current owners is a smoker. These facts could be relevant to prospective buyers, but not all of them will necessarily qualify as “adverse material facts.”

To determine whether a fact is material, the agent must ask whether a reasonable person would consider it significant to the transaction. In Moye White LLP v. Beren, the court ruled that a fact is material if it is something a reasonable person would want to know when making a decision. Material facts can include items like the condition of the title, environmental hazards, or the physical state of the property.

Next, the agent must evaluate whether the material fact is adverse. This means considering whether the information negatively affects one of the parties involved. If it does, the agent has a duty to disclose it to all parties. This obligation extends beyond the agent’s own client—if the information is significant and unfavorable to the buyer or seller, disclosure is required, regardless of who benefits or suffers from the fact.

Adverse material facts encompass issues like structural damage, health hazards, and title defects—including liens or encroachments. Examples include damage from insect infestations, problems with expansive soil, or a building’s zoning violations. These factors significantly impact a property’s value or condition and must be disclosed.

Importantly, an agent is only required to disclose facts they actually know. They are not held responsible for information they don’t know, even if they “should have known” it. For example, if a seller does not inform their agent that the foundation is crumbling, the agent has no duty to disclose that issue because they lack actual knowledge of the problem (Baumgarten v. Coppage).

Understanding the duty to disclose adverse material facts is key to protecting the interests of both buyers and sellers and maintaining the integrity of the transaction. However, there are limits. Some state laws specifically prohibits agents from disclosing information that might psychologically stigmatize a property, such as if the property was the site of a homicide or if an occupant had HIV or another non-transmittable disease.

Real estate agents must disclose all known adverse material facts, but they are not required to disclose circumstances that may stigmatize the property psychologically. When in doubt, it’s better for agents to err on the side of disclosure to ensure transparency and protect the interests of all parties involved.

Only About This Property

The Seller’s Property Disclosure (SPD) primarily covers the property or unit being sold. If the property is part of a Common Interest Community, the seller is only required to disclose issues related to the specific unit or property itself, with minimal exceptions. This means the seller is not obligated to disclose what happened in other units or properties within the community.

Seller Gives Permission to Share

The Seller’s Property Disclosure (SPD) is not just for the buyer currently under contract—it can be shared with others as well.

The form often states:

“Broker may deliver a copy of this Disclosure to prospective buyers.”

This means that once the seller completes the SPD, the real estate agent has permission to provide it to other potential buyers if the current deal falls through or if the property goes back on the market. Sellers should be aware that this information will be shared, ensuring transparency for all interested parties.

Does Not Determine If Something Is Included with Sale

The Seller’s Property Disclosure (SPD) does not determine whether specific items are included in the sale of the property.

The form itself makes this clear:

“Note: The [Contract], not this Disclosure, determines whether an item is included or excluded; if there is an inconsistency between this Disclosure and the Contract, the Contract controls.”

For example, just because the SPD mentions a hot tub doesn’t mean it’s automatically included in the sale. If there’s any chance the seller might consider including the hot tub, they may want to list it on the SPD. If they didn’t originally plan to include it but later decide to, the seller should update the SPD to reflect that change. This keeps everything clear and consistent between the disclosure and the contract.

Source of Water

The Seller’s Property Disclosure (SPD) typically includes a section where the seller is required to disclose the source of water for the property. This information is becoming increasingly important in real estate transactions due to growing concerns over water rights, availability, and quality. In some areas, water access and its reliability can directly impact the property’s value and future usability.

In certain cases, instead of being included on the SPD, you might encounter a separate document called a “Source of Water Addendum,” which provides the same crucial information. Whether on the SPD or through a separate addendum, knowing the source of water is vital for buyers to assess any potential risks or concerns related to the property’s water supply.

No Warranty from Real Estate Agent

The Seller’s Property Disclosure (SPD) comes with an important disclaimer about the role of real estate agents.

It typically states:

“Seller and Buyer understand that the real estate brokers do not warrant or guarantee the above information on the Property. Property inspection services may be purchased and are advisable. This Disclosure is not intended as a substitute for an inspection of the Property.”

This means that while the seller provides the information on the SPD, the real estate agent is not responsible for verifying its accuracy. The responsibility to ensure everything is accurate lies with the seller. As the buyer, you should not rely solely on the SPD for details about the property’s condition. Hiring a professional inspection service is highly recommended to uncover any potential issues the seller might not be aware of or disclose.

No Hidden Adverse Material Facts

In real estate contracts and forms, anything written in BOLD and ALL CAPS is generally something to pay extra attention to. This section of the Seller’s Property Disclosure (SPD) is no exception. The SPD typically includes a clear advisory that emphasizes the importance of transparency from both the seller and the real estate agent.

It often states:

“ADVISORY TO SELLER: Seller acknowledges that Broker will disclose to any prospective buyer all adverse material facts actually known by Broker, including but not limited to adverse material facts pertaining to the physical condition of the Property, any material defects in the Property, and any environmental hazards affecting the Property. These types of disclosures may include such matters as structural defects, soil conditions, violations of health, zoning or building laws, and nonconforming uses and zoning variances. The information contained in this Disclosure has been furnished by Seller, who certifies it was answered truthfully based on Seller’s CURRENT ACTUAL KNOWLEDGE.”

This section serves as a safeguard for both the seller and the broker, ensuring that all known adverse material facts about the property are disclosed.

It’s essentially a CYA (cover your assets) form for the seller, giving them a chance to come clean about everything they know. By signing this section, the seller certifies that they have provided accurate information to the best of their current actual knowledge.

There is also a designated spot for the seller to sign, further solidifying their responsibility for the disclosure’s accuracy. This helps protect the seller from future claims of withholding important information.

Still Got to Inspect It Yourself

Even though the Seller’s Property Disclosure (SPD) provides useful information about the property, it’s important to remember that you, as the buyer, still need to perform your own due diligence.

The SPD itself advises that you thoroughly inspect the property and get expert help to fully evaluate its condition.

• Physical Condition of the Property – The seller has disclosed what they know, but a professional inspection can reveal underlying issues like foundation problems, roof damage, or plumbing concerns that may not be obvious at first glance.
• Presence of Mold or Biological Hazards – Mold can be a serious health issue and may not always be visible. A mold inspection is recommended to ensure there are no hidden biological hazards that could affect your health or future resale value.
• Rodents, Insects, and Vermin (Including Termites) – Pests like termites can cause significant structural damage over time. Make sure to get a pest inspection to identify any infestations before closing on the property.
• Legal Use of the Property and Access – Verify that the property is legally zoned for your intended use (for example that it is residential, commercial, multi-family property, short-term rental) and that you have clear access to it through any necessary easements or legal rights-of-way.
• Availability and Source of Water, Sewer, and Utilities – Confirm where the property’s water comes from (e.g., well or municipal supply) and make sure all necessary utilities, including sewer, electricity, and gas, are available and functioning properly.
• Environmental and Geological Condition of the Property – If the property is located in an area prone to environmental risks like flooding, landslides, or earthquakes, it’s important to get expert opinions on the geological safety of the site.
• Presence of Noxious Weeds – Noxious weeds can be difficult and expensive to control. Check to ensure the property isn’t infested with harmful plants that could impact the land’s usability or require costly mitigation.
• Other Matters Important to You – Whether it’s noise levels, nearby developments, or specific property features, there may be other factors that affect your decision to purchase. Take the time to investigate anything that could impact your enjoyment or ownership of the property.

In short, the SPD is just one part of your due diligence process. You’ll want to back it up with your own inspections and research to make sure you’re fully informed before making your purchase.

Seller Has No Duty to Inspect

The Seller’s Property Disclosure (SPD) makes it clear that the seller is only responsible for disclosing what they currently know about the property. This is based on their actual knowledge at the time they complete the form. It’s important to understand that this doesn’t include anything the seller should have known, any general common knowledge about the property, or anything they could have discovered through an inspection.

In other words, the seller is not required to investigate or inspect the property to find potential issues before filling out the disclosure. They are simply reporting what they are already aware of, and they are not held responsible for any hidden problems that might exist but that they genuinely do not know about. So, if there are issues with the property that the seller isn’t aware of because they haven’t done an inspection, they won’t be held liable for failing to disclose those issues.

As the buyer, this is why it’s critical to do your own inspection—since the seller isn’t obligated to dig deeper into the property’s condition before disclosing what they know.

Get Additional Information and Expert Advice

The Seller’s Property Disclosure (SPD) encourages buyers to seek additional information beyond what the seller provides. It’s advisable to consult various sources, including local, state, and federal agencies. These can offer valuable insights into environmental risks, zoning laws, building permits, and other regulations that might impact the property and your intended use.

Get a Survey

The Seller’s Property Disclosure (SPD) highlights the potential for disputes regarding boundaries and property features like fences, driveways, and hedges. These disputes can arise if there’s any uncertainty about where your property ends and your neighbor’s begins. A survey is an effective way to avoid these issues.

By getting a survey, you can clearly determine the exact boundaries of the property. This ensures that any structures, fences, or landscaping are within the property lines and won’t cause problems with your neighbors in the future. If there’s any doubt about the location of these features, or if they’re close to the property line, a survey can help clarify things before the sale is finalized, preventing future disputes.

No Seller Warranty

The Seller’s Property Disclosure (SPD) makes it clear that the seller does not guarantee the property is suitable for whatever purpose you, as the buyer, intend to use it for. Just because the seller discloses the condition of an item—like the HVAC system or plumbing—doesn’t mean they’re promising that it will continue to work after the sale or that it’s fit for your specific plans.

For example, if you’re a real estate investor planning to convert a single-family home into a multi-unit rental, the seller’s disclosure about the property’s current condition doesn’t mean that it’s guaranteed to support that use. The seller isn’t responsible for ensuring the property will meet zoning requirements or handle the additional infrastructure demands of your intended investment plans. You’ll need to do your own due diligence to confirm the property is suitable for your specific investment strategy.

Buyer Acknowledges Receipt of Seller’s Property Disclosure

As the buyer, you’ll typically be asked to sign the Seller’s Property Disclosure (SPD) to acknowledge that you’ve received it. This signature doesn’t mean you agree with or accept everything in the disclosure—it simply confirms that you’ve been provided with the information. It’s an important step in ensuring transparency during the transaction.

When Do You Typically Get the Seller’s Property Disclosure

You can receive the Seller’s Property Disclosure (SPD) at different points during the home-buying process. Sometimes it’s uploaded to the MLS, giving you access to it even before you go see the property. This can be helpful so you can look out for specific issues while you’re viewing the property in person.

In other cases, a copy of the SPD might be printed and available at the property during your showing. Sometimes it’s just a single copy left at the property, or it could be included in a packet for you to take with you. Having access to the SPD while you’re looking at the property allows you to see any disclosed issues firsthand and evaluate them on the spot. However, that’s not always the case.

There are times when the seller or their real estate agent will send the SPD over as you’re about to write an offer. Having this information before making an offer can influence how much you offer or whether you make an offer at all. Depending on what’s in the SPD, you might also request specific due diligence documents, like receipts for repairs or test results for certain issues.

In some cases, the contract will specify a date by which the seller must provide the SPD, and failure to do so could put them in default of the contract. Once you receive the SPD, you’ll need to sign it to acknowledge receipt.

Your real estate agent might even be able to pull old Seller’s Property Disclosures from previous sales of the property. This can provide additional information about the property’s history and what was disclosed to earlier buyers, giving you a broader view of any ongoing issues.

Using Seller’s Property Disclosure When Getting Insurance

When getting an insurance quote for a property, the Seller’s Property Disclosure (SPD) can be a useful tool. It often contains details about the property—such as the roof’s age, previous repairs, and any potential issues—that will help your insurance agent provide a more accurate quote. By sharing this information upfront, you can avoid surprises later and ensure you’re getting the right coverage for the property’s condition.

Additionally, ask your insurance agent for a CLUE (Comprehensive Loss Underwriting Exchange) report. This report provides a history of insurance claims made on the property, including any damage or repairs due to incidents like fires, floods, or storm damage. Having the CLUE report with you when you inspect the property can help you identify areas that may need further investigation and make sure there’s adequate insurance coverage for any potential risks.

Using Seller’s Property Disclosure During Inspection

When preparing for your property inspection, it’s ideal to have a copy of the Seller’s Property Disclosure (SPD) in hand. This, along with the CLUE report from your insurance agent, will guide you and your home inspector to focus on specific areas that may need extra attention. The SPD can reveal known issues, while the CLUE report highlights past insurance claims, offering a fuller picture of potential trouble spots.

When you meet with the home inspector you’ve hired, make sure they carefully evaluate any areas of concern mentioned in the SPD and CLUE report. Here’s what your inspector might uncover regarding these troublesome areas:

• It Was Fixed and Shouldn’t Be an Issue in the Future – Your inspector may confirm that a previous problem, like a repaired roof or updated plumbing, was properly resolved. This gives you peace of mind that the issue likely won’t cause trouble down the road.
• It Was Fixed but Will Be an Issue in the Future – Sometimes, a repair may be more of a temporary fix. Your inspector might note that while the issue was addressed, the solution may not last, meaning further work could be needed in the future. For example, a patched foundation crack may require monitoring or additional repairs over time.
• It Was Not Fixed – In some cases, the SPD or CLUE report may disclose an issue that was never repaired, such as water damage or an old electrical system. Your inspector will give you a professional opinion on the severity of the issue and likely recommend immediate repairs or further evaluations by a specialist.
• Unknown or Unresolved Issue – If an area listed in the SPD or CLUE report seems ambiguous, your inspector might suggest additional testing, like mold or structural evaluations, to fully understand the scope of the problem.

Disclosure of Latent Defects; Present Condition

The contract to buy and sell typically includes a section outlining the seller’s obligation to disclose any known issues with the property, known as latent defects.

This section is important, as it defines the seller’s responsibilities and the buyer’s rights if new issues are discovered after the contract is signed.

Here’s what is usually covered:

• Disclosure of Adverse Material Facts – The seller is required to disclose any adverse material facts they know about the property at the time of the contract. These are significant issues that could affect the value or usability of the property, such as structural problems, water damage, or environmental hazards.
• Subsequent Disclosure – If the seller discovers any new adverse material facts after the contract is signed, they must promptly disclose these in writing to the buyer. This ensures that the buyer remains informed of any significant issues that come to light during the process.
• Right to Terminate – If the seller discloses new adverse material facts after the contract is signed, the buyer has the right to terminate the contract. This termination right typically lasts until either the closing date or five days after the buyer receives the new disclosure, whichever comes first.
• Present Condition – The contract usually states that the property is being sold “As Is,” meaning the buyer is purchasing the property in its current state, along with any faults. However, this doesn’t relieve the seller of the obligation to disclose known material issues.

It’s important to review your specific contract, as the language and obligations may differ depending on the transaction or local regulations.