Real Estate Disclosures: You should tell the truth, the whole truth, and nothing but the truth
What are the disclosure requirements for residential sellers in Colorado?
You’re selling your home. Among a laundry list of things you have to do, you have to make your required disclosures of all your house’s defects. You may ask: what must I disclose? How much do I have to disclose? And do I have to disclose all of that? Well, the short answer is yes. This blog will briefly guide you through Colorado’s real estate disclosure laws so you can avoid future liability.
What are disclosure requirements and why are they important?
In Colorado, people who sell residential property have a duty to disclose “adverse material facts.” This means sellers are required by law to tell potential buyers about any problems with the property that might affect their decision to purchase the property. If sellers don’t disclose problems with the property, they could be liable for the cost of the repair after the sale.
For example, the seller must disclose if they know the property is in a special taxing district, if they know the property is associated with an HOA, and the source of the potable water on the property. These requirements vary depending on the type of property sale. Colorado imposes different requirements on commercial property sellers, residential sellers, and real estate brokers.
What are the disclosure requirements for residential sellers?
As a general rule, residential sellers should err on the side of caution when considering whether or not to disclose a problem with a property they’re selling. The consequences of failing to disclose a known problem with the property can be severe, so sellers should be careful to disclose anything they think may affect the price of the property or a buyer’s decision to purchase it.
The Colorado Real Estate Commission provides sellers with a variety of helpful forms that cover most property sales. These forms go through the property step-by-step and ask multiple questions as to whether there has been or is a problem with the property. The standard Colorado Real Estate Commission purchase/sale contract typically requires a completed Seller’s Property Disclosure form. The Seller’s Property Disclosure form prompts sellers to note any problems with specific aspects of the property, and sellers should fill this out as carefully and as detailed as possible.
Residential sellers in Colorado have the highest requirements for disclosure, as a result of Colorado court rulings, statutes, and federal law. The biggest requirement on residential sellers comes from Colorado courts which require sellers to disclose any hidden defects they know about on the property – adverse facts material to the property. In this scenario, an adverse fact is considered material if knowing about it would impact a reasonable person’s decision to purchase the property or affect the purchase price.
Does a real estate broker have any disclosure obligations?
Simply put, yes, real estate brokers have disclosure obligations too. In all real estate transactions, brokers are obligated to disclose known adverse material facts to all parties involved in the matter. This involves not only buyers, but sellers as well, if applicable.
Much like residential sellers, brokers are only required to disclose all known adverse facts; if they do not know about a defect, then they have no obligation to disclose, and brokers are not required to ask sellers about potential problems. However, if a broker finds out about a problem with the property and does not disclose it, they could face serious consequences.
For example, if a seller knows about a crumbling foundation but does not tell the broker, then the broker has no obligation to disclose to the buyer as they have no actual knowledge of the defect. If a broker is unsure about whether a known fact that affects physical property is adverse, the broker should err on the side of disclosure in order to protect themselves from liability.
How do these disclosure requirements affect buyers? What should I do if I find undisclosed problems with a property after closing?
Buyers should conduct their own inspection of the home after closing and look out for potential problems. As always, buyers should keep any documents relating to the disclosure and carefully document any problems if they arise.
If you find damages or defects that the seller of your property did not disclose, the best thing to do is call a lawyer to discuss your options. Prior to meeting with a lawyer, you should prepare any relevant documents, in particular the seller disclosure form, the purchase contract, and any inspection reports documenting the issue.
If you have any additional questions about disclosure or property sales, fill out an interest form today to see if GLO can help you.
GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific fee arrangements and signed engagement letters. GLO does not guarantee any results.