For nearly every single residential contract for sale*, the Maryland Code requires that the seller to furnish, EITHER:
a Residential Property Disclosure Statement, OR a Residential Property Disclaimer Statement.
Confusingly, the form provided by the Maryland Real Estate Commission combines both of these statements into one document. As a result, Sellers routinely make mistakes and fill out this form incorrectly. So, your Realtor should provide very specific guidance on how to do it properly.
What’s the Difference Between the Disclosure Statement and the Disclaimer Statement?
The Disclosure Statement requires a comprehensive set of disclosures and affirmations for the property listed for sale. You will first need to confirm the inclusion of certain appliances and answer a series of questions about the type and source of the available heating, cooling, water and sewer. Next, the Seller must go through a 19-point questionnaire and affirm whether there are any known defects or problems related to the property, including questions about: foundation, basement, roof, structure, insulation, plumbing, electrical, heating, cooling, drainage, alarm systems, and more. This is quite an extensive list of disclosures. But keep in mind, disclosures are limited to those defects that are actually known by the Seller.
I would like to highlight one item that trips people up – Question 16A: “If you or a contractor have made improvements to the property, were the required permits pulled from the county or local permitting office?” Caution: If you are unable to affirmatively answer this question, this may be a red flag for potential buyers.
The Disclaimer Statement is much simpler. It is a basic statement that the property is listed “as is” and the Seller makes no representations or warranties as to the condition of the property or any improvements thereon. However, Sellers are still required to disclose any “Latent Defects” they know about.
Note about Latent Defects: The legal definition and implications of Latent Defects are the topic of another blog post, but if a defect is material, not readily observable, and would constitute a direct threat to health or safety, a Seller must absolutely disclose this regardless of whether they complete the Disclosure or Disclaimer.
Which Statement should I complete as the Seller?
Honestly, it doesn’t matter that much in most situations. If the house is excellently maintained, the full disclosure gives the Seller an opportunity to brag about how great every aspect of the house is. This may instill some confidence in prospective Buyers. Alternatively, if you are concerned that the Disclosure Statement may paint your house in an unfavorable light, you can consider opting for the Disclaimer Statement instead. In either case, be extremely careful as you complete this document. The worst thing you can do here is to make some misrepresentations which could open you up to potential liability.
But, if the Seller deliberately chooses to complete the Disclosure Statement, effectively selling the property “as is”, does that mean the Seller is hiding something? In most cases, that is an overstatement. At the time of this writing, it is a Seller’s market. It is common that, even if the Seller would be able to confidently fill out the full Disclosure, Sellers will simply prefer to fill out the Disclaimer because it is so much simpler to complete. This has certainly not scared away Buyers from moving forward with offers. However, in such cases, Buyers should absolutely insert an Inspection Contingency into any offer for purchase. That way, regardless of what the Seller discloses, the Buyer will have an opportunity to get their own inspection and request repairs.
And remember, regardless of the particular Statement to be completed, the Seller will need to disclose any Latent Defects.
Feel free to reach out to me and provide commentary based on your experiences. Please contact me with any questions about this, or any other real estate matter.
*There are extremely specific exemptions to the Disclosure/Disclaimer requirement, i.e. new construction, vacant land, foreclosure sales. Please consult with your Realtor, and review Section 10-702 of the Real Property Article, Annotated Code of Maryland for additional information.