Purchasing a home or a commercial real estate property can be stressful and confusing, especially if one doesn’t know what’s involved.
That is where disclosure statements come in, according to Brian Cantrall, vice president of Chestnut Hill Realty in Beachwood; Nancy Emerman, Realtor at Keller Williams Greater Cleveland in Pepper Pike; and David Leb, senior sales associate at Cushman & Wakefield | CRESCO Real Estate in Cleveland.
“The point of the disclosure statement is so the seller is not hiding anything from the buyer,” Cantrall explained. “It’s avoiding any litigation or potential issues in the future. This is the baseline starting point.”
The forms typically explain if there have been any problems with the property within the last five years, as well as any changes or fixes made.
“People forget things that have been repaired and don’t disclose it until there has been an inspection,” Emerman said. “So, whatever they know, we suggest they disclose it and think about it.”
For commercial properties, Leb said it’s a little different. The main type of disclosure statement is the agency disclosure, which is required by law and is sent to the buyer and seller, or tenant and landlord.
“Although it is always important, it’s most important under a ‘dual agency’ situation, which means you must disclose that the agent or broker is representing both parties in the deal,” he noted.
What needs to be disclosed varies, but the professionals said it typically falls to property issues or other projects.
“You’d list things like water damage, current and past, roof problems, basement problems like flooding and mold,” Emerman said. “These are the things you might not notice from the outset but could be a problem later on. A good idea for sellers is to have a pre-sale inspection so the seller is aware of some of the things they need to fix and disclose before putting the house on the market.”
Cantrall added another thing to disclose would be things like structural issues. All of this allows buyers to feel informed before making a purchase.
“Things like (disclosure statements) can help the buyers ask follow-up questions and gather more information to assure they won’t have those problems going forward,” he noted.
For commercial properties, Leb explained the buying-selling relationship tends to not be as strictly regulated as residential.
“Commercial sellers often sell property ‘as-is, where-is,’ and do not have to disclose the property’s history or deficiencies,” he said. “In Ohio, it’s up to the buyer to be as diligent and thorough as possible while investigating a property, as they cannot rely on the seller to disclose everything about the property.”
Regardless of what is listed on a disclosure statement, Emerman explained using one for residential property adds a layer of trust between parties.
“Buyers can get concerned that maybe the seller didn’t tell them something,” she said. “It’s a major part of the comfort for a buyer – the trust they have in what has been put on paper and what they find in a final inspection. It means everything. It is a very important part of the sales process when it comes to home buying.”
When it comes to disclosure statements, regardless of property type, the professionals said they can lend knowledge to clients about what to do.
“With buyers, most don’t know what is a big or little deal, and what is common with homes,” Cantrall said. “There is some education needed on the types of issues and the implications of what else we need to ask of sellers. It’s all about interpreting the form and giving each party advice accordingly.”
Professionals can also provide contacts necessary for inspections and work.
“I often recommend preferred property inspectors, environmental consultants, HVAC contractors and other necessary trades to look closely at a property to give the buyer as much information as possible to make an informed decision,” Leb said.
Emerman added, “It’s about having those contacts and having them available for the right people because they become part of who you are in your business.”