Seller’s Disclosure Notice for Texas
Every state has their own required seller disclosure forms. California has the Transfer Disclosure Statement and the SPQ, Colorado has the Seller’s Property Disclosure, and Texas has the Seller’s Disclosure Notice. Due to what would be an astronomical cost for buyers to thoroughly and completely inspect a property (and the damage that would be done to the property in the process), the real estate industry heavily relies upon sellers to disclose potential and actual issues with the home and the property. Many states make it a legal requirement to fully disclose any potential issues and failure to do so can incur significant civil penalties, which can include punitive damages or damages designed to punish the seller.
For all of these reasons, it is really important to
understand the forms used to disclose any property issues. Before we delve too
deep, please note that because this form has important legal and—in some cases—tax
consequences, sellers are strongly advised to consult a legal or tax
professional before signing.
There is a Texas Seller’s Disclosure Notice provided by the Texas Real Estate Commission, also known as TREC OP–H, and one provided by the TEXAS ASSOCIATION OF REALTORS, also known as TAR-1406, is for use by the seller.
TAR-1406 is a five-page disclosure form with a space to enter the property address at the top of each page. If more than one unit is being sold, a seller should fill out a form for each of the units.
Section 1 asks for the seller to note certain attributes of the unit with the option of saying Yes, No, or Unknown. The range of attributes span from whether it has a public sewer system to whether there are ceiling fans. Several questions, such as whether there is a garage, have further questions to clarify greater details about the attributes of the property. It is worth noting that while this information is being communicated, it does not necessarily mean these items are being sold with the property. For example, one item that is asked is whether there is a spa. However, the spa may have been in a list of items excluded from the sale that the seller intends to take with them when they vacate the property. Conveyance of property is done in the purchase agreement and any corresponding addendums.
Section 2 delves into key areas of the house that are the more common areas known to have problems, asking if there are any defects or malfunctions. Unlike with Section 1, Yes or No are the only possible responses, and any affirmative response requires further explanation.
Section 3 deals with areas of the property that may have serious implications for making the property habitable. Similar to section 2, any affirmative response requires additional explanation, which may result in a need to include additional pages.
Section 4 asks “Are you (Seller) aware of any item, equipment, or system in or on the Property that is in need of repair, which has not been previously disclosed?” This section is a bit of a mea culpa, where the expectation is that sellers will come clean about any items they have not yet been asked about.
Section 5 is a pretty broad section, asking questions about any current or potential lawsuits concerning the property, any improvements or modifications to the property that may or may not have been permitted and details of any homeowners’ association/maintenance fees. While every section is important, we’ve seen firsthand how failing to disclose improvements and/or structural modifications has resulted in hundreds of thousands of dollars in lawsuits. When in doubt, disclose.
Section 6 is just an acknowledgement of whether a survey of the property has or has not been provided with the Seller’s Disclosure Notice.
Section 7 asks if any written inspection reports have been created in the past 4 years. If there has been a written inspection report, sellers are expected to provide the report and contact information for the inspector(s).
Section 8 deals with any tax exemptions that currently apply to the property. If something applies to the seller’s unique situation, they may think they don’t need to disclose it (e.g. if they are a disabled veteran or senior citizen), but they should still disclose it. A buyer may have seen property tax amounts paid on the property and assume they will pay the same amount and that may not be true.
Sections 9 and 10 ask whether the seller has filed a claim for damage to the property or received proceeds from an insurance or legal proceeding related to the property. Section 10 asks if any awarded funds were actually used to make the repairs for which the claim were related.
Section 11 is a seller declaration regarding whether smoke detectors are properly installed on the property.
There is also a section with additional notices to the buyer,
including a place for sellers to notify the buyer of providers of electric,
sewer, water, cable, trash, natural gas, phone, propane, and internet.
Both buyers and sellers are expected to sign and initial