Pros & Cons of Seller Disclosures

Which Way Are You Leaning?

Buying a new house is probably the largest investment most people make during their lifetime. Naturally they want to make sure they do everything correctly to ensure a quality and profitable, financial investment. Questions begin dancing around in their head.  How can I do that? Who can I trust to help me? I can contact a Realtor® but how can they help me? What do they know about this house? I’ve got it. I need to talk to the owner because he knows more about this property than anyone. Hum mm, I wonder if the owner will tell me the truth or will they lie to me? If the shoe was on my foot, would I be totally honest and tell a prospective buyer every little thing that’s wrong with my house? I’m a good person and I’m honest but I want to sell this house and if I tell them every little bad thing I know, they might not buy it. Common sense tells me that I need to get some advice from someone who has the proper training; who has been educated in handling such matters. I need a professional I need to call a Realtor®.

Realtors Are Best Qualified To Represent You

That is a very smart buyer, isn’t it? Real estate agents have to go to school to learn their trade. It is required by state law. They must learn state and federal laws governing the sale of real estate nationally. They also learn state and federal laws protecting consumer rights, environmental issues, prohibition of Americans with disabilities, and discrimination of all peoples rights. They have been schooled in establishing market values, material and labor cost, insurance related issues, obtaining financing from lenders, as well as learning basic knowledge in all fields of the real estate industry. After they have completed the required levels of education, they are tested and licensed by the state in which they live and work. It stands to reason if the state and federal government trust a Realtor® to represent the consumer’s best financial interests when buying or selling real estate; the consumer can also rely on them.

Seller Disclosures Widely Used in Most States

With all this in mind, let’s now address the issue dealing with seller disclosures. It is absolutely a fact that the seller knows more about their house than anyone else. It is also a fact that in most states, when real estate discrepancies are settled through the judicial system, judges rule largely on disclosures made by the seller in the sellers disclosure form. Supreme Court cases confirm the importance in the use of seller’s disclosure in most states. Some of the same Supreme Court cases also confirm that states that have the law of caveat emptor should take a different stance on seller disclosures. To my knowledge there are only three remaining caveat emptor states; Alabama, Arkansas, and Virginia.

Caveat Emptor Negates the Need for General Seller Disclosure

If we go back in time to 1903, history tells us that all states were caveat emptor. This French term simply means buyer beware. Other words it is the buyer’s responsibility to do their due diligence to inspect every aspect of real property prior to closing on a sale. Slowly, state by state, began transferring the responsibility from the buyer to the seller by doing away with the caveat emptor law. Case after case settled in Supreme Courts have stated their decision was based on the fact, the seller misrepresented a fact on the disclosure form. In some of those cases the judges based their decision on the fact the buyer never asked a specific, direct question to the seller. This sounds like a good basis for requiring a seller disclosure on every transaction. It would get all the defects out in the open so they can be dealt with and it would probably lessen the liability on the real estate agent as well. This is true in all states that aren’t caveat emptor.

Alabama Buyers Shouldn’t Rely on Seller Disclosure

Alabama is one of the three caveat emptor states. Alabama law requires all buyers of used real estate to inspect or have inspected all aspects of real property prior to closing on the sale. If a buyer elects not to spend the necessary money to have the property professionally inspected, the buyer will have no legal recourse through the courts should some after closing defect arise. Alabama Courts and Supreme Courts in various states all confirm that reliance on a seller’s disclosure does not negate the need to have professional inspections. Matter of fact, some Supreme Court cases have confirmed that the only information that a seller must disclose in a caveat emptor state are defects that relate to health and safety. Another surprising fact is that health and safety issues are limited; that is there are less than a dozen nationally recognized health and safety issues. I will provide a list and explanation of these issues in the near future, when space will permit. I can even show you in an actual Alabama Supreme Court case, whereby it was proven by the courts that the seller outright lied about defects but they were not health and safety related, and the court ruled in favor of the seller citing “caveat emptor” and it was the responsibility of the buyer to perform the proper inspections and necessary research prior to closing.

Why Haven’t I heard This Before?

By now some of you are thinking, “I’ve bought many houses and lots of land in Alabama and I’ve never heard this before.” That may be true but that doesn’t change the fact that the law exist. It just means that none of the real estate agents you worked with told you about the law. It might not have been that important at the time. Most people never know about the caveat emptor law until they have a court case involving real estate, and many times their lessons are learned at their own financial expense. Another reason we haven’t heard a lot about this particular law is because in recent years the Supreme Courts have ruled based on caveat emptor, whereby rulings in previous years were ruled differently. You see once the Supreme Court rules in any one direction, it creates “case law” that overrules common law in future cases. This is why we need judges basing their decisions on the law and not on interpretation. But the fact remains that caveat empotor has been the law in Alabama since 1903.

National Franchises May Require Seller Disclosures

Many of the national franchised companies recognize seller disclosures as a good practice and make them a company-wide policy. This makes franchises in all state have to use seller disclosure. This is fine for all states that are not caveat emptor but what does that do to their offices in Alabama, Arkansas, and Virginia? It causes them to do something that actually increases their liability; especially when they are employed as a Buyer’s Agent to represent the buyer in the purchase of real estate. A buyers agent should warn their client not to rely on any information provided by the seller and explain the importance of doing their due diligence to have all the professional inspections done.

Commission Best Source for Facts

My 43 years as a licensed Realtor® has taught me to always follow the law and rely on the directions of the Alabama Real Estate Commission because their legal counsel will be the people that will prosecute me if I violate the law.Please don’t misunderstand what I’m saying. If a suit is brought against me, it will be by or through the Attorney General. However, breaking a law also places me under the authority of the Commission which is the licensing body. The Commission can also impose severe discipline.  Those very same attorney’s are also the ones that will defend me should someone bring charges against me. I have always depended on the commission’s  legal counsel  to provide me the information I need to pass down to my students as well as the agents and consumers that attend my classes.

Senior Counsel Speaks Against Seller Disclosure

 In 1996, Charles Sowell, then the senior counsel for the commission, wrote an article published in “Briefly Legal” entitled “caveat emptor vs. Seller Disclosure, ‘a Dilemma for Brokers, Buyers, and Sellers.” The caption read as follows; “e all caveat emptor, i.e. “buyer beware,” is the law in our state in the selling of used homes. Simply stated, this means that neither the seller nor the seller’s agents, unless asked, are required to disclose defects, except those which might pose a health or safety risk to the buyers. Many brokers list and sell homes relying on the principles of caveat emptor. Seller disclosure is almost the exact opposite.” This article may be read in its entirety by going to the commission’s website; then click on legal and look for the title listed above. Anyone can access this article and I encourage everyone to read it. Charles summed the article up in two short sentences. Seller disclosures are widely practiced in other states.Caveat emptor as we know it is not the law in most other states.

Qualifying Brokers Are Held Responsible

It is important that everyone understands that the real estate commission does not determine whether or not real estate agencies in Alabama use seller disclosure forms. It is left up to the discrepancy of their qualifying broker. The qualifying broker for a company can make it mandatory for their agents to get a seller disclosure forms completed but just because they require it doesn’t mean it is required by the law because it isn’t. In reality, the use of seller disclosures in Alabama can place the buyer of used real estate in a very harmful position while the seller is not harmed by these disclosures in any way.

Get Your Issues Researched

Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to  and view previous articles.