Seller Property Disclosures for Real Estate Investors

Bonus Module

When you're buying a property, one of the key documents you'll encounter is the Seller's Property Disclosure (SPD).

It's important to remember that the exact format and requirements for the SPD can vary depending on your market.

Your real estate agent will guide you through the specific version used in your area and help you understand what’s expected when it comes to seller disclosures.

Table of Contents

Included below:

• What is a Seller's Property Disclosure?

• Important Legal Consequences: Talk to Your Attorney or CPA

• Why the Seller, Not the Agent, Fills Out the Disclosure

• Current Actual Knowledge

• Legal Liability

• Not Just What's Listed on the Seller's Property Disclosure Form

• Real Estate Agents Must Disclose Too

• Adverse Material Facts

• Only About This Property

• Seller Gives Permission to Share

• Does Not Determine If Something Is Included with Sale

• Source of Water

• No Warranty from Real Estate Agent

• No Hidden Adverse Material Facts

• Still Got to Inspect It Yourself

• Seller Has No Duty to Inspect

• Get Additional Information and Expert Advice

• Get a Survey

• No Seller Warranty

• Buyer Acknowledges Receipt of Seller's Property Disclosure

• When Do You Typically Get the Seller's Property Disclosure

• Using Seller's Property Disclosure When Getting Insurance

• Using Seller's Property Disclosure During Inspection

• Disclosure of Latent Defects; Present Condition

What is a Seller’s Property Disclosure?

A Seller’s Property Disclosure (SPD) is a document prepared by the seller to share what they know about the property’s condition. It provides buyers with insights into any known issues or repairs, helping you make a more informed decision about the property. We’ll dive into the details of the SPD below.

However, not all sellers provide this document. Some sellers might give you one that simply has a line through it, with a note stating, “did not live in property.” There are a few common reasons why this might happen:

• Investment Property - The seller might not have lived in the property because it was an investment, so they claim limited knowledge.

• Inherited Property - A seller who inherited the property may not be familiar with its history.

• Flipped Property - A house flipper might not have lived in the property long enough to know all the details.

• Legal Advice - Some sellers are advised by their attorney not to fill one out, believing it could expose them to more liability.

Interestingly, some attorneys argue the opposite—that filling out the disclosure may actually reduce risk. By disclosing known facts, sellers demonstrate transparency and avoid claims of withholding important information. It’s highly unlikely a seller has no knowledge of the property they owned, whether they lived in it or not. After all, even an absentee owner knows about major issues like leaks, renovations, or tenant complaints.

Important Legal Consequences: Talk to Your Attorney or CPA

While the Seller’s Property Disclosure (SPD) strongly encourages both parties to consult legal or tax counsel before signing, it’s common for most buyers and sellers to proceed without actually doing so—unless something unusual stands out.

Many buyers simply review the SPD themselves which describes the condition of the property. However, if there’s something on the disclosure that seems out of the ordinary—like an environmental hazard, major structural issues, or complicated legal claims on the property—seeking legal or tax advice becomes important.

When in doubt, get legal and tax advice.

But in most straightforward transactions, buyers and sellers often handle the review of this form on their own without involving an attorney or CPA.

Why the Seller, Not the Agent, Fills Out the Disclosure

The Seller’s Property Disclosure (SPD) is a document that the seller, not the real estate agent, is responsible for completing.

In fact, the form often explicitly states:

“THIS DISCLOSURE SHOULD BE COMPLETED BY SELLER NOT BY BROKER.”

The reason for this is simple—the seller has direct knowledge of the property that the real estate agent does not. The SPD serves as a risk-reduction tool for the seller, giving them the chance to disclose everything they know about the property. By being upfront about any issues, the seller can help avoid future claims from the buyer, who might otherwise accuse them of withholding important information after the sale.

The real estate agent’s role here is to facilitate the process, but the responsibility of providing accurate information lies squarely with the seller. This ensures that the disclosure reflects what the seller knows about the property, protecting them from potential legal disputes later on.

Current Actual Knowledge

The Seller’s Property Disclosure (SPD) is intended to reflect the current actual knowledge of the seller at the time it is completed.

The form usually includes language like:

“Seller states that the information contained in this Disclosure is correct to Seller’s CURRENT ACTUAL KNOWLEDGE as of this Date. Any changes will be disclosed by Seller to Buyer promptly after discovery.”

This means the seller must disclose what they know about the property as of the day they sign the form. If the seller learns new information after submitting the SPD—such as material facts uncovered in an Inspection Report provided by the buyer—they are expected to update the disclosure if the buyer terminates the contract and the property goes back on the market.

For example, if you, as the buyer, provide the seller with an Inspection Report that reveals issues with the foundation, and then decide to walk away from the deal, the seller now has documented knowledge of the foundation problem. Emails between the seller and their agent discussing the Inspection Report, or the inspection objection, serve as proof that the seller is aware of the issue. This can actually strengthen your negotiating position, as the seller can’t simply ignore the problem and hope the next buyer won’t find out. Once the seller knows about the issue, they’re legally obligated to disclose it to future buyers, or they could face legal consequences. This puts the seller in a position where they either need to address the issue or negotiate a better deal with you, knowing they can’t hide the problem from the next buyer. We will explain the potential legal liabilities for failing to disclose in the next section.

Legal Liability

If a seller fails to disclose a known material defect, they are opening themselves up to potential legal consequences.

The Seller’s Property Disclosure (SPD) explicitly warns sellers about this:

“Seller’s failure to disclose a known material defect may result in legal liability.”

Just in case there’s any confusion about what happens if a seller withholds important information, the form makes it clear—there could be significant repercussions.