8 Problems Home Sellers Must Disclose to Buyers

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No home is perfect. When you're selling one, your job is to highlight its best features — the big backyard, the renovated kitchen, and the bright sunroom — while downplaying the too-small master bedroom or the cramped first-floor bathroom.

But there are certain negatives that you shouldn't hide. If you keep these problems secret — anything from a leaky basement to past termite damage — you might face a future lawsuit from your former home's new owners.

What is a disclosure agreement?

When you're selling a home, you'll have to sign a disclosure form asking you several "yes/no" questions about your house. The form might ask whether your basement has leaked, if your home has suffered termite damage, if your property sits in a flood zone, whether past construction work has been done without the proper permits, and whether your home has suffered past sewer backups.

You'll have the option to answer "yes," "no," or "I don't know" on these questions.

If you lie on this form, it could lead to trouble. State regulations vary, but you could be responsible for what you do and don't disclose on this form for up to 10 years. If you lie on your disclosure form, the new owners can hit you with an expensive lawsuit.

Keep in mind that every state has different rules when it comes to disclosures. California, for example, has some of the strictest disclosure regulations for sellers to follow. Here, sellers must disclose any possible hazards relating to floods, earthquakes, and fires in what is known as a Natural Hazard Disclosure Statement. Sellers in the state of California must also provide buyers with a form that alerts them to a state database of sex offenders living near the home.

Other states typically require less. It's best to work with your real estate agent on the required disclosures in your state and municipality.

1. Lead-based paint

Under the federal government's Residential Lead-Based Paint Hazard Reduction Act of 1992, if your house was built before 1978, you must disclose all known examples of lead-based paint in your home. You must also provide buyers a pamphlet prepared by the EPA titled "Protect Your Family from Lead in Your Home," which offers them tips on how to keep their children and others safe from lead paint.

Under the federal law, buyers also have 10 days to test the house for lead paint.

Don't try to skip out on this disclosure. Under federal law, buyers can sue you for triple the amount of damages that they actually suffered because of lead paint if you fail to follow the disclosure rules.

2. A leaky basement

Even if you are not legally required to disclose all the problems with your home, there are some that you're better off listing. For instance, if your basement floods during heavy rain, don't hide it. Your new owners will find out when the next big storm hits, and you can bet they won't be happy. If you're unlucky, they might file a lawsuit against you for hiding this information.

3. A leaky roof

Disclose a damaged or leaky roof, too, if you haven't repaired it. This is another issue that can only remain hidden for so long — until the next rain, or until the home inspector discovers the problem. This can create all kinds of headaches right before your home sale is about to close.

4. Termite damage

Let potential buyers know if you've treated your home for termites or other dangerous pests. This is a problem you don't want showing up during a home inspection. It could scuttle your sale.

5. Damaged foundation

Repairing a damaged or sinking foundation is a big expense. You might be tempted to keep your home's foundation problems a secret, but don't. Potential buyers who order a home inspection will certainly uncover this major issue. Buyers, scared off by big future repair bills, might walk away from the sale.

6. Radon

Radon is a toxic gas that rises from the ground and up through the basements of some homes. Prolonged exposure to radon can cause lung cancer. Before you list your home, you should test its radon levels. If they are too high, you should pay for remediation services before listing your home.

Many states require that you disclose high radon levels. If you know that your home has high radon levels and you haven't paid for professionals to solve the problem, disclose this fact. Hiding this information could leave you open to a future lawsuit.

7. Asbestos

We all know that asbestos is extremely toxic. Breathing it in can cause lung cancer and other serious health problems. Many older homes still have asbestos in them, usually as insulation wrapped around pipes or even in floor tiles. If you have asbestos in your home, your state might require you to disclose it. (Not all do.) Not doing so when legally required could open you up to an expensive lawsuit.

Remember, not all asbestos is a problem. If it is hidden away in areas that you nor the buyers will ever access, you probably won't have to pay to remove it.

8. Mold

Mold problems are another big issue when selling a home. Most mold is harmless, but there are some varieties that can cause illness or respiratory problems. Because of this, many states require that you disclose past mold issues. If you've paid to have mold removed in the past, you should disclose this. You could again face a hefty lawsuit if you don't.