Michigan Seller Disclosure Statement Explained

Hey there, so let's talk seller's disclosure statements.

Now, this is required by law whenever you sell a home in the state of Michigan, whether or not you do that through an agent or a for sale by owner. However you sell it, it is required in most circumstances that you fill out a seller's disclosure statement.

Now, there are some exceptions.

For example, if you've recently inherited this from a parent and haven't lived in the home, then you are exempt. If it's part of an estate transfer, you are exempt from having to fill out a seller's disclosure statement, but in most cases you are required to fill it out. So let's talk a little bit about it.

This form can be somewhat confusing.

There's a lot of outdated stuff in this form, but it's actually— this form and its contents are actually written into the law in the state of Michigan. So changing the form would literally, will take an act of Congress in Michigan. All right. So you fill in your property address right here, and then this gives you some important instructions when filling it out. Okay.

A really important thing right here. This statement is a disclosure of the condition of the property in compliance with the Seller Disclosure Act.

Okay. That's the law that I'm talking about. Okay.

Now, what's really important is that it says here, this is a statement of disclosure of the condition information concerning the property known by the seller.

Okay. That's an important piece right there that the seller needs to know about it. Unless otherwise advised, the seller does not possess any expertise in construction, architectural engineering, or any other specific area related to the construction and conditions of the improvements of the property or the land.

And unless otherwise advised, the seller has not conducted any inspection of generally inaccessible areas such as the foundation or roof.

The statement is not a warranty of any kind by the seller or by any agent representing the seller in this transaction and is not a substitute for inspections or warranties the buyer may wish to obtain.

This is a very, very important point that sellers and buyers of real estate need to know is that there's not an obligation on the seller to, first of all, know every single thing about the property.

The seller is not obligated to know everything.

So if they can only disclose known defects, uh, and sellers are not responsible to go seek out those defects.

Now, there's some defects, obviously, if there was ever water in the basement, Most of the time you'd be aware of that.

Water in a crawl space, you may not be aware of that.

Okay. And if you really want to hear about more details about how a buyer really made the error of considering a seller's disclosure statement as a kind of warranty, I represented a seller in the, in the village of Northport, did not represent the buyer who ultimately bought the property.

But then claimed to have been defrauded because even though he had the property inspected, there's no obligation on the part of my seller client to inspect the property.

In fact, she had never lived in the property. She bought it, did, did some remodeling, and then rented it out for over a decade to her son, and she never lived in the home. And then after the sale, and there was a professional inspector Then a little bit of water was found in the crawl space, and there was found some water intrusion into the, uh, attic through the roof.

And the inspector missed both of those things.

And yet the buyer felt like my seller, a 70-plus-year-old lady who had never lived in the home, should have known about those things. But it was Okay, for the, for an inspector to miss them, apparently.

So anyway, this is a key because it is a part of the Seller Disclosure Act.

This key thing for you to understand.

Okay.

So let's go through it.

Seller's disclosure. The seller discloses the following information with the knowledge that even though this is not a warranty, the seller specifically makes the following representations based on the seller's knowledge at the signing of this document. Upon receiving this statement from the seller, The seller's agent is required to provide a copy to the buyer or the agent of the buyer. The seller authorizes its agents to provide a copy of the statement to any prospective buyer in connection with any actual or anticipated sale of the property.

So what I do actually is I take the—

once the seller fills this out, it is uploaded into the MLS in a section called associated documents, and it's there.

For buyer's agents to be able to take and share with their clients. If they are making an offer on the property, then they need to sign an initial right down here. You can see they sign an initial document indicating receipt. That's why they're signing it.

It's a way to prove, yes, I have received this document and I've reviewed it.

The following are representations made solely by the seller and are not representations of the seller's agent.

Okay, this information is a disclosure only and is not intended to be a part of any contract between the buyer and seller.

So that's an important point that's obviously bolded.

Okay, instructions to the seller. Number 1, answer all questions, report any known conditions affecting the property, attach any additional pages with your signature if additional space is required, complete this form yourself. If some items do not apply to your property, check not available. Okay, so that's a distinction.

For example, a lot of homes nowadays do not have a TV antenna, TV rotor controls. So you would mark not— we would mark not available there. Okay. The yes, no, and unknown are basically, is there a range here on the property?

Yes, there is one and it is working.

So then you'd mark yes.

If yes, there is one and it's not working, you would mark no. Versus there's not one in the house at all, then you'd mark not available.

Okay.

If there is one in the home and you're not sure whether it works or not, then you mark unknown.

So let's go through that again.

Dishwasher, is there one?

Yes, there is one.

Is it working?

No, we know that it's not working, then we mark here.

Yes, there is one, and yes, we know that it's operating properly, then we mark yes.

Or yes, there is one, but I, I don't know whether it's working properly or not, then you'd mark unknown.

If there's not a dishwasher at all, then you mark not available. Okay, so we go through all of these, and, and, um, I know this is painstaking, but you can skip ahead in the video.

But let's go through each one of them. Refrigerator, hood fan, that means the hood fan above the range. Is there a garbage disposal, TV antenna, TV rotor controls, electrical system? This throws off some people. Remember, this is an old seller's disclosure statement, and even today you might be buying a house from the Amish and there would not be an electrical system. There would be no electricity in the home.

That's all that refers to.

That actually confuses quite a few of my seller clients.

Is there a garage door opener or remote control?

Alarm system, intercom. These, those are now because of different tech, more advanced technology, intercoms aren't very common, but they were much more common 20, 30 years ago.

Central vacuum.

If you're not familiar with that, like in, in my school growing up, there was a central vacuum. I was always wondering where, when I saw them attach the hose to the wall. I was wondering, why is all the dirt going inside the wall? But it actually is going into a central vacuum system. Attic fan, pool heater liner, microwave, trash compactor, ceiling fan, sauna, washer, dryer, lawn sprinkler system, water heater, plumbing system. So again, just like the electrical system, in Amish homes there's no indoor plumbing. And that can throw some people off, but we're just talking about, do you have indoor plumbing? That's what that refers to.

Water softener or conditioner. This is oftentimes, some people own their own water softener.

Some people rent. This is a good time to talk through which of those. If you have a water softener, but you don't own it, you, we just need to note that in here.

Okay. Well and pump. Septic tank and drain field.

Now in certain townships or in certain counties, there is a point of sale septic inspection, but here you need to disclose what you know about the condition of the septic field and septic tank.

Okay. A sub pump.

That means, is there a water pump in the basement? I, uh, owned a home for a short period of time in Northport basement would fill up regularly with water and they had a sub pump. That was one thing I, we had to monitor quite often.

If you're in the city water, city sewer, you would mark that.

Central air conditioning, central heating system, wall furnace, humidifier, electronic air filter, solar heating system, fireplace chimney, wood burning system. Okay. And by the way, if you mark If there's anything that may require an explanation here, then that's where you would add additional detail for the buyer to review, okay?

Okay, then we get down here, a little bit more nitty-gritty stuff. So, basement crawl space, has there been any evidence of water?

So, oftentimes there may have been, like I've had some water intrusion into my own basement, to a very, very small degree. I've owned this home since 1998. We had an absolutely torrential rain and just a little tiny little, about 1 inch along the wall came in. And then I put up gutters after that and redirected the water away from the foundation and never had a problem again.

And so I would describe something like that here.

If I were a seller, I would mark yes. And then I would describe significant rainfall in the year. If I can recall the year, put in gutters, never had a problem since. Okay. Something along those lines. Okay.

The type of insulation. I, a lot of my clients don't know. A lot of my clients absolutely know what kind of insulation that they have.

What's of particular concern is this formaldehyde foam insulation, urea formaldehyde foam insulation.

What's of particular concern is this right here, this, this type of insulation. If you know that you have that, then absolutely disclose it.

Actually, most of my clients don't really know what kind of insulation that they have, but most that do, it's either, it's either fiberglass insulation or the blown-in type of insulation.

Roof leaks.

You also have to disclose how old your roof is. And by that average age of the roof, typically we're talking about how old the shingles are. Okay. So for example, I just put in a new roof on my barn and apartment where my daughter lives. I'm pointing in that direction because it's actually through the window on the other side of the screen here. And so if I were selling this property, I would be saying that roof is about 3 years old is all. Even though this, that structure was built in the early '70s. Okay, but I just put brand new shingles on it. Whereas the roof over my head right here at my house is due to be replaced, the shingles, within the next couple of years. So the age of that, I did that in 1998 when I first moved in. My cousin Danny and I, he did all of the thinking. I was just feeding him shingles and bringing the shingles up on the roof.

So that's what we're talking about there. Okay.

The type of well, if you know the depth, diameter, age, repair history of the well, you need to disclose that.

Some of this now, the well is kind of a moot point if in your jurisdiction, in the case of Leelanau County, for example, where I live, the, the county comes in and does a point-of-sale well and septic inspection anyway.

Most of the people that I sell for, they don't know this information anyway.

Okay. Septic tanks, drain field condition, if known.

Okay. And this can become, this is where, why inspections are sometimes really important because for example, one of the first homes that I bought, we moved from, I got a principal's job over in, uh, Skoda, lived in a little town called Glenny, bought a home, 40 acres.

From this single elderly gal and the septic system worked fine for her.

Well, I move in there with my 3 kids. One of them may have still been in diapers, maybe not, but anyway, doing a lot more laundry. We're putting a lot more water through that septic system and the septic field failed. Okay.

But in her disclosure, it was working fine for her.

Okay. So anyway, we were just using a lot more water than a single elderly lady ever would. And that caused the septic field to fail.

So she was not required. She didn't do anything wrong. She disclosed what she knew about the septic field.

But anyway, that's an example of why inspections sometimes are pretty important. Okay. Heating system, your type of age, the type and the approximate age of your heating system. You know, that'd be forced air, boiler, hot water. You know, those kinds of different— might be electric baseboard, what kind of heating system you have and how old it is. Okay.

Plumbing system.

So the water lines, if they come through copper and right here it says copper galvanized, well, it's missing CPVC piping is sometimes used and now PEX, right? In newer construction, the plastic more flexible lines are used and those aren't even choices here. So that's where you'd have to add Whoops. You'd have to add other there. Okay.

Any known problems with your plumbing system, you want to put it in here.

So if the pipes have ever frozen while you were there and that had to be repaired, you would need to disclose that. Okay.

Any electrical problems with the electrical system.

Yeah. Any known problems that you've had with the electrical system in your house, you'd want to disclose that here. Okay.

History of infestation.

Termites, carpenter ants, etc. I had some issues with carpenter ants in a home that I owned in Kingsley. Actually, carpenter ants really do not bore into wood unless it's already rotten, unlike termites that can do a lot of damage. Carpenter ants just take advantage of already damaged wood. But anyway, what I did was— the reason for that was that a tree was growing really, really close to the home I actually had that tree cut down, got rid of the carpenter ants. So in that case of filling out my seller disclosure statement, I would write that in here, you know, had carpenter ants for a short period of time, cut down a tree, removed carpenter ants, not a problem since, that type of thing.

Okay, environmental problems.

Are you aware of any substances, materials, or products that may be an environmental hazard such as, but not limited to, asbestos, radon gas, formaldehyde, lead-based paint, fuel, chemical storage tanks, and contaminated soil on the property. So this might be a situation where if you knew that there used to be an underground fuel oil tank on the property, that you would note that here and disclose the fact that yeah, there was an underground fuel oil tank. Disclose whether or not you are aware of any leak related to that kind of thing. Most sellers don't know about whether radon exists. I would always recommend, by the way, any homeowner get a radon test. I'm happy to— I have a radon testing piece of equipment that is the same piece of equipment that home inspectors use. It's a service that I provide to my buyer clients.

The reason I started doing that is that radon is the second leading cause of lung cancer and right behind smoking.

And I had a lot of my clients just not think that it was that big of a deal and not get it tested. And it is becoming more and more prevalent in the Grand Traverse area, especially on the west side of Traverse City or out in Williamsburg. I've shown a number of different homes in the Williamsburg area that already had radon mitigation systems integrated into the home because they had elevated levels of radon. The tighter and more energy efficient that we're building our homes now, it's becoming more and more important to test for radon. But anyway, if you're aware that you have an elevated radon problem, you need to disclose that. If you know that you bought an older home with asbestos tile, for example, then you would need to disclose that if you're— again, if you're aware of it. Okay, so right here you would disclose, and then here's where you would provide your example.

Okay, flood insurance.

If you have flood insurance on the property, you need to disclose that, and you need to disclose, do you own the mineral rights? A lot, almost all of my clients are uncertain about whether they own their mineral rights or not.

Okay. Next, features of the property shared in common with adjoining landowners, such as walls, fences, roads, driveways, or other features whose use or responsibility for maintenance may have an effect on the property.

Okay.

So this is an area we run into a lot.

If there are, and it kind of ties in with the next one, any common areas such as pools, tennis courts, walkways, or other areas co-owned with others or a homeowners association that has an authority over the property. Okay.

Sometimes these so go together.

For example, I have a listing that's going up here shortly where there's just a gentleman's agreement. There's no written HOA, but all of the property owners just kind of agree verbally to chip in and cover the cost of plowing the road that all of them use to access their own driveways.

So you'd want to disclose that here.

I would think about shared in common. That's not a big deal, but if you know that there's something that you're sharing, this is a chance you want to make the next possible owner aware of that. Okay. All right.

Any encroachments, easements, zoning violations, or nonconforming uses.

Okay. So if you know that you have, for example, I just helped a seller sell his property that he had surveyed and found that the neighbor had encroached about 3 feet onto his property, installed a fence. So there was an encroachment that we had to disclose on the seller's disclosure statement. If there's an easement that you're aware of, you need to disclose that. Any zoning violations that you might be involved in, you need to disclose that. Or if you have a nonconforming use, that means you might be allowed under the zoning because you're kind of grandfathered in, but you need to disclose that. Okay.

Any common areas such as pools, tennis courts.

So you'll run into this if you're in a subdivision, For example, Cherry Home subdivision north of Northport, there is a clubhouse. There are a set of tennis courts that are all shared as part of the HOA dues. The maintenance of those is shared. And then people that live in that subdivision are allowed to use those facilities. We would need to disclose that.

Okay. Structural modifications, alterations, or repairs made without necessary permits or licensed contractors.

So if you've done some or had done some major renovations and you didn't use a licensed contractor or pull the necessary permits, you would need to disclose that.

Settling, flooding, drainage, structural, or grading problems.

And this would likely— grading problems, flooding, obviously relate to up here. Has there been any evidence of water?

Okay.

But you just need, if you've had any problems associated with those, you need to disclose that. And by the way, it gives you down, if we go all the way down here, this is where you add detail if you mark yes on any of these.

Okay. Any underground or any major damage from fire, winds, floods, or landslides. So for example, I sold, represented the buyer and the seller because they later sold the property after purchasing.

Thing where there had been a fire in the home and the seller was aware of that. And they then— there was a fire, but then they hired the necessary licensed contractors and fixed it all. It was all done properly, but still they would have to disclose the fact that damage had been previously done with a fire.

Any underground storage tanks, we talked a little bit about that earlier. Here's an interesting one, farm or farm operation in the vicinity. Or proximity to a landfill, airport, shooting range, etc. How will we define vicinity?

Okay, and especially when we're talking about a shooting range or probably an airport, you just got to use your best judgment here. My advice to my sellers is to always disclose more than you think you ought to.

So if you can hear, if you live near a shooting range and you can hear the pop pop pop, probably need to disclose that fact.

Okay. And then here's your chance down here to explain in further detail.

If the wind's just right, coming out of the northeast, heading my way, I can hear pop, pop, pop from the shooting range. Most of the time I can't hear it.

Versus if you're right next to it and it's driving you nuts, you would need to also disclose that. But the explanation gives you a chance to go into greater detail about the particulars of why you're disclosing that, that particular thing.

Farm and farm operation.

If you're close to a dairy farm or a farm with a lot of animals and the stench from the manure is really bad in the spring, you need to disclose that. Okay. That could come back to bite you if you did not disclose that at a later time.

Okay.

Okay.

Any outstanding utility assessments or fees, including natural gas extension main surcharge.

So here's an example of, I'm working with a seller selling a house out in Kingsley.

When she bought the home, it was on propane.

She switched it to natural gas and they're charging her like $30 extra a month for the next 3 years. To pay for that line that went from the road to the house and hooking up the meter, something along those lines. That particular seller needed to disclose that, and this was the right— this was the right number to disclose that in.

Any outstanding municipal assessments or fees. So here's an example.

If you're in the Village of Northport recently and you are part of the municipal sewer system,, and you had 5 years left to pay, we need to disclose that.

Okay.

Any pending litigation that could affect the property or the seller's right to convey the property. So representing a buyer right now, going through purchasing a home from a divorcing couple, they need to, to disclose that in this part of the seller's disclosure statement, because it could potentially have an impact on the seller's right to convey the property. Okay, again, here's the place to add any additional detail if we mark yes on any of these items.

And then we come down in here, seller has lived in the property since, and we pick a date.

Okay, you know, you go back, whatever. Let's say you've only been in there since July 2023, and then most of the time we don't put a date in here. We just put, if you still are residing in the home, then you put present. Sometimes you might move out and rent the home and you're renting, you're, you're selling it with tenants currently in it. If that were the case, then you'd go back to whatever date you stopped living in the home. Okay.

And then here's where the distinguishing, how long have you owned it?

This is the house that I'm in right now. Doing this video, we lived in it, moved away from it, rented it out, came back to it. This allows, uh, you to kind of take that into account.

Okay.

And then we come down here and these are standard things right here that are just included in every seller's disclosure statement. Okay. About talking about indoor air quality, et cetera, et cetera. Okay. Buyers are advised that certain information compiled pursuant to Sex Offenders Registration Act, Okay, you can look up sex offenders, by the way, and find out if your neighbor is a sex offender before you move in. And then here's buyer's advice that the state equalized value of the property residence, exemplar information.

Okay, here, here's the big thing about taxes. Buyers should not assume that buyer's future tax bills on the property will be the same as the seller's present tax bill, okay?

And that has to do with the uncapping of property taxes, and I've shot a whole separate video on that. Check out for the link in the description. If you're buying property and you want to know what your anticipated taxes will be, don't rely on what the seller's paying, okay? Because if— especially the longer that that seller has owned it, the more that tax is going to be low, much lower than what you will experience, okay? And that's what's called the uncapping of the taxes, okay?

All right, so there's seller disclosure statement and all the detail involved with that. Appreciate your time. Let me know if you have any questions, comments, etc., about, uh, seller's disclosure statements, why we fill them out, and so on and so forth.

All right, I'm Sander Scott, your full-service realtor.