TREC and the Seller’s Disclosure Notice

The Sellers’ Market and Things That Go Bump in the Night

The Texas Property Code requires the seller of a single residential property to deliver the Texas Association of Realtor’s “Seller’s Disclosure Notice” ….is it worth it?

The Disclosure Notice is supposed to be a factual statement of the seller’s knowledge of the features and condition of a residential property that the sellers have chosen to make available for sale to the public.

Prominently displayed after the address of the property is the statement:


The Disclosure Notice also includes other statements, such as:

“Seller acknowledges that the statements in this notice are true to the best of Seller’s belief and that no person, including the broker(s), has instructed or influenced Seller to provide inaccurate information or to omit any material information.”

“This Seller’s Disclosure Notice was completed by Seller as of the date signed. The brokers have relied on this notice as true and correct and have no reason to believe it to be false or inaccurate. YOU ARE ENCOURAGED TO HAVE AN INSPECTOR OF YOUR CHOICE INSPECT THE PROPERTY.”

Who Is the Disclosure Notice Meant to Benefit?

One could wonder what party the Disclosure Notice is meant to benefit: the buyer; the seller; or even the real estate agent and broker involved in the transaction. Is the Disclosure Notice even worth the paper it is written on? Or, is it solely an opening to a dispute resolution procedure (including litigation) to determine what the seller did know and at what point in time?

Real estate agents and real estate brokers are certainly off-the-hook for any misstatements or omissions committed by the sellers.

One might argue that real estate agents and brokers are the only true beneficiaries of the Disclosure Notice.

Agents and brokers are relieved of all responsibility related to the disclosures and the condition of the property. Whether or not the agent and broker knew of or were aware of the deficiencies in the condition of the property, directly or indirectly, responsibility for the disclosure and all conditions is specifically disclaimed. It is up to the buyer to find out and buyer beware!

Even the Seller’s have limited exposure (absent manifest fraud) as nothing disclosed in the Disclosure Notice or omitted from that Disclosure Notice constitutes a warranty by the sellers as to the condition of the property. Further what constitutes seller’s knowledge and at what point in time is that knowledge relevant? Not all sellers will have the capacity to have knowledge of the deficiencies. And what about the normal waiting period between execution of the purchase contract, delivery of the Disclosure Notice and the financial closing of the purchase? Is the Seller required to update the Disclosure Notice as of the closing date of the purchase and sale? Certainly, there is an invitation to litigate what the seller did and did not know at a specific point in time.

How Does a Property Inspection Affect a Seller Disclosure?

Then there is the inspection. Buyers must rely on the inspection. Some lenders do not even require that an inspection take place. Following deficiencies uncovered during the inspection, a real estate agent and broker in a seller’s market, will attempt to dissuade a buyer from asking that deficiencies be remedied or that the sales price be lowered to offset the cost of repairs and caution that there are back-up offers ready to go if the buyer chooses to terminate the contract (assuming this negotiation occurs during an option period.) What happens if the water heater blows up and floods the house before the closing? Can the buyer refuse to close and get his earnest money back?

If the buyer chooses to close on the purchase of the home despite the results of an inspection report that shows deficiencies in the property is the seller off-the-hook as related to all problems with the home since those issues are now known to the buyer?

Do Realtors and Brokers Have A Vested Interest In the Sale?

Agents and brokers have a vested interest in making sure that the sale happens. Otherwise they do not get paid. Mortgage brokers and lenders are also incentivized to make sure the sale is completed because they will also not get paid if it doesn’t. Is it purely coincidental that property appraisals come in very close to the sales price of the property? Agents and brokers will tell you that is because of their skill in properly pricing the property. Is it?

One day soon we may be in a buyer’s market for residential real estate purchases. Buyer’s that bought during a seller’s market and that were exposed to and completed necessary costs may now be the party required to complete the Disclosure Notice. They can expect that the next Buyer will want a copy of the prior inspection report to see whether all repairs noted were in fact completed. And now that buyer will be the party that attests that all statements made in their Disclosure Notice.

The fact that an agent and broker have relied on a seller’s Disclosure Notice as having been true and correct only insulates the agent and broker. That does absolutely nothing for the unwary buyer. Buyers beware! Things that go bump in the night while the property is owned by a seller may be in your future Disclosure Notice.

Facilitating Real Estate Transactions For Buyers and Sellers

Take the necessary steps to position your business for success. Do so by knowing your options and understanding the difference between an established, competent Texas lawyer and other service providers. With more than 35 years providing business, corporate transactional and general counsel services – including experience as an Executive Vice President, Chief Legal Officer and General Counsel – Attorney Stephen Rizzieri has a broad background and extensive experience from which to assist entrepreneurs and owners to navigate legal issues affecting their ability to grow and efficiently operate their business.

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