This article provides comprehensive information regarding Seller Disclosure Statements, a crucial component of residential property transactions. It clarifies who is responsible for completing the statement, offers guidance on accurate completion, and addresses common questions and misconceptions.

Who Completes the Seller Disclosure Statement?

Simply put, sellers of residential property consisting of between one and four units must fill out the Seller Disclosure Statement.

This requirement applies to a broad range of transfers, including:

• Traditional sales
• Transfers by exchange
• Land contracts
• Leases with the option to purchase
• Ground leases
• Transfers of stock or interest in a residential cooperative

Important Note: This requirement does not include sellers of vacant land or commercial property.

Common Misconceptions

It’s a common misconception that a residential seller is exempt from filling out the disclosure statement if they have never lived in the home. This is not true. Never having occupied the property does not exempt a seller from filling out the statutory seller’s disclosure. Even sellers who have never lived in the home are likely to know something about the condition of the property.

Exemptions

There is a narrow list of exemptions that will excuse a seller from completing and providing a disclosure statement to a potential buyer:

• Transfers pursuant to a court order, including transfers ordered by a probate court in the execution of an estate, a writ of execution, foreclosure sale, those made by a trustee in bankruptcy, transfers by eminent domain, and transfers resulting from an order for specific performance.¹
• Transfers to a mortgagee by a mortgagor or successor in interest who is in default, or transfers to a beneficiary of a deed of trust by a trustor or successor in interest who is in default.
• Foreclosure sales/deeds in lieu and subsequent sales from a lender.
• Transfers by a non-occupant fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust.
• Transfers between co-tenants.
• Transfers to a spouse, parent, grandparent, child, or grandchild.
• Transfers between spouses resulting from a judgment of divorce or separation proceeding.
• Transfers to or from any governmental entity.
• Transfers of newly constructed residential property that has not been inhabited.

Quick Reference Guide for Exemptions: The Sellers Disclosure Exemptions Statement serves as a quick reference. If the seller is unable to check one of the boxes on that form, the property is not exempt and a Seller’s Disclosure Statement would be required. If the property is exempt, the Exemptions Statement can then be uploaded to your listing on the MLS to prevent others from requesting a Seller’s Disclosure Statement.

Tips When Filling Out the Seller Disclosure Statement

It is the seller’s responsibility to complete the Seller Disclosure. While REALTORS® may explain that the form is required by state law (with a handful of exemptions) and offer general information about the content of the form, they should not complete it for the seller.

Understanding the Appliances/Systems/Services Section

The Appliances/Systems/Services section of the form offers the following four columns: Yes, No, Unknown, and Not Available.

• Yes: For those items that are available in the property and are in working order.
• No: For those items that are in the property, but are not in working order. The “Explanations” section below the columns may be used for additional clarification concerning the condition of certain items.
• Unknown: This column speaks for itself, indicating the seller has no knowledge of the item’s condition.
• Not Available: This column is for those items that are not in the property or will not be negotiated into the sale. This is important as some sellers mistakenly check the “No” column when they should actually be checking “Not Available.” For example, if a property does not have a lawn sprinkler system, the seller should check “Not Available,” not “No” (which implies the system exists but is not working).

Sellers Who Have Never Lived in the Property

If the seller has never lived in the property, they must still complete the form to the best of their ability, even if that means many of the columns might be checked as “Unknown.” The “Explanations” field may be used to state that the seller has never lived in the property. The seller should not simply write “seller has never lived in property” across the entire form, as they might still have knowledge about the working order of certain appliances and systems.

Updating the Disclosure Statement

It is crucial for the seller to understand that the Seller’s Disclosure Statement should be updated if the condition of the property changes after the form has been completed. This updated statement must be completed, signed, and uploaded to the MLS if new information is discovered during the course of the listing that impacts the content/accuracy of that disclosure statement.

FAQ

Is the buyer entitled to a microwave if the Seller’s Disclosure Statement indicated it was in working order, but the purchase agreement said nothing about it?

No. The Seller’s Disclosure form specifically states that “the items below are included in the sale of the property only if the purchase agreement so provides.” This language was added to the form some years ago to specifically address this question.

Are sellers exempt from providing a Seller’s Disclosure Statement if they have never lived in the residence and have only used it as a rental?

No. Sellers are not exempt from Seller Disclosure Act requirements just because they have never lived in the property. Sellers who have owned and leased a residence must nonetheless fill out the Seller’s Disclosure Statement to the best of their knowledge. Michigan law does provide a list of exemptions that excuse a seller from completing the statutory disclosure form, but “never having occupied the property” is not one of those exemptions.

Does the seller need to disclose on the Seller’s Disclosure Statement that a basement leaked two years ago, even though it was fixed?

Yes. The Michigan Court of Appeals has stated that, given the wording of this specific question (i.e., “Has there been evidence of water?”), there is no time limitation. The leak must be disclosed, but the seller may indicate that it was repaired. This applies even if the leak occurred ten years ago and has since been fixed with grading work; the seller cannot answer “no” to the question about basement leaks. In a related case, sellers were required to disclose a flood that occurred 26 years prior.

What if the seller suffers from dementia and her daughter has power of attorney? Should the daughter fill out a Seller’s Disclosure Statement on her mother’s behalf?

No. The power of attorney gives the daughter the authority to act on her mother’s behalf; it does not give her the authority (or the ability) to make representations on her mother’s behalf. The mother is also not able to complete the form. While the Seller Disclosure Act does not specifically address this situation, if it is known that a seller is not competent, it should be indicated in the MLS that a Seller’s Disclosure Statement is unavailable, and the situation should be very briefly explained verbally to potential purchasers. The legal analysis is simply that in this situation, compliance with the Seller Disclosure Act is impossible.

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Innocent & Intentional Misrepresentations

What are the repercussions for a seller who misrepresents the condition of the property?

This will likely depend on whether or not the seller’s false claims about the property were intentional. The SDA protects a seller against claims for innocent. In other words, a seller will not be held liable for a making a false statement about the property if the seller did not know that their statement was false and had no intent to deceive the buyer. If the seller does not have personal knowledge of a property defect, then that seller cannot be held liable for an inaccurate answer on the disclosure statement. A seller will, however, be held liable for an “error, inaccuracy or omission” if they have actual personal knowledge of the error, inaccuracy or omission. This means that a seller cannot knowingly make a false statement about the condition of the property (fraudulent misrepresentation) or knowingly withhold or conceal information about the property that the seller is obligated to provide (silent fraud). Fraudulent misrepresentation and silent fraud claims are very similar except that silent fraud is based on the suppression of material information rather than an affirmative misrepresentation. A silent fraud claim also requires the seller to have had a duty to make a disclosure (This could be either the duty to answer the questions on the seller’s disclosure statement or the duty to provide a truthful answer if a buyer makes a specific inquiry about the property). For example, let’s say that a seller knows that their roof leaks. When completing the disclosure statement, the seller either answers “no,” or skips the leaky roof question altogether. This is not an “innocent misrepresentation.” If (when) the buyer discovers the undisclosed leaky roof after closing, the buyer may pursue legal action against the seller for either fraudulent misrepresentation (purposefully making a false statement about the condition of the roof) or silent fraud (purposefully avoiding a question on the disclosure statement that they were obligated to answer). Note, however, that in order to successfully bring forth a claim of fraudulent misrepresentation or silent fraud, a buyer must be able to show that they reasonably relied on the seller’s omission or misrepresentation. This can be a difficult element to prove, especially if the buyer obtained and relied upon information from an independent inspection. As a general rule, a listing agent will not be held liable for misrepresentations made by their seller-client so long as the agent did not “knowingly act in concert” with the seller to violate the SDA. To “act in concert” means to work together to accomplish a common goal. For example, a listing agent who knowingly distributes a seller’s disclosure statement that they know to be false may be found to have “acted in concert” with the seller to misrepresent the property. In that scenario, the listing agent would likely be held liable, along with the seller, for fraudulent misrepresentation. Of course, a listing agent will also be held liable if they make their own purposeful misrepresentations about the property.