By the late 1980s, state legislatures began to codify property disclosure as a natural extension of consumer-protection laws. As a result, any home seller, whether represented by a real estate agent or selling "by owner," can be legally liable if a state's disclosure requirements aren't met.

Today, most brokers use some form of seller disclosure to protect their sellers and themselves, even in states where it isn't required by law.

"The state doesn't necessarily cover some of the areas that the industry feels are problematic, so what you're seeing is state Realtor organizations developing forms that go further than the state-mandated forms," says Taraszki. "Some states require that you use only their forms; in other states, such as Pennsylvania, the state form is considered the minimum requirement."

The federal government also chipped in a nationwide disclosure requirement under the 1992 Real Estate Disclosure and Notification Rule that requires all sellers of homes built before 1978 to disclose the presence of lead-based paint.

See you in court
So what does it all mean if your buyer drags you into court?

"It depends," says Ralph Holmen, National Association of Realtors associate general counsel. "If the seller completes the form and outright lies, that clearly is going to be a problem; that's just flat-out fraud. Similarly, if the broker knew that a misrepresentation was being made, he or she could be held liable.

"If, on the other hand, the seller simply made a mistake, there may or may not be culpability."

Most successful civil actions result in a monetary award to correct the problem, and some states allow the buyer to collect legal fees, says Holmen. In extreme cases, courts have given the buyer the option to rescind the transaction and even recover sale-related costs such as lender's fees.

NAR is so bullish on disclosure that it has included it in its code of ethics, regardless of state law. Not all real estate professionals are Realtors, however, and not all Realtors comply with the code.

"One, it helps equip sellers and brokers who represent sellers to defend themselves when the buyer claims he was not told something or was told something incorrectly; there is a record of what the buyer was told," says Holmen.

"Also, when you provide that information fully and early, you avoid problems completely. The buyer knows what he's getting so there isn't any litigation at all."

Buyer (still) beware
Sounds great in theory. But buyer-broker Tom Wemett, president of the National Association of Exclusive Buyer Agents, says practical application is less than precise.

Oftentimes, agents adopt a don't-ask, don't-tell attitude just to secure a listing.

"What happens is that listing agents go into the property with blinders on; they don't want to know about that stuff. They hand the seller the property condition disclosure form and say, 'Get this back to me so we can provide it to the buyer.' The problem is, sellers never fill out the form correctly," he says.

There also are those within the industry who feel that mandatory disclosure is simply a big waste of time. Sellers are asked questions they are unqualified to answer (Underground storage tank? Infestation?). Mandatory disclosure also gives agents and brokers only the illusion of legal protection. Buyers would be better served, they say, by a thorough property inspection and an extended home warranty.

Jay MacDonald is a contributing editor based in Mississippi.