As a homeowner, you probably make frequent trips to the hardware store and undoubtedly you are faced with at least 1-2 small repairs per year, to keep your home in good order. Chances are, you don’t sweat the small stuff. If you don’t already keep a file with records of expenditures and repairs, I’m going to share with you two good reasons why you should.
The first reason is that the small stuff adds up…and the big stuff really adds up quickly! Some day when you decide to sell your home, you may be concerned about capital gains taxes on the increased value of your home. Check with your accountant for the specifics, but in general, you can subtract the cost of home improvements and repairs from your gain. In order to do this you’ll need proof, so keep those receipts.
The second reason is less obvious, especially if you haven’t bought or sold a home in awhile. Current seller disclosure forms require the seller of a residential property to disclose all repairs and improvements made during the years that they owned the home. Not remembering to disclose a past repair item could have serious consequences. For most sellers, completing the disclosure forms is a daunting task and many admit that they did a lot more over the years that they no longer remember. Ideally, you’ll want to keep receipts, invoices, bids and any associated warranty documents to make this task easier.
Professional bids and reports should be kept and passed along to the next homeowner, even if you decided not to go forward with a project. There’s actually a section in the disclosure forms that asks about these. If that sounds excessive, here’s an example of what could happen and how you can protect yourself: Your neighbor tells you that they just improved their drainage and thinks that you might want to also. They give you the name & number of the contractor they used. The contractor points out concerns for flooding if your drainage isn’t improved. You get the bid and it’s way more than you want to pay, especially since you’ve never had any trouble with drainage. Ten years later you sell your house and you’ve still not had any issue with drainage and you don’t think to mention the 10 year old bid. The new buyer moves in and experiences flooding from record breaking rainfall. Your old neighbor has an incredible memory and shares with the new owner that they did not have any issue with flooding because they put in needed drainage and their contractor told you that you should also, but you didn’t. Your nondisclosure feels like an innocent mistake to you, but to the new buyer, it comes across as deliberately withholding information that would have resulted in them not buying the home or paying less for it, and they’ve now also incurred damages from the flooding. Their attorney will likely agree. The best thing that you can do to protect yourself is to disclose everything when you sell, and the easiest way to do that is to keep a home file for your receipts, bids and warranties.
If you’re thinking about selling your property and now feeling a bit overwhelmed by the reality of disclosures, please reach out to me at 925-964-5010 or via email at Lisa.Hopkins@Compass.com. I’d love to share my tips, strategies and experience to guide you through the process.
