Selling › Selling Situations › Major Defects and Disclosure

Selling a House With Major Defects: What Alabama Sellers Must Disclose

Alabama is a buyer-beware state for used homes, but sellers still cannot hide known health or safety defects or answer buyer questions falsely, and agents must disclose defects they know about. Honest disclosure, priced well, is how houses with real problems sell.

Reviewed October 31, 2026 by George Lensch, broker, Wyze Realty. General information about Alabama, not legal, tax or financial advice.

Foundation cracks, mold, a failing septic system, an addition built without permits, a code violation notice from the city. These problems are stressful, and many sellers worry that they make a house unsellable or that telling the truth will scare every buyer away. Neither is usually true. Houses with serious defects sell all the time, at prices that reflect the problem. What causes real harm is hiding a defect and having it surface at inspection, at closing or after the sale.

Caveat Emptor in Alabama, in Plain English

Alabama follows the rule of caveat emptor, or "let the buyer beware," for used homes. The Alabama Supreme Court restated it in Teer v. Johnston (2010): "Alabama adheres to the caveat emptor rule in the sale of used residential property." Alabama also has no state statute that requires sellers to fill out a disclosure form.

That sounds like sellers can stay quiet about anything. They cannot. The rule has exceptions, and the exceptions are exactly the situations where sellers most often end up in a lawsuit.

The Exceptions That Matter

1. Health or safety defects

A seller or agent who knows of a material defect that affects health or safety, which the buyer does not know about and cannot readily observe, must disclose it (Fennell Realty Co. v. Martin, 1988). Alabama courts describe this exception as narrow: it requires a direct threat to health or safety. It also does not create a duty to go looking for defects; it is about what you actually know.

2. A fiduciary relationship

Where a fiduciary relationship exists between the parties, a duty to speak can arise (Cato v. Lowder Realty Co., 1993). Alabama's fraudulent suppression statute, Ala. Code 6-5-102, covers concealing a material fact when there is a duty to disclose it.

3. Direct questions

When a buyer asks a specific question, the seller and agent must answer truthfully (Moore v. Prudential Residential Services, 2002). "Has the basement ever had water in it?" deserves an honest answer, not a dodge.

4. New construction

Caveat emptor does not apply the same way to new homes sold by a builder. Alabama abrogated it for new construction (Cochran v. Keeton, 1971). This guide is about used homes.

What "As Is" Does, and What It Does Not

Alabama courts have held that an "as is" clause in the purchase contract generally bars a buyer's later fraud claims, because the buyer agreed not to rely on the seller's statements (Massey v. Weeks Realty Co., 1987, and Teer, 2010). There is an exception where a fiduciary relationship exists, such as some dual agency situations (Potter v. First Real Estate Co., 2002).

Two cautions. First, "as is" protects you best when you have been honest; it is not a strategy for concealment, and an attorney should look at your specific facts. Second, "as is" does not excuse real estate licensees from their own legal duties, which come next.

Your Agent Has a Separate Duty to Disclose

Even though sellers have limited duties under caveat emptor, Alabama licensees do not get that same room. Under Ala. Code 34-27-36(b)(3), the Alabama Real Estate Commission can discipline a licensee for making a material misrepresentation, or for failing to disclose to a potential buyer or tenant a latent structural defect or any other defect known to the licensee. The defect must be one that would matter to a reasonable, prudent buyer; trivial or insignificant defects are excluded.

As of October 2026, the Commission can fine a licensee $100 to $5,000 per violation, after Act 2025-380 raised the maximum from $2,500 effective October 1, 2025.

What this means for you: once you tell your agent about a known defect, the agent must disclose it to buyers. That is not working against you. It is the reason to tell us everything up front, so we can price and market the house around the truth instead of watching a deal fall apart at inspection.

Have a defect you are not sure how to handle? Call (256) 808-6861 or schedule a confidential call. There is no cost and no obligation.

Common Defects, One at a Time

Foundation and structural problems

Cracks, sloping floors, sticking doors and bowed walls can range from cosmetic settling to serious structural movement. The most useful thing a seller can do is get a written evaluation from a structural engineer and, if repairs are recommended, one or two written repair bids. A known structural defect is exactly the kind of latent defect an agent must disclose, so the question is not whether buyers will learn about it, but whether they learn about it with a real number attached or with a scary guess.

Mold and moisture

Visible mold is almost always a symptom of a water problem: a roof leak, plumbing leak, grading that sends water toward the house, or humidity in a crawlspace or ducts. Buyers care most about the cause. Find and fix the source if you can, keep records, and consider a professional assessment. Because mold can raise health concerns, known mold problems are an area where the health-or-safety exception may come into play. Talk to an attorney if you are unsure what to say.

Septic systems

In Alabama, onsite sewage (septic) systems are overseen by the Alabama Department of Public Health and run through county health departments. A permit is required before installing a new system or repairing an existing one. Before repairing a failed system, an owner needs an ADPH "Approval for Use" permit. Call your county health department first so it can check its records for an existing Approval for Use; if none exists, a soil professional must evaluate the site.

Alabama does not generally require a septic inspection at sale, but buyers and lenders often ask for one. In Madison County, contact the Madison County Health Department, 301 Max Luther Dr NW, Huntsville, AL 35811. Main line 256-539-3711; environmental (septic) 256-533-8726.

Unpermitted additions and work

A garage converted to a bedroom, a deck, a finished basement or electrical work done without permits can surprise buyers, appraisers and insurers. Start by asking your city or county building department what permit records exist for the address. Depending on the local office and the work, some owners are able to get a permit after the fact, which may involve opening walls for inspection. Others disclose the work as unpermitted and price it accordingly. Either way, do not describe unpermitted square footage as if it were permitted.

Code violations and unsafe-building notices

In Huntsville, the City's Community Development department enforces codes on unsafe buildings, substandard housing, junk and litter, tall grass and weeds, inoperative vehicles, public nuisances and more. If an owner does not comply with a notice, the city can abate the problem and place a lien with City Council approval. Owners can ask the Housing Board of Adjustments and Appeals (P.O. Box 308, Huntsville, AL 35804) for an extension within the time stated on the notice. Community Development: 256-427-5400, comdev@huntsvilleal.gov, City Hall 3rd floor, 305 Fountain Circle.

Alabama law (Ala. Code Chapter 11-53B) gives cities a process for repairing or demolishing unsafe structures, with sections on notice, hearings and appeals, cost assessments and liens. If you have received a notice, do not ignore the deadline. Call the city to understand what is required and by when, and ask your closing attorney how any open order or lien would be handled at closing.

How to Disclose Well

1. Write down what you know. When it started, what you saw, what was done about it and when. Facts, not guesses.
2. Gather the paper. Inspection reports, engineer letters, repair invoices, warranties, permits, insurance claim files and any city notices.
3. Get a professional opinion where it helps. A written repair bid turns an unknown into a number buyers can work with.
4. Tell your agent everything. We will help you decide how to present it in the listing and in conversations with buyers.
5. Answer buyer questions in writing and truthfully. If you do not know, say you do not know. Do not guess and do not shade the answer.
6. Let buyers inspect. Restricting access to a problem area invites suspicion and, potentially, claims.
7. Have an attorney review anything unusual. Disclosure questions are legal questions. A real estate attorney can tell you what applies to your facts.

Fix It, Offer a Credit, or Sell As-Is?

A note on cash offers: If a cash offer is on the table, we will show you it next to what listing on the open market would likely net, in writing, and you choose.

Test What You Know

These questions cover the Alabama rules sellers most often get wrong.

Ready to talk about pricing a house with a known problem? Call (256) 808-6861 or schedule a confidential call. There is no cost and no obligation.

Common Questions

Talk It Through, Confidentially

Big decisions are easier with someone in your corner. Whether you are ready to sell, still deciding, or just need to understand your options, call or schedule a time to talk. The first conversation is free, private and comes with no obligation. If what you really need is an attorney, a CPA or a housing counselor, we will tell you that and point you in the right direction.

Schedule a Confidential Call Call or Text (256) 808-6861

Sources

• Alabama REALTORS Legal Helpdesk, caveat emptor for the seller's agent
• Ala. Code 34-27-36 (Justia, older version)
• Alabama Real Estate Commission, statutory changes
• Alabama Department of Public Health, Onsite Sewage program
• Madison County Health Department contact
• City of Huntsville, Code Enforcement
• Ala. Code Chapter 11-53B, unsafe structures (Justia)

Related Guides

Wyze Realty LLC, Huntsville, Alabama. Information on this page is general and educational, is not legal, tax, financial or credit advice, and may not reflect the most current law. Consult an Alabama attorney, CPA or HUD-approved housing counselor about your situation. All real estate services are provided in accordance with the Fair Housing Act.