The process of purchasing or selling a property includes a multitude of contracts, disclosures and inspections. It is vital that these documents are complete and understood, as they can affect the value and desirability of the property. It is important that you ask your Realtor any time there is any part of these contracts or disclosures that you do not understand. The following is a list of the most commonly used disclosures and a brief summary of their purpose. These are meant to be brief definitions – be sure to discuss these with your Realtor to fully understand them.
- The Disclosure Regarding Real Estate Agency Relationships aids you in understanding the type of agency relationship or representation you wish to have with the agent in the transaction: “Seller’s Agent”, “Buyer’s Agent” or “Agent Representing Both Seller and Buyer”.
- The Statewide Buyer and Seller Advisory is a document that lists a plethora of issues that might be a factor for the property being sold. It includes such items as “Errant golf balls” if the property is on a golf course, “Megan’s Law” if there is concern regarding sexual predators, “Death on a Property”, “Fire Hazards”, etc. Buyers should read through it to be certain that they have done all of the research and inspections that they deem necessary.
- The Transfer Disclosure Statement (your Realtor will probably refer to it as the “TDS”) is, as the California Association of Realtors describes it, the “granddaddy of them all”. It contains two sections. The first is the seller’s section and is essentially a questionnaire of what the seller knows regarding the property including amenities, any significant defects and other items of interest. The second section is the responsibility of the Realtors involved. Their duty is to do a diligent visual inspection of the property and note all facts that would materially affect the value or desirability of the property.
- The Agent Visual Inspection Disclosure is quite often completed in lieu of the space allowed for the Realtor on the Transfer Disclosure Statement. The duty is the same as the TDS – to do a diligent visual inspection of the property and note all facts that would materially affect the value or desirability of the property.
- The Seller Property Questionnaire is a more detailed document than the Transfer Disclosure Statement, giving the seller the opportunity to disclose items not listed on the TDS.
- The Natural Hazards Disclosure Report identifies residential geographical zones susceptible to natural hazards, such as the Special Flood Hazard Areas, Dam Inundation Zones, Very high Fire Hazard Severity Zones, Wildland Fire Areas and Earthquake Fault Zones. Brokers quite often have these reports done by a third party and may include other zones such as Military Ordnance Locations, Industrial Use Zoning, Meth Lab Activity and Registered Sex Offenders.
- The Sellers Affidavit of Nonforeign Status is a document used to obtain an exemption from withholding. In it, the seller certifies, under penalty of perjury, that the seller meets one of the withholding exemptions. It should be provided to the buyer from the seller. The seller agrees to provide the necessary information in the escrow in accordance with the typical practice of real estate transactions in California.
- The Mello-Roos Taxes and 19154 Bond Act Assessments requires a seller to disclose to a prospective buyer that the property is located in a Mello-Roos district or subject to a 1915 Bond Act assessment.
- Supplemental Property Tax Bills are incurred as a result of the difference in the value given the property before escrow and after escrow. When paying prorated property taxes in escrow, the taxes are based on what the present owner’s property value was when they purchased it. The new owner’s property taxes will be based on what they paid for the property. As a result, the new owners will receive a supplemental tax bill for the difference in what they paid in escrow and the new value.
- The Residential Environmental Hazards Bookletprovides information on environmental hazards that may affect a property. A few of these hazards are asbestos, formaldehyde, hazardous waste, household hazardous waste, lead, mold and radon.
- The Lead-Based Paint Hazards disclosure applies to properties built before 1978. In this disclosure, the sellers disclose if they have had the house tested for lead-based paint and if it does or does not have lead-based paint. The agents also sign this acknowledging that they have informed their clients as to their obligation in completing this form.
- The Homeowner’s Guide to Earthquake Safety provides general information about earthquakes and specific information about how to find and fix earthquake-related weaknesses in real property.
- Water Heater and Smoke Detector Statement of Compliance applies to tasks that must be completed prior to close of escrow. An operable smoke detector must be installed in every single-family dwelling and water heaters must be strapped.
- The Water-Conserving Plumbing Fixtures and Carbon Monoxide Detector Notice informs all parties regarding the requirements for installation of carbon monoxide detectors and the law regarding water-conserving plumbing fixtures. Many time appraisers will call for carbon monoxide installation if they are not present.
