Disclosures Cheat Sheet
When a buyer is interested in a house, agents will send along a disclosure packet, which provides more details about the property than what you see when you toured it. Buyers should read all pages in a disclosure packet but there are ones you should pay particular attention to. As an agent in the Bay Area, I pay particularly close attention to the ones below:
Agent Visual Inspection Disclosure (AVID): Listing agent needs to report anything visual that would affect the desirability of the property. This is required even if the seller is exempt from TDS. Seller Disclosure (SF) / Seller Property Questionaire (Bay Area): similar to the TDS (see #1), this required by law and a more extensive set of seller disclosures.
Inspection Report: Many disclosure packets include an inspection report so that buyers will waive the inspection contingency so that they cannot renegotiate after they go into contract. If you have questions about the inspection, call the company that performed the inspection directly. These are independent 3rd party inspectors.
Structural Pest Report: I usually go straight to the total cost to cure to see how good of a shape the property is in. These inspectors are regulated by the Structural Pest Control Act and Regulations of California and must file the report with the state when issued. A pest inspector is looking for “active deterioration of wood” (i.e. structural).
Natural Hazard Disclosure (NHD): see if any natural hazards affect your property. In the Bay Area, look to see if your property is in a liquefaction zone (you can also check here). Also, if the property is in a flood zone and you have a mortgage, you will typically be required to purchase flood insurance. Report of Residential Building Record (3R): lists all the improvements made with permits. Depending on the type of work, improvements without a permit exposes you to work not being done to code and the possibility of you taking it down/brining it to code. Preliminary Title Report: list of owner(s), and details related to any claims or interests (outstanding taxes, liens, easements, etc) on the property. If there are any, it is typically taken out of the seller proceeds during escrow. Pay particular attention to easements and any restrictions. For questions about title, call the insurance company that is providing the report. Lenders will require you to buy title insurance.
Residential Earthquake Hazards Report: The seller fills out a questionnaire that revolves around the foundation, bolting, and other earthquake safety measures.
Energy Water Inspection: Energy Conservation inspection is only needed once in the life of a house. The Water Conservation Inspection is completed every time the house changes hands. It is a Seller's responsibility to do the necessary work to meet the requirements per SF contract. If the Seller is willing to leave 1% of the sale price in escrow, the responsibility of doing the work is transferred to the Buyer. The buyer is reimbursed using the Seller funds held in escrow.
Sewer Lateral / Sidewalk Compliance Report (Oakland only): in Oakland the seller's are responsible for this. They can also transfer the responsibilities to the buyer - make sure you if this will be an additional cost to you.
Underground Storage Tank Report: if this is not in the disclosure packet, you can call the one company that does these inspections, Golden Gate Tank Removal. See if they have a report on file. If not, you can order one, even if you are not the owner. If a tank is found, whoever is the owner of the property is responsible for its removal EVEN if you waived inspection contingency.
Disclosures Specific to the Property:
- Real Estate Transfer Disclosure Statement (TDS): filled out by the seller to let the buyer know of any defects with the house - not just physical defects but ANYTHING that affects the desirability of the property, such as loud neighbors, BART/Muni noises.
- By California law, every seller needs to complete this document. Some sellers are exempt such as if the successor has not lived at the property for the past year, probate sale, etc.
- Sellers can be sued for not disclosing a material fact so read this carefully! Most real estate lawsuits revolve around this document.
- A completed TDS includes the listing agent visual inspection (AVID - see below). Unless the buyer receives a completed TDS, the buyer has 3 days (personal delivery) or 5 days (email/mail) to cancel the contract without just cause.
- If in a multi-unit building: Tenancy in common (TIC) should have a TIC Agreement in place and Condos/PUDs have Covenants, Conditions, and Restrictions (CC&Rs). These very important documents outline the rules related to use of common areas, restrictions, etc.
Additional Disclosures - below are disclosures that are identical for all properties that you only read once:
- Flood Map Advisory and Disclosure: informs you of where you can find out if your property is in a flood zone (NHD, 3R - see above). You can also find out here: https://sfplanninggis.org/floodmap/
- Water Conserving Plumbing Fixtures and Carbon Monoxide Detector Notice: stating state laws around requirements and homeowner compliance
- Water Heater and Smoke Detector Statement of Compliance: stating state laws around water heater bracing and carbon monoxide requirements (i.e. have one) and seller's compliance of the laws. This will be caught during appraisals if non-compliant (seller will have to comply).
- Energy and Water Conservation Booklet: inform you of today's energy and water standards. Provides background for the Energy-Water Inspection disclosure (see #10 above).
- Statewide Seller and Buyer Advisory: your rights as a buyer or seller. Also what the broker's responsibilities are.
- Disclosure Regarding Agency Relationship: it is simply to inform the seller/buyer what a real estate agent does. The signature is just acknowledgment that you received the form and is not a binding agreement.
- Possible Representation of more than one buyer or seller: This document state that a broker can possibly represent both the buyer and seller.
- Lead-Based Paint and Lead-Based Paint Hazards: this doesn't necessarily mean your property has lead-based paint, it's just informational.
- Market Condition Advisory: basically saying you as a seller, is solely responsible for the offer price. Brokers/agents may give you what they think but we do not have a crystal ball.
- Wire Fraud and Electronic Funds Advisory: wire fraud is real. This notice is to inform you on how to protect yourself. Most likely you will be wiring your downpayment to escrow. You should contact the escrow agent to ensure the wiring instructions are from them and not a fraudster.