This is going to be a somewhat longer post, because there are items where details are necessary! Keep an eye out for future posts that may discuss some of these concepts on their own and in detail.
Disclosures are important in selling your home! We cannot emphasize this enough. As we always tell clients, “If you have to ask yourself whether or not you should disclose something, the answer is YES disclose it!” The number one cause of lawsuits in residential real estate is lack of proper disclosure.
During the escrow process, you must inform the buyer of specialized conditions that affect your home. These may include the following conditions:
Sellers of properties built prior to 1978 have the following obligations:
- Provide buyers with a HUD pamphlet entitled “Protect Your Family From Lead in Your Home.”
- Disclose all known lead-based paint and related hazards and provide any available reports.
- Include a standardized warning as an attachment to the contract.
- Complete and sign statements verifying that requirements have been met.
- Retain the signed acknowledgement for 3 years.
- In addition, you must provide the buyers with a 10-day opportunity to test for lead.
California Law requires sellers to disclose, via a “Natural Hazard Disclosure Statement” or NHD, if properties are located in one of six predetermined “natural hazard” zones. (If the property is not within one of these zones, you of course, have no such obligation).
The six zones are:
- A flood hazard zone as designated by the Federal Emergency Management Agency (FEMA).
- An area of potential flooding after a dam failure (also known as an inundation area).
- A very high fire hazard zone.
- A wild-land fire area, also known as a state fire responsibility area.
- An earthquake fault zone.
- A seismic hazard zone.
If an NHD is delivered to the buyer after both parties have signed the Purchase Agreement, the buyer will have three days to rescind the agreement. However, if the buyer received the NHD before they signed the Purchase Agreement, then they cannot use the NHD to rescind.
Especially (but not exclusively) if you are selling a home in a newer area, you may be within a Mello-Roos tax district, and you must provide to the buyer a “Notice of Special Tax.” If this notice is delivered to the buyer in person, they have three days to rescind their offer. If it is delivered via U.S. mail, they have five days to decide.
Basically, a “Mello-Roos Community Facilities District” is formed by a local government, district, or agency to finance public services and facilities including; police and fire departments, ambulance and paramedic services, parks, schools, libraries, museums and cultural facilities.
If you are selling a condominium, townhouse, or other planned development (for purposes of this discussion, we will call them all “condominiums”), the buyer needs to know about common areas (greenbelts and recreational rooms) and the homeowner’s association.
The buyer will be required to make monthly payments known as regular assessments to maintain common areas, as well as special assessments to replace a roof or repair the plumbing, as determined by the homeowner’s association (HOA).
Condominiums may also have regulations regarding architectural requirements, limitations on pets, and age restrictions (i.e. senior housing). These must be formally disclosed to the buyer during escrow. You may provide this information via the following documents, to the extent that they exist and are available:
- Declaration of Restrictions: Commonly known as “CC&Rs,” or Conditions, Covenants and Restrictions.
- Articles of Incorporation or Articles of Association Bylaws.
- All current financial information and related statement including; operating budget, estimated revenue and expenses, HOA reserves, estimated remaining life of major components (including roofs, plumbing etc…), and regular and special assessments.
- A statement describing the HOA’s policies and practices in enforcing lien rights or other legal remedies for default in payment of its assessments.
- A summary of the HOA’s property, general liability, earthquake and flood insurance policies.
- On existing HOAs, a statement describing any restrictions on the basis of age, such as authorized senior citizen housing.
Many smaller HOAs will not have all of these documents, but must provide what they do have.
Of course your realtor will guide you through all of the necessary disclosures and provide the correct forms for you to complete. We “package” your disclosures and provide them (if possible) to any prospective buyer prior to them writing an offer on your home. This will increase the chance for a successful sale of your home, and buyers will not “back-out” due to undisclosed items not known ahead of time.
Whew! Did you make it through all of that? Sorry to make you read so much. This post was a bit of a doozy. Although keeping it right around 800 words wasn’t too bad.
Do you have any questions about home disclosures? Feel free to write us at our contact page anytime. Or at the top of the page, you can see Steve’s direct number!
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