REAL ESTATE TRANSFER
Real estate transactions continue to become more and more complicated. One
of the regulations requires sellers to provide a comprehensive disclosure
statement to the buyer, called the Real Estate Transfer Disclosure Statement
(TDS). It is designed to alert the buyer to any known defects in the property
being purchased. All sellers must comply with this law . . . even if they are
selling their home themselves without real estate licensee representation. An
exception exists for "third party sellers" which are defined as those
who have acquired the property via foreclosure, etc. Typically these sellers
are lending institutions that have never lived in nor seen the property and
thus are relieved of the responsibility to make any disclosure.
While the statement is not a warranty, nor is it intended to be a substitute
for any formal inspections, buyers may rely upon the disclosures in determining
whether to purchase and/or what terms upon which to purchase. The buyer has the
right to cancel the contract within three days of receipt of the disclosure
statement or alert the seller regarding any items that require attention. Thus,
it makes sense for the seller to provide this disclosure as quickly as possible
after finalizing the purchase agreement.
The form provides a check list of all items and systems
contained in the property and then requires the seller to identify all
known defects and/or malfunctions within the structure or its systems
(plumbing, heating, etc.). Additionally, the seller must reveal any additions
or structural modifications made without permits.
If real estate licensees are involved in the transaction, they are required
to perform a visual inspection of the property and report any observed defects,
code violations or changes from the seller's disclosure. While mentioned above
that a third party seller does not have to make this disclosure, if a real
estate licensee represents such a seller, the licensee can not escape the
responsibility of completing the appropriate portion of the disclosure.
Finally, the buyer must acknowledge receipt of the disclosure statement and
has three days (as indicated above) during which they may cancel the
transaction based upon the information contained in said disclosure.
Cancellation under these circumstances can not be arbitrary, but must occur due
to information, that had it been known, would have resulted in the buyer not
making an initial offer to purchase.
The data revealed in the disclosure is identified as separate from the
purchase contract, and in most situations, is not currently provided to
lenders. Thus, the disclosures do not presently impact the buyer's ability to
acquire real estate loans.
Both buyers and sellers have become more aware of the value of acquiring an
independent home inspection conducted by a certified home inspector. Most
purchase contracts now alert and often encourage buyers to acquire, at their
expense, a home inspection report. Coupled with the seller's disclosures on the
TDS, a home inspection report is likely to make a buyer aware of any and all
aspects of the home which they wish to purchase.
As real estate transactions have become more complicated, buyers need be
made aware of the numerous disclosure issues and should be offered the
opportunity to acquire various inspections, including a home inspection (noted
above), a pest control inspection, a roof inspection, etc. Buyers will have to
depend upon their own observation of the prospective property to be purchased
and determine the number and/or extent of inspections they wish to have done.
The real estate representative can provide some guidance and additional
information regarding this subject but the final decision as to which, if any,
inspections are to be done rests with the buyer. You are always invited to call
Humboldt Home Loans with your questions.