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Updated          May 28, 2018

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.

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