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Thursday, October 9, 2008

Understanding Disclosure Paperwork From The Seller Of Your New Home


The beginning of the escrow process is an exciting and very busy time for most home buyers and real estate agents. One of the first issues to attend to is the gathering of all disclosures made by the seller about the condition and overall situation of the property in question. And you thought there was a lot of paper work to sign during the offer process? Just wait till you see how much more is coming down the pipe!

As a home seller, they do have an obligation to provide the buyer with signed copies of these disclosure forms detailing all material defect known about the property within the first seven days of the transaction. As a home buyer, you have an obligation to read, understand, and sign off on any information provided within these disclosures or cancel the agreement if something strikes you as a deal killer.

We will attempt to guide you through these documents so that you have a basic understanding of the information they are trying to convey. The forms making up the disclousure packet include but are not limited to:


Agency Disclosure For Seller and Sellers Agent - Shows that the sellers agent has a fiduciary duty to act in the best interest of the seller.

Transfer Disclosure Statement (TDS) - Filled out by the seller showing A) the current equipment in the systems of the home B) the awareness by the owner of any material defect with any of these systems C) the awareness of any problems in the area or surrounding community/neighborhood and D) the awareness by the agents of any known defects.

Preliminary Title Report - Shows all matters affecting title to the property including but not limited to back taxes, mechanic leins, and past due homeowners association dues.

Supplementary Statutory Disclosures (SSD) - More representations made by the seller as to whether people have died on the property in the past three years, whether the property is located near ammunitions or industrial areas, and a few other items.


Earthquake and other Hazards Booklet -
A booklet usually paid for by the seller detailing the extent of risk associated with earthquakes, radon gas, and other hazards, with regards to California real estate. Booklet also provide some advice for things you can do to help mitigate damage from earthquakes and other disasters. The last two pages have a section to be filled out by the seller and signed off on by the buyer. Pay attention to any of the boxes marked that may pose potential hazard risks in the future. You may not be able to renegotiate the deal but at least you will know for the the future.


Sellers Affidavit of Nonforeign Status and Withholding Exemption (FIRPTA) - Sellers disclosure of their citizenship and details of ownership to prevent foreign investors skipping out on paying capital gains taxes after the sale.

Natural Hazard Disclosures (NHD) - A packet usually purchased by the seller stating the presence of various natural hazard risks to the property. Typically, these hazards include flooding, fire, and liquifaction (land movement during earthquake). Most of our coastal real estate will have some flood risk, most hillside real estate will have some fire risk, and nearly all the properties in our area will have some degree of liquifaction risk.

Lead Based Paint Hazards Disclosure - Only used with property built prior to 1978. Disclosure discusses the risks associated with lead based paint, the hazards it can present, and whether the owner knows of the the presence of any lead based paint within the property.

Water Heater and Smoke Detector Statement of Compliance - Discloses State law with regards to the bracing and strapping of water heaters as well as the presence of smoke detectors.

Seller Property Questionaire - More disclosures from the seller with regard to whether they have repaired, replaced, or rebuilt the home or any of its systems plus more disclosure about known defects affecting the property.

Statewide Buyer and Seller Advisory - The catch all form outlining all things real estate brokers are not qualified to advise clients about.


Normally, these disclosures can be returned to the seller within the first seventeen days of the agreement but it is often better to get them to us well in advance of this date. We would personally recommend signing these documents with some other preliminary paperwork such as the inspection authorization, escrow insructions, and loan application to save you some time. We know your hand is probably already beginning to cramp just looking at all of this but we've found it less painful to do as much paperwork as possible at one time while your in "the zone" as opposed to the tedious drip of never ending forms. As always, if you have any questions about these disclosures, please do not hesitate to ask.

We think you will enjoy our next article on home inspections.