Reviewing disclosures regarding the property you are purchasing and the surrounding areas are a HUGE part of your due-diligence period, as they bring to your attention anything considered to potentially be a “Material Fact”.
Much of this information may not be obvious from simply seeing the property in person, or even from your home inspection, which is why it’s vital that you review them thoroughly and address any questions you may have!
PLEASE WATCH THE VIDEO BELOW
1:23 Transfer Disclosures Statement
7:55 Seller Property Questionnaire
11:42 Earthquake Hazards Report
12:17 Natural Hazard Disclosure Statement
14:27 Mold Advisory
15:03 Lead Based Paint Hazards
15:59 Preliminary Title Report
19:38 Seller’s Affidavit of Non-foreign Status
20:43 Statewide Buyer & Seller Advisory
21:57 Market Conditions Advisory
22:39 Notice of Your Supplemental Property Tax Bill
Below is a brief summary providing a general outline of most of the disclosures you will be receiving.
NOTE: You might not be receiving these all at the same time, so be sure to keep this summary as a handy reference! Some of these may not apply to your specific transaction.
Please review ALL disclosures carefully! If you don’t understand something or have a question, PLEASE contact us or Claudia immediately, we here to answer all your questions!
– Transfer Disclosure Statement (TDS): This important disclosure document which is completed by the seller includes the Seller’s mandatory disclosure of specified items and any known adverse material conditions of the property, as well as sections for the seller’s and buyer’s agents to comply with diligent visual inspection requirements (AVID — See below).
– Seller Property Questionnaire (SPQ): This disclosure is completed by the Seller in an effort to give the Buyer an even more comprehensive understanding of the property to be acquired. The purpose of the SPQ is to give you more information about known material or significant items affecting the value or desirability of the property and help to eliminate misunderstandings about the condition of the property.
– Natural Hazard Disclosures (NHD): Since the seller is not an expert on the Natural Hazards of the area, and cannot personally be expected to provide you with a complete picture of the hazards, these NHDs are provided by a 3rd-party with access to accurate local information. This ensures you are provided accurate information from a reputable source. These NHDs outline whether the property is in an area known to be prone to natural disasters such as flooding, earthquakes, hurricanes, or tornadoes. It is designed to protect buyers from unknowingly purchasing a property that might incur damages from natural disasters simply because of the property’s location in a naturally hazardous area.
(Make sure you verify if the property is located on a flood zone, fire zone, earthquake zone, dam inundation zone, or similar zoning. It can affect your insurance cost).
- Mold Advisory: The buyer is herein advised to hire a licensed inspector to conduct a mold and water intrusion inspection.
– Preliminary Title Report: The Preliminary Report lists all encumbrances discoverable by the Title Company affecting the property, such as liens including second mortgages and tax liens, easements across the property, pending lawsuits against the property owner, etc. How to Read a Preliminary Title Report – CLICK HERE
(Make sure you are aware of all the easements).
Here are some of the important pieces of the Preliminary Report you should review carefully:
The Legal Description: This is the literal description of where the property is located and the boundaries of the property in relation to the nearby streets and intersections. In the case of a condominium or Planned Unit Development (PUD), the legal description will also include the property’s interest in any common areas, exclusive or non-exclusive easements, and details on any parking or storage that conveys with the property.
Property Taxes: If there are any tax liens against the property, they will show up as the primary lien on a title report. Escrow will handle the pay-off of any outstanding taxes prior to the close of escrow.
Other Liens: These are generally listed directly below property taxes and they’re always ordered first, second, and third. Escrow will handle the pay-off of any outstanding liens before the close of escrow.
* If there are any easements recorded against the property and another entity has access to the property via the easement, this would be recorded against the title report. Any easements typically stay with the property unless both parties agree to remove it. In most cases, there will be a few easements on a property for utility companies: for the water company to access water meters and pipes, and the same for gas and electricity providers.
Restrictions, historic oversights, planning requirements: If the home is located in a historic district and therefore subject to the rules and restrictions of that district, it will show up on the Preliminary Report.
CC&Rs (if applicable): There may be a link or reference to CC&Rs attached to the Preliminary Report. These Covenants, Conditions and Restrictions are limitations and rules placed on a group of homes or a community by a builder, developer, neighborhood association and/or homeowner association, which are recorded against the property. They lay out the rules that all property owners in the development/community must follow regarding things such as parking, architectural rules, exterior appearances, etc. Once you’re the owner, you’re subject to all of these rules attached to your property, so you’ll want to make sure you understand and are comfortable with them. CC&Rs ultimately protect the owner and owners of the neighboring properties by maintaining aesthetic standards and work to protect your value from negative influences such as a neighbor painting their home pink or constructing a shed in their front yard.
– Home Owners Association (HOA) Package (if purchasing a home within an HOA community): Be sure to review and understand:
Parking and additional storage locations
Last 12 months of HOA meeting minutes (minutes of meetings up to 12 months back should typically be provided, but there are scenarios in which the meetings are not held as often as they should be)
CC&Rs: These Covenants, Conditions and Restrictions are limitations and rules placed on a group of homes or a community by a builder, developer, neighborhood association and/or homeowner association, which are recorded and attached to the property. They lay out the rules that all property owners in the development/community must follow regarding things such as parking, architectural rules, exterior appearances, pet rules, etc. Once you become the owner, you will be subject to all of these rules attached to your property, so you’ll want to make sure you understand and are comfortable with them. (If you have a dog, are planning on having hard surface floors installed, want to have coverage in your balcony or any other type of alteration, MAKE SURE your plans and/or pet will not conflict with any CC&R rules!)
– Agent Visual Inspection Disclosure: This disclosure documents the results of both your agent and the seller’s agent’s required visual inspection of a property. This report may mention even the tiniest of visual “defects” of the property. Don’t be shocked to see some things listed that may sound worse than they really are! For example, a “hole in the wall” could in reality be as simple as a thumb-tac hole. This disclosure should NOT be relied upon as anything more than a reference for visual defects the agent has observed— realtors are not licensed general contractors! Don’t get caught up on this document— if you have a question or concern, let your agent know and they should be able to point the defect(s) out to you in person.
– Local Area Disclosures for San Diego County Booklet: This guide is to provide regional information which may impact the Buyer’s decision to purchase a property in San Diego County. This booklet is divided into multiple sections which include: General Disclosures, Environmental Disclosures, information regarding Traffic, Roads and Transportation, Air Traffic and Airport Disclosures, and Specific Area Disclosures.
– Buyer’s Affidavit: This documents whether or not federal Foreign Investment in Real Property Tax Act (FIRPTA) withholding is required. It also explains the criteria that the buyer and property must meet for FIRPTA.
– Environmental Hazard/Earthquake Report: This document provides the homeowner with basic information about finding and fixing earthquake-related weaknesses in the home. It also provides general information about earthquake risks and links to resources for more information on earthquake safety.
- Statewide Buyers and Sellers Advisory: This document advises both Buyer and Seller of various factors that may affect the decision to buy, different types of inspections that can be obtained, and questions to ask or research and information to be disclosed. Buyer is advised in each particular section to contact appropriate professionals for concerns.
– Market Condition Advisory: This reminds the buyer that market conditions fluctuate and as a result, there is no guarantee that prices will continue to move in a particular direction.
– Notice of Supplemental Tax Bill: After a change in ownership or when new construction is completed, the Office of the Assessor/Recorder must determine a new base year value for the property.
(See video below)
Questions? Call us anytime!