So, what is a disclosure? Like it sounds, a disclosure is a fact about something that is communicated in some way to another entity. In a real estate transaction, these can come in a number of forms.
Whether you are the buyer or seller, disclosures are a key part of the process
In a typical, default purchase contract in the State of California, the seller has seven days from the date escrow opens to deliver all the disclosures to the buyer. This gives the buyer a full ten days to review the disclosures and back out without any ramifications if some information about the property is undesirable to them. In some cases, the seller will deliver the disclosures sooner, even before an offer is made.
The Association of Realtors has made this process very straight-forward by supplying sellers with forms that can be completed, with questions that can be answered about certain facts about the property. For example, the Transfer Disclosure Statement asks the seller questions about the type of utilities and appliances the home has and the types of repairs that have been made. The Seller Property Questionnaire asks several questions about neighborhood noise, deaths on the property, pets on the property, easements, liens and known planned community developments. It is important, and a sellers’ legal responsibility to complete these forms honestly, for this will protect him or her from future litigation.
Other disclosures such as the Natural Hazards Disclosure Statement give information about any hazardous environmental conditions such as the property being in a flood hazard or earthquake hazard zone. Signing this disclosure indicates that the buyer understands that information on the report could affect his or her safety or homeowner’s insurance rates.
Some disclosures only serve to inform both the buyer and seller of regulatory requirements. One example of this type of disclosure is the Carbon Monoxide Detector Disclosure which is used to let both the buyer and seller know that in the State of California, it is required by law that a carbon monoxide detector must be installed in any residential property prior to sale.
Although a buyer can find out quite a bit from the disclosures made by the seller, it should not replace the property inspection. In cases where the seller only lived in the property a short time, there may be facts that they are unaware of, and therefore cannot disclose to the buyer. Additionally, when the seller discloses information about improvements such as a new roof or a room addition, it is wise to check with the city planning department to see that permits were pulled for these jobs. If the project was completed without a permit, there could be ramifications in the future for the buyer such as fines or health/safety hazards.
Sellers should treat the disclosure documents very seriously, answering each question honestly and transparently. Conversely, buyers should review the disclosers carefully, asking questions when items are not clear. The disclosure process can be a positive one, giving both the buyer and seller a sense of confidence in a complicated and sometimes scary process. Your real estate professional will supply you with all the forms needed to complete this step in the process.