Home Buying 101 Series: Disclosures, Disclosures, Disclosures!

July 15, 2019

Our Home Buying 101 Series has returned – and it’s time to talk disclosures! Let’s first focus on the area of seller disclosures…

In the first seven days, a seller will provide a buyer with information about their home via a form called a TDS (Transfer Disclosure Statement). As an agent, I always ask for two additional forms – an SPQ (Seller Property Questionnaire) and an SPQA (Seller Property Questionnaire Addendum). These forms provide additional questions that the seller needs to answer to help the buyer determine if there is anything that is not acceptable to them. In addition, it allows the buyer to ask any questions that would arise from reading through those documents.

The buyer will also receive an NHD (Natural Hazards Disclosure). This document will reveal if the home is located on an earthquake fault, flood, fire, or seismic-hazard zone. It will also let you know if an endangered species lives in the area and what types of soils are in the area, i.e., prone to sliding or liquefaction. It also provides local area disclosures, such as a nearby airport, if the neighborhood was used for military ordinance, etc.

Another important document that the seller will need to provide is the FIRPTA (Seller’s Affidavit of Nonforeign Status and/or California Withholding Exemption). This form determines whether tax withholding is required. Each person that is on the title is required to fill out this form. If tax is due, escrow will withhold 3.5% for state and 15% for federal taxes. I’ve never understood why, but the buyer is held responsible for this tax being paid per state and federal tax code, even though the capital gain is the sellers.

Next up is the WCMD (Water-Conserving Plumbing and Carbon Monoxide Detector) disclosure. Any home located within San Diego proper is required to install low-water fixtures at the point of sale of the home. California law now requires individual cities within San Diego County and throughout the state to disclose if there are any non-water-conserving devices on homes that were built before 1994. Unlike those homes in San Diego proper, this is not a point-of-sale item.

The WHSD (Water Heater and Smoke Detector Statement of Compliance) states that the seller has complied with state law that requires the water heater to be strapped and smoke detectors inside each bedroom. Lest the seller think they can pawn this off onto the buyer, the appraiser for the buyer is required by the lender to take photos of these items, along with carbon monoxide detectors.

For homes built prior to 1978, the seller is required to provide an FLD (Lead-Based Paint and Lead-Based Paint Hazards Disclosure, Acknowledgement and Addendum). Most sellers have no idea if their home has lead-based paint. If a buyer is concerned about lead-based paint or asbestos, there are tests that can be performed using kits from places like Lowe’s. A buyer can also hire a certified professional to test for these items.

If requested by the buyer, the seller may provide a Wood Destroying Pest & Organisms Inspection Report. The buyer can elect to have this inspection completed themselves if the seller is unwilling to do so during their 17-day contingency period. This report will let you know if the property has termites, subterranean termites, dry rot or the potential for these items. A buyer can ask the seller to take care of these items via an RR (Request for Repairs) or request that they be taken care of in the offer to purchase. A buyer could waive having this inspection, however, as an agent, I would advise against it.

Lastly, a buyer should request that the seller provide a home insurance history to see what types of claims, if any, were requested from their insurance provider. This information will provide valuable knowledge of any potential issues with the house.

And that’s only a piece of the disclosure pie – can you believe it?! Stay tuned for the second half of our feature on disclosures next month. In the meantime, if you are considering buying, it’s never too early to seek the advice of a real estate professional and lender. We are here to help you achieve your homeownership dreams and determine if now is a good time for you to purchase a home. Don’t hesitate to reach out to me at 619.405.7673 or homes@livininsd.com.

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