California Real Estate Principles 10 1 Edition Chapter

California Real Estate Principles, 10. 1 Edition Chapter 4 Real Estate Disclosures © 2015 On. Course Learning

Chapter 4 Student Learning Outcomes 1. Give four examples of a material fact to be disclosed regarding a property. 2. Recognize an agent’s duty to inspect and report on material defects on residential property. 3. Identify when the Transfer Disclosure Statement must be used in a real estate transaction. 4. List four natural hazards that would be found in the NHD statement.

Easton v. Strassburger (1984) The broker has an affirmative duty to: v. CONDUCT a reasonably, competent and diligent INSPECTION of residential (1 -4) property, and to v. DISCLOSE to prospective purchasers v. ALL FACTS revealed by the inspection that MATERIALLY affect the v. VALUE or DESIRABILITY of the property

Material Facts • Sellers must disclose all known material facts regarding residential property • A material fact is something that affects the value of the property • A material fact can include a roof leak, appliances that are not operating, a hole in the wall, and/or neighborhood noise problems • Seller’s should disclose anything that they would want to know if they were purchasing the property

Transfer Disclosure Statement • Seller of one to four units must fill out and provide buyers with the TDS • Seller to disclose any previous reports and/or inspections on the property • Seller is required to identify items in the property and indicate if they are not working or not working properly • The listing and selling agents must perform a diligent visual inspection of all accessible areas of the property • If no agent involved, Seller must still provide • Should be given to buyers prior to signing purchase contract Rescission Rights- Buyer • If given after signing of RPA, buyer has three days to cancel. • If mailed, buyer has five days to cancel

REAL ESTATE TRANSFER DISCLOSURE (TDS) – Pages 121 -123 • Material facts affecting value or desirability of the property relevant to a person making an informed decision • Seller and real estate agents are required to disclose defects (Easton vs. Strassburger) that affect the value • Agents has affirmative duty to inspect, inquire, disclose, recommend, document.

A TDS is Not Required… When is a seller exempt from a Transfer Disclosure Statement? This question comes up very often. It’s required more often than you might think. • By the way, if a Transfer Disclosure Statement (TDS) is needed then the Seller Property Questionnaire (SPQ) is needed too. State law makes it a package deal to use both forms on a transaction. • The following transfers are exempt from these disclosure requirements: • The sale of new homes as part of a subdivision project where a public report must be delivered to the purchaser or a public report is not required. However, when such new homes are sold through a real estate broker, the broker owes the buyer a duty to disclose any material facts which affect the value, desirability and intended use of the property; • Foreclosure sales; • Court ordered transfers; • Transfers by a fiduciary in the administration of a decedent’s estate, a guardianship, conservatorship, or trust except where the trustee is a former owner of the property; • Transfers to a spouse or to a person or persons in the lineal line of consanguinity; • Transfers resulting from a judgment of dissolution of marriage, or of legal separation, or from a property settlement agreement incidental to such a judgment; • Transfers from one co-owner to another; • Transfers by the State Controller for unclaimed property; • Transfers resulting from failure to pay taxes; and • Transfers to or from any governmental entity. (CAL. CIV. §§ 1102, 1102. 3) Source: http: //balboateam. com/2016/03/28/seller-exempt-tds/

Environmental Hazards and Earthquake Disclosures • Environmental Hazards include, but are not limited to: - Hazardous wastes - Asbestos - Lead paint - Mold - Radon gas • Earthquake Disclosures include, but are not limited to: - Bolted down foundation - Braced water heater - Unreinforced masonry

Disclosing Death on the Property Death on the property may have an impact on the value of the property. - Death on the property within the last three years must be disclosed. - Cause of death need not be disclosed and should not be disclosed if death was caused by a disability such as AIDS, cancer, or Parkinson's disease. - If death occurred due to a suicide or murder, this may have an impact on the value of the property. It is best to disclose.

Lead Based Paint Properties that were built prior to 1978 may contain lead based paint. Because of this buyers and tenants of these properties must be given a lead based paint notice prior to moving into the property.

Natural Hazard Disclosure Statement (NHD) The NHD Statement* contains information about possible natural hazards such as: -flood area -very high fire severity area -flood inundation area -seismic hazard area -earthquake fault zone *This is not a complete list of hazards contained in the NHD. Mandatory NHD Sample report- Canvas “Files. ”

Water Heater Bracing, Smoke Alarms, and Carbon Monoxide Detectors State law requires all water heaters be anchored or braced so they do not move or fall over during an earthquake. At a minimum, all properties are required to have a smoke alarm. Local ordinances usually require more than one smoke alarm in a property. Carbon monoxide detectors are required for residential properties that contain a carbon/fossil fuel source.

Megan’s Law A buyer is to be provided information that there is a database available to screen the a neighborhood for registered sex offenders. A word of caution: real estate agents should not view this website with their buyers or sellers. The information may not be accurate or updated. Providing inaccurate or incorrect information by the agent may put them at risk for a possible lawsuit.

Agent Visual Inspection Disclosure (AVID) California Civil Code requires that real estate agents who involved in a transaction make a visual inspection of all accessible areas of the property. The California Association of REALTORS® recommends using the AVID form since there is no particular form required under the California Civil Code. Some agents continue to use the Transfer Disclosure Statement, third page.

Summary of Major Mandated Disclosures • • Real Estate Agency Relationship Real Estate Transfer Disclosure Statement Agent Visual Inspection Disclosure ( AVID) Residential Environmental & Earthquake Hazards Disclosure Natural Hazard Disclosure Statement Common Interest Development General Information Seller Financing Addendum & Disclosure Statement • OTHER: - Megan’s Law Military Ordinance Location Home Inspection Notice Water Heater Bracing/Smoke Detector Notice