Disclosures Flashcards
A salesperson is aware that the Lone Pine City Council
has voted to widen Highway 395 in downtown and that work will begin in several months. The salesperson is showing a property along Highway 395 to an out of town buyer - customer.
What is the salesperson’s responsibility to the buyer?
1. Do not disclose the road widening…the salesperson
represents the seller
2. Disclose the road widening…it is a material fact to which the buyer is entitled to know
3. Do not disclose the road widening…the principle of
caveat emptor applies
4. Do not tell the buyer, as this is a patent defect
- Disclose the road widening…it is a material fact to which the buyer is entitled to know
CAR Residential Resale Purchase Agreement (RPA) states property is sold “as is” in its present condition however, the seller must disclose:
• Patent versus Latent
• Patent – open defect
– Caveat emptor, a Latin phrase meaning, let the buyer beware is becoming a thing of the past.
• Latent – hidden defect
– Must be disclosed
• Material facts – must be disclosed to all: clients and customers
Transfer Disclosure Statement (TDS)
• Statutory disclosure that most sellers of residential property (1-4) must provide
to prospective buyers.
• The condition of the property
• Any matters known to seller affecting title
• Is a detailed statement telling what the seller knows about the condition of the
property.
• The sellers must disclose, in writing, any and all known material facts that affect
the value of their property whether the buyers ask or not.
A private seller advertises a single-family home for sale “as is”. Since the seller is not using the services of a real estate broker, the seller:
A. Has met the legal requirement of caveat emptor by
putting the term “as is” in the newspaper advertisement.
B. Is not obliged to disclose any defects in the property because the property is being sold “as is”.
C. Must give a Real Estate Transfer Disclosure
Statement to prospective buyers.
D. Is not obliged to give a Real Estate Transfer
Disclosure Statement to prospective buyers.
C. Must give a Real Estate Transfer Disclosure
Statement to prospective buyers.
The Real Estate Transfer Disclosure Statement (TDS)
• The TDS is a detailed statement telling what the seller knows about the condition of the property.
• is a statutory disclosure that most sellers of residential property (1-4) must provide to prospective buyers.
– This law applies to For Sale By Owner
• The sellers must disclose, in writing, all known material facts that affect the value of their property, even if the buyers don’t ask.
- The “as is” language in the contract gives notice of patent defects and means that the buyer accepts the property in the condition in which it is reasonably observable by him or her.
- Selling a property “as is” means that the seller is not going to fix any of the problems.
- Buyer can request repairs; however, seller is not obligated to make any repairs.
• Latent (hidden - not openly visible) versus Patent (open)
– Must disclose known or suspected latent defects!
Federal regulations require many prospective purchasers and tenants to receive disclosure information about which environmental issue?
- Lead-based paint
- Radon
- Asbestos
- Buried storage tanks
- Lead-based paint
- The lead-based paint disclosure is required for any residential property built before 1978, whether or not a problem exists
- Only need to disclose radon, asbestos or buried storage tanks if you know or suspect their presence
All listing brokers must conduct a reasonably competent and diligent visual inspection of the property.
Which items must be visually inspected?
A. Condominium common area
B. Permits held in the name of the condominium association
C. Condominium unit
D. All of these items must be visually inspected by a listing broker.
C. Condominium unit
- If the property is a condominium, the real estate agent is responsible for inspecting the unit, not the common area.
- Real estate agents do not have to inspect areas of the property that are not reasonably accessible such as public records or permits.
A Real Estate Transfer Disclosure Statement is required in the _ of one-to four residential units.
A. sale
B. lease
C. foreclosure
D. all of the above
A. sale
Transfers Exempt from the Disclosure Requirement
• From one co-owner to another
• Spouse or another related person resulting from a dissolution of marriage, legal separation, or a property settlement agreement
• Pursuant to a court order, foreclosure sale, or probate estate sale
• By the state controller for unclaimed property
• Resulting from the failure to pay taxes
• From or to any governmental entity
• First sale of a newly constructed home in a subdivision, provided a copy of a public report is delivered to the purchaser
A pest-control company discovered no evidence of termite in a house offered for sale. But it did discover conditions that are likely to lead to infestation.
The cost of correcting such conditions is:
A. always paid by the seller.
B. always paid by the buyer.
C. split 50/50 by the seller and the buyer.
D. paid by the buyer only if he or she wishes to have these conditions corrected.
D. paid by the buyer only if he or she wishes to have these conditions corrected.
• Seller is under to obligation to make any repairs however repairs can be negotiated.
Most likely, current issues the seller would fix and potential future issues the buyer would want fixed.
During negotiations for the purchase of a house, the seller never informed the buyer that the house was served by a septic tank with a failed drain field. Escrow closed and the buyer moved in.
What recourse does the buyer have? A. Revoke the offer. B. Litigate in court against the seller based on fraud. C. Rescind the contract with the broker. D. Sue the title company.
B. Litigate in court against the seller based on fraud.
- Once escrow is completed and the deed is recorded, buyer is now the owner.
- Buyer’s recourse would be to sue the previous owner (seller).
What are the steps to disclose an agency?
- Elect, Disclose, Confirm
- Elect, Confirm, Disclose
- Confirm, Elect, Disclose
- Disclose, Elect, Confirm
- Disclose, Elect, Confirm
Steps in the Disclosure Process for Agency
• Disclose, Elect, Confirm
STATUTORY DISCLOSURES - Agency Agency Disclosure (AD Form) - Describes the obligations of an agent as seller’s agent, buyer’s agent, or dual agent.
Agency Relationship
• Seller’s Broker (Listing Agent) represents Property Seller
• Buyer’s Broker (Selling Agent) represents the Buyer
Who presents the agency disclosure?
- Seller’s agent before the entering into a listing agreement
- Buyer’s agent before the buyer makes an offer to purchase
- The seller’s broker to the buyer’s broker before any transaction
- Both 1 and 2 .
- Both 1 and 2 .
- Seller’s agent must deliver the form to the seller before entering into a listing agreement.
- Buyer’s agent must provide the form to the buyer before the buyer makes an offer to purchase.
Election of the Agency - Options: • Seller’s Broker (Listing Agent) • The Seller Exclusively • Both the Seller and Buyer • Buyer’s Broker (Selling Agent) • The Buyer Exclusively • Both the Seller and Buyer
What case resulted in having the seller’s agent complete the Transfer Disclosure Statement?
- Easton v. Strassburger of 1976
- Consumer Credit Protection Act
- Holden Act
- Interstate Land Sales Full Disclosure Act
- Easton v. Strassburger of 1976
SELLER’S STATUTORY DISCLOSURES
• As a result of the Easton v. Strassburger case
• Sellers must complete a Transfer Disclosure Statement (TDS).
• Real estate agents must perform a visual inspection of the property and
complete Agent Visual Inspection Disclosure (AVID).
• Red flag is something that alerts a reasonably observant person of a potential
problem.
• Typically, a red flag could include cracks in walls, foundations, and
sidewalks; stains from leaks in the roof, and similar items.
Consumer Credit Protection Act - A federal law that includes the Truth-in-Lending Law.
Holden Act - (1) A law designed primarily to eliminate discrimination in lending practices based upon the character of the neighborhood in which real property in located. (2) Also known as Housing Financial Discrimination Act of 1977. (See redlining)
Interstate Land Sales Full Disclosure Act - A federal law that protects consumers from fraud and abuse in the sale or lease of land. The Act is regulated by the U.S. Department of Housing and Urban Development (HUD) and attempts to prevent marketing schemes that entice consumers to purchase land sight unseen.
