Property Disclosures - Part 2 - Chapters 18-23 Flashcards
Use the federal lead-based paint (LBP) disclosure to timely disclose the existence of a lead based paint hazard on residential properties built prior to 1978
An owner of a residential property built prior to 1978 cooperates in the LBP disclosure and their agent other marketing efforts by:
- filling out and signing the federal LBP disclosure form
- filling out and signing the TDS containing the LBP, environmental (man made) and other property conditions
- making a physical home inspection report available to prospective buyers as an attachment to the TDS form
- providing the seller agent with copies of any report or document containing information about LBP or LBP hazards on the property
Determine when to deliver the LBP disclosure to a buyer
A prospective buyer of a residence built prior to 1978 is put on notice of LBP conditions by handing them the disclosure forms before they make an offer.
Advise owners and buyers on the conditions of the LBP disclosure
The LBP disclosures advise the buyer they have a 10 day period after their offer is accepted to evaluate the lead based paint risks involved.
Disclose LBP to potential buyer BEFORE they make an offer
Once buyer makes offer, they have a 10 DAY period after offer is accepted to evaluate the LBP risks.
lead-based paint
Lead based paint is defined as any surface coating containing at least 1.0 milligram per square centimeter of lead or 0.5% lead by weight. It was banned by the Federal Consumer Product Safety Commission in 1978.
lead-based paint hazard
A lead based paint hazard is any condition that causes exposure to lead from lead-contaminated dust, soil, or paint which has deteriorated to the point of causing adverse human health effects.
lead based paint exemptions
Exempt from the Federal LBP disclosures are FORECLOSURE SALES of residential property. Yet, a foreclosing lender still has a common law duty to disclose property defect known to them at the time of the foreclosure sale.
Determine when to disclose prior death on a property
Generally, seller’s agents are NOT required to voluntarily disclose info to potential buyer regarding a prior occupant whose death, from any cause, occurred on the property MORE THAN THREE years prior to the purchase offer, or who was afflicted with HIV or AIDS. If a death on the property for some reason adversely affects the market price of the property, it is considered a material fact and must be disclosed.
Assess whether a history of death on a property might affect the buyers valuation or desire to own the property.
On a direct inquiry by the buyer/agent about deaths on the property, the seller’s agent is to disclose their knowledge of any deaths on the property, no matter when they occurred. An intentional concealment of a death after a buyer makes a direct inquiry is a breach of the seller’s agent GENERAL DUTY and the buyer’s agent AGENCY DUTY.
An inquiry by the buyer into deaths indicate a death is a material fact which might affect the buyers use and enjoyment of the property. This imposes an affirmative duty on the buyer’s agent to investigate or recommend an investigation into any deaths before an offer is made.
How are deaths on a property which occur WITHIN THREE YEARS of the offer treated
Deaths are to be disclosed if they occurred within THREE YEARS of the offer being submitted.
Understand the use and operating restrictions placed on conduct in HOA communities in exchange for every other owner-member doing the same
As a common owner of the Common Interest Development (CID) (example Condo Unit) and as a member of the HOA, use and operating restrictions are placed on most types of conduct, including: * parking * pets * guests * signs * use of the pool, rec and common areas * patio balconies * care and maintenance of the unit * structural alterations * the leasing of the premises The implicit bargain in becoming an owner-member is the consent to conform conduct to meet extensive use restrictions in exchange for every other owner-member to do the same.
Identify the obligations and assessments imposed on a buyer of a unit in a common interest development (CID)
The obligations imposed by the HOA on a buyer of a unit in a CID fall into two categories:
* use restrictions contained
* financial obligations to pay assessments
Two types of assessment charges exist to fund the expenditures of HOAs:
* regular assessments, charged monthly
* special assessments, due in lump sum on a date set by HOA
Determine when a seller’s agent is to request the HOA deliver the Common Interest Development (CID) documents concerning use restrictions and HOA finances for delivery to prospective buyers when a CID property is listed
It is at the listing stage when the seller’s agent prepares the owners request to the HOA to deliver up the CID documents concerning use restrictions and HOA finances.
extraordinary expense
An extraordinary expense is brought about by an emergency situation lifting the limits placed on the amount an HOA may charge for regular and special assessments. Extraordinary expenses include amounts necessitated:
- by a court order
- to repair life-threatening conditions
- to make unforeseen repairs
homeowner’s association (HOA)
A Homeowners Association (HOA) is an organization made up of owners of units within a common interest development (CID) which manages and operates the project through enforcement of conditions, covenants and restrictions (CCRs).
pro forma operating budget
The pro forma operating budget is a budget which discloses the amount of assessments collected by an HOA, its cash reserves and whether special assessments are anticipated to occur.
The Pro Forma Operating Budget (PFOB) is the starting point for the prospective buyer’s analysis of the financial impact the purchase of a unit in the CID will have on their income.
regular assessments
An HOA’s regular assessments typically fund the operating budget to pay for the cost of maintaining the common areas in a CID. Regular assessments are set annually and a are due and payable in monthly installments. Regular assessments are limited to a 20% increase over the prior year’s amount.
special assessment
An HOA’s special assessments are levied to pay for the cost of repairs and replacements that exceed the amount anticipated and funded by regular assessments. An increase in Special assessments is limited to 5% of the prior year’s budgeted expenses.
Understand the use of a home inspection report (HIR) to mitigate risks of misrepresentation in the preparation of a seller’s Transfer Disclosure Statement (TDS)
Reliance on a home inspection report (HIR) prepared by an inspector relieves the seller and the seller’s broker from liability for errors in the Transfer Disclosure Statement (TDS) which are unknown to them to exist.
Exercise care in the selection of a qualified home inspector
For a seller’s agent to avoid liability in the preparation of the TDS by relying on the HIR, the seller’s agent need to select a competent home inspector to inspect and prepare the HIR. Thus, the seller’s agent needs to exercise ORDINARY CARE when selecting the home inspector.
Use an energy efficiency audit report by a Department of Energy certified Home Energy Rater to market property
A buyer and their agent may also wish to assess the energy efficiency of the property and the costs of making energy efficiency upgrades. A home energy audit is performed by a Department of Energy-certified Home Energy Rater.
Although Home Energy Raters are specially trained and certified, any home inspector may perform a home energy audit provided the audit conforms to the HERS (home energy rating system) regulations established by the CA Energy Commission.
California Home Energy Rating System
The California Home Energy Rating System (HERS) is a CA state system used to create a standard rating for energy efficiency and certify professional raters.
home inspection report (HIR)
A Home Inspector Report (HIR) is a report prepared by a home inspector disclosing defects in improvements on a property and used by the sellers agent to complete the TDS (Transfer Disclosure Statement) and assure prospective buyers about a property’s condition.
home inspector
A home inspector is a professional employed by a home inspection company to inspect and advise on the physical condition of property improvements in a home inspection report (HIR) for reliance by the seller’s agents and the buyer as a warranty of the condition of improvements. NO licensing scheme exists to set the minimum standard of competency or qualifications necessary to be a home inspector. However, they are required to conduct an inspection with the same ‘degree of care’ a reasonably prudent home inspector would exercise to locate material defects during their physical examination of the property and report their findings.
home energy audit
A home energy audit is an audit conducted by a Home Energy Rater evaluating the energy efficiency of the home.
With the energy audit in hand, a buyer can incorporate the costs of the recommended energy efficient updates into the total costs for purchasing the property.
Home energy audit companies are private, non-profit organizations approved by the Department of Energy (DOE) as a part of the CA Home Energy Rating System (HERS).
