Who Are the Real Estate Disclosures Protecting?

In a world where lawsuits are common place in real estate, how does anyone protect themselves from litigation when selling a house. Even in California where all houses are sold as is, is there an implied responsibility to disclose things. What if you have never lived in a house that you are selling?

According to the courts, the answer is yes and so with every new lawsuit and judgement, come brand new disclosures to protect the seller and buyer but more importantly they protect the agents that are involved in a transaction.

Contrary to popular opinion,  real estate agents are not a requirement in any real estate transaction. The truth of the matter is that most people add real estate agents as a convenience for assistance in marketing, managing showings, providing access and scheduling inspections and appraisals.

But when a seller or buyer hires a real estate agent, that relationship is taken to a new level and its known as agency. That agency creates a fiduciary level of responsibility within the transaction that did not exist before. Many of the disclosures that you see and sign today are only a requirement born and created to protect the real estate agents from lawsuits from the buyers and the sellers after a transaction has closed.

Disclosures are documents of protection for everyone, but are critical for agents to document that they have recommended certain actions by the buyer and seller. Brokers, especially in California,  avoid lawsuits by having their agents have sellers and buyers sign multiple disclosures for everything as a way to document that they performed their duties as a fiduciary. It really is that simple.

Most disclosures are born out of that agency relationship and some brokers require the agents to have everything signed (whether legally required or not) as a matter of covering their own asses before the agent can get paid. It is a big reason why real estate agents are known a “paper pushers with no purpose”. In the end, these documents become part of the sales record if they are ever called into question they can be retrieved.

While some of the documents actually do provide necessary information to buyers. The bad habit of some agents, having sellers blindly blanket signing is creating additional liability that the seller wouldn’t otherwise already have.  I can remember a few circumstances where as the buyer and seller I have refused to sign certain disclosures that tacitly affirmed knowledge of something that I was in fact not aware of.  In other words, these disclosures are creating additional liabilities for sellers where they would other wise not have that liability.

So, Who Are the Real Estate Disclosures Protecting?

The knee jerk response is always the Buyer. The argument has always been presented that the buyers have a right to know if something is going to materially affect the value of their property. Simply put, If you, as the seller know something, you need to disclose it. That is the original intent of the disclosures, right? After reading some of them lately… I am not so sure.

Buying and selling houses in Sacramento, Stockton and Modesto has become a business for me. I want to be protected as well. Along that journey I have completed hundreds of transactions mostly representing my self and at times I have been represented by a real estate agent or broker. It has been interesting to note the vast differences in the amount of paperwork alone if I am not utilizing their services.

Now granted my purchase and sale agreement is at a maximum of three pages. A real estate agents agreement is 15 pages. You get the point.

In every case that a real estate agent has been involved, whether buying or selling, the sheer number of disclosures has become daunting. The paradox is that some of them actually deal with the condition of the house but the majority do not.

In today’s article I wanted to uncover the purpose for many of the disclosures that agents are required to have you sign.  I have often wondered why real estate agents have so many different disclosures. For them its all about the rules, regulations and procedures and covering their collective rear ends.

Where does it begin and How Many Disclosures are there?

It  all starts with the Seller and the listing agreement. From that point forward it appears to be the beginning of an endless drip campaign of seller disclosures that are designed to flow to the buyer. Some are required by law, others are local practice by brokers and others are just plain made up.

California Association of Realtors forms

  • Residential Listing Agreement
  • Agent Visual Inspection Disclosure (AVID) – one from the listing agent, and another from the buyer’s agent
  • Carbon Monoxide Detector Notice (CMD)
  • Disclosure and Consent for Representation of More than One Buyer or Seler (DA)
  • Disclosure Regarding Real Estate Relationship Listing Firm to Seller  (AD-1)
  • Homeowner Association Information Request if applicable (HOA)
  • Lead Based Paint and Lead Based Paint Hazards (FLD)
  • Market Conditions Advisory (MCA)
  • Real Estate Transfer Disclosure (TDS)- Seller answers questions
  • Seller Property Questionnaire (SPQ) – Seller answers questions
  • Seller Affidavit of Non-Foreign Status Status – Foreign Investment in Real Property  Tax Act (FIRPTA)
  • Statewide Buyer and Seller Advisory
  • Water Heater and Smoke Detector Compliance (WHS)
  • Wire Fraud
  • Megan’s List
  • Inspections Advisory
  • Lead Paint
  • Water Fixtures
  • Others

Sacramento (City) Local Ordinances and Other Disclosures

  • Sacramento Local Disclosures
  • Natural Hazards Disclosure
  • Earthquake Booklet Receipt
  • Residential Earthquake Hazards Report — Seller answers questions

XYZ Realtors agency internal disclosures

  • Notice to Buyers and Sellers Regarding Foreign Investment
  • Public Records Seller Advisory Disclosure
  • Seller Advisory Regarding Completing the Transfer Disclosure

And during the listing period, or in case of an accepted contract, one may anticipate any or a combination of the following

  • Modification of terms (if listing is extended, price is reduced, etc)
  • Counter offer
  • Purchase Agreement Addendum (if buyer is getting a second loan, for example)
  • Request for Repairs or Credits
  • Notice to Buyer to Perform
  • Extension of Time – to extend contingency period or close of escrow
  • Demand to Close Escrow
  • And if things don’t work out, Cancellation of Contract and Joint Instructions to Escrow

Disclosures Don’t take the Place of Inspections

As annoying as the sheer number of disclosures can be, the other process that is really beneficial for buyer and sellers are the inspections. Inspections are the best source of disclosures and reveal the true condition of the property. Is it any wonder that over 98% of the house buying population orders at least one home inspection?

Sometimes the best way to Correct a House Problem is To Just Sell it.

My name is Peter Westbrook and I am a local Cash House Buyer in Sacramento, Stockton and Modesto. I have been in business for over 10 years and this is one of those topics that is near and dear to my heart.

As a we buy houses company, we buy houses in their current as-is condition. We don’t require disclosures, inspections or appraisals.

If you need to sell your house fast in Sacramento and get the most money from the sale I would suggest that you call me at (209)481-7780 and get a no obligation cash offer. You can also visit my website at http://www.westbrookrei.com and fill out the short form and I will call you. Either way I think that you will be pleasantly surprised on my ability to make an evaluation and offer to purchase your house.

At “Westbrook REI” we are the best at what we do because we work at it every day. We understand that a commitment to customer and a commitment to our business only happens with hard work. We have years of experience and a plan that we follow. We are a real company with real people that are committed to helping you achieve your goals.

Call me today and I will talk to you personally.

Sell Your Sacramento House As-Is

Peter Westbrook

Peter Westbrook is a local Cash Home Buyer / Real Estate Investor in Stockton, Sacramento and Modesto CA and Tulsa Oklahoma. He has written numerous real estate articles that have been published here and by other blog and news outlets. Peter has appeared on several local and national news reports regarding the state of the Stockton and Sacramento Real Estate Markets.

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