Lender Owned Property - Disclosure
November 5, 2008
Since such a high percentage of real estate being sold in this market consists of lender owned properties; commonly referred to as REO (real estate owned), I thought I might share the list of disclosures that are legally required by either California or Federal Laws. I realize that some of this disclosure may be difficult to obtain, but as a purchaser or as an agent, it is useful to know
what you can request of the lender/seller.
In California:
1. Agents must give Buyers and Sellers an Agency Disclosure Statement which defines the duties of the three different types of agency permitted under California law.
2. Agents must do reasonably diligent visual inspection of the property and give the Buyer a written copy of their observations.
3. Lender/sellers must give Buyers a Pamphlet entitled "Protect Your Family from Lead in Your Home" if the house was built prior to 1978. This pamphlet is incorporated in C.A.R.'s Combined Hazard Book.
4. Lender/seller must provide the Buyer with a Lead Paint Hazard disclosure indicating whether the seller has knowledge of lead paint on the property.
5. Lender/seller must provide the Buyer with the governing documents for condominiums or other common interest developments as well as minutes, financial statements, etc. that are required by law.
6. Lender/seller must disclose if the Buyer will be required to carry flood insurance.
7. If the Lender/seller has knowledge of any material facts that might be a factor affecting a Buyer's decision to purchase the property, the lender/seller is required to make those disclosures. Using a C.A.R. Seller Property Questionnaire would be helpful in fulfilling this obligation.
8. Lender/seller is required to disclosure in writing a pending issue from a health officer prohibiting the occupancy or use of a property contaminated by meth lab activity.
9.Lender/seller must disclose the availability of a database of registered sex offenders in at least 8-point type font.
10. Lender/seller must deliver to Buyer a statement of compliance with the smoke detector and with the hot water heater laws.
11. Lender/seller must provide a Buyer with a notice of the advisability of title insurance in a separated document if title insurance is not being provided.
Federal:
Under the Federal Investment in Real Property Tax Act (FIRPTA) a Buyer must withhold 10% of the sales price from the seller's proceeds, and send it to the IRS, unless an exemption applies.
An exemption is available if the Lender/seller provides the Buyer with a written certification that the lender is a nonforeign corporation.
Under California state law, a buyer must withhold three and a third percent of the sales price without certification that the lender is a corporation qualified through the California Secretary of State or has permanent business in California
There are many other recommended disclosures and a Buyer of a REO property should use due diligence in inspecting the property, but the above are the minimum required. Don't be afraid to request them from the Seller or the Seller's agent.
Since such a high percentage of real estate being sold in this market consists of lender owned properties; commonly referred to as REO (real estate owned), I thought I might share the list of disclosures that are legally required by either California or Federal Laws. I realize that some of this disclosure may be difficult to obtain, but as a purchaser or as an agent, it is useful to know
what you can request of the lender/seller.
In California:
1. Agents must give Buyers and Sellers an Agency Disclosure Statement which defines the duties of the three different types of agency permitted under California law.
2. Agents must do reasonably diligent visual inspection of the property and give the Buyer a written copy of their observations.
3. Lender/sellers must give Buyers a Pamphlet entitled "Protect Your Family from Lead in Your Home" if the house was built prior to 1978. This pamphlet is incorporated in C.A.R.'s Combined Hazard Book.
4. Lender/seller must provide the Buyer with a Lead Paint Hazard disclosure indicating whether the seller has knowledge of lead paint on the property.
5. Lender/seller must provide the Buyer with the governing documents for condominiums or other common interest developments as well as minutes, financial statements, etc. that are required by law.
6. Lender/seller must disclose if the Buyer will be required to carry flood insurance.
7. If the Lender/seller has knowledge of any material facts that might be a factor affecting a Buyer's decision to purchase the property, the lender/seller is required to make those disclosures. Using a C.A.R. Seller Property Questionnaire would be helpful in fulfilling this obligation.
8. Lender/seller is required to disclosure in writing a pending issue from a health officer prohibiting the occupancy or use of a property contaminated by meth lab activity.
9.Lender/seller must disclose the availability of a database of registered sex offenders in at least 8-point type font.
10. Lender/seller must deliver to Buyer a statement of compliance with the smoke detector and with the hot water heater laws.
11. Lender/seller must provide a Buyer with a notice of the advisability of title insurance in a separated document if title insurance is not being provided.
Federal:
Under the Federal Investment in Real Property Tax Act (FIRPTA) a Buyer must withhold 10% of the sales price from the seller's proceeds, and send it to the IRS, unless an exemption applies.
An exemption is available if the Lender/seller provides the Buyer with a written certification that the lender is a nonforeign corporation.
Under California state law, a buyer must withhold three and a third percent of the sales price without certification that the lender is a corporation qualified through the California Secretary of State or has permanent business in California
There are many other recommended disclosures and a Buyer of a REO property should use due diligence in inspecting the property, but the above are the minimum required. Don't be afraid to request them from the Seller or the Seller's agent.
posted by shirley harry at 9:41 AM
2 Comments:
This is really informative and can serve as a help/guide for both agents, and purchaser. Good article!
Great article. Home buyers should be careful with agents that are only interested in the money they get. This article should help home buyers distinguish a honest agent from those that aren't.
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