RESOURCES

WHSD- Water Heater & Smoke Detector

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The WHSD (Water Heater & Smoke Detector) introduces both parties of the transaction to the requirement of installing both a Water heater (to be braced, anchored & strapped due to earthquake hazards) and smoke detectors. This form is required ONLY when the TDS is not included in transaction (e.g. a trustee sale).

 

TA - Trust Advisory

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When a home is held in a trust, it is not uncommon for the trustee to have never lived or even been at the property. Although the trustee will most likely be able to only provide very little information when selling the home, he/she is still obligated to provide disclosures that outline the general compliance of the home. The TA (Trust Advisory) clearly defines what these requirements but also identifies which disclosure the seller (trustee) is not responsible for.

 

SPT- Notice of Supplemental Tax Bill

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Most homes are sold regardless of where we are within the tax year. However it is important to note the buyer is responsible to ensure that taxes are paid from the day he/she takes ownership of the property.

SIP - Seller's License to Remain in Possession Addendum

Ideally after the transaction has closed all parties go their way. However in many cases the seller may require additional time to either move or find a new home. In such cases the SIP (Seller's License to Remain in Possession Addendum) acts a mini lease between the new owners and the seller. It covers the main terms that both parties should agree on such as deposit amount, daily or monthly monetary considerations, length of possession and insurance.

 

SBSA- Statewide Buyer & Seller Advisory

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The SBSA serves a  guide to what the responsibilities of the buyer and seller of a transaction are as well as the various real estate terms & lingo that your clients will encounter throughout the transaction. As this is one of the largest investments your client will make, it is important for your client to become familiar with these terms.

 

RFR- Receipt for Reports

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As we all know there can be A LOT of reports throughout a real estate transaction. Just to name a few: the home inspection and all other inspection Reports, NHD Report, Appraisal and Termite Report. It is very important however to make sure that your buyer has at least been made aware of the reports that are in circulation throughout the transaction in order to protect yourself in case of a lawsuit due to something that should have been pointed out in one of these reports. To make life easier, the RFR (RFR- Receipt for Reports) serves as a great tool to summarize each report to be signed by your buyers.

 

RCSD- Rep. Capacity Signature Disclosure

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Oftentimes you will find that your client is either purchasing or selling the property through either a Trust, Corporation, Limited Liability Company, Partnership company. If this is the case, the identity of the representative of such entity must be disclosed to the counterparty via the RCSD (Rep. Capacity Signature Disclosure).

 

NHD Report & Receipt

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California state law requires the sellers and their listing agent to provide prospective buyers with a Natural Hazard Disclosure statement that designates whether the home they're selling is located in a hazard area. Hazard areas include flood, fire, earthquake fault and seismic hazard zones. The disclosure will also note whether the home is subject to Mello Roos tax. Paid for by the sellers, the report is prepared by a city engineer, geologist or land surveyor. Buyers must get the disclosure during the inspection contingency period and will have three days to decide if they want to rescind their offer based on the report's findings. It must be signed by all parties before the transaction can close.

 

MCA- Market Conditions Advisory

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You’ll find that your clients often come from many different industries but typically not from real estate (otherwise they’d most likely be able to purchase their own home). Due this very reason it is important to make your buyer aware of some of the key aspects of the real estate market & transaction itself. The MCA (Market Condition Advisory) cover briefly how real estate markets operate and how the offer process works and how contingencies affect your client's offer.  

 

LAD-Local Area Disclosure

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Every neighborhood is different so are the some of the factors (natural or man-made) that can affect one’s quality of life when living there. Airports cause noise, nearby entertainment attractions such sports stadiums can cause elevated levels of traffic while nearby industrial buildings may release smells and other nuances into the air. The LAD (Local Area Disclosure) gives the buyer an understand of these factors if present. Keep in mind that some areas that are not affected and may therefore not require this form, however you should always check with your broker in order to keep the transaction compliant.

 

FLD- Lead Base Paint

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Exposure to lead could potentially have negative consequences to one’s health. Many home builders prior to 1978 used building materials (such as paint) that included certain amounts of lead. The FLD Disclosure whas put in place In order for your clients to understand the presence of lead in the prospective home and the health dangers that originate from being exposed to lead.

 

FVAC- VA/FHA Amendatory Clause

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FHA financing is a wonderful tool for many prospective homebuyers who could otherwise not afford to do so. The FHA Amendatory Clause is intended to ensure that home buyers with FHA-backed loans receive important information in a timely manner about the house to be purchased. The Amendatory Clause states that if the buyer has not received information about the appraised value of the home he/she intends to buy, he/she is not obligated to purchase the home. If they elect not to buy the house, the buyers shall not be required to forfeit earnest money they have deposited for the purchase.

 

EQ- Earthquake Hazard

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Unfortunately, Earthquakes are a reality of living in California. Although you clients may often times not even aware that we live in one of the most earthquake prone states. The EQ Booklet describes the most common weaknesses that can cause damage to homes, in the event of an earthquake. Providing this booklet is only required if the home was built in or before 1960. It was around that time new building requirements took into effect that increases a home's safety from potential earthquake damages. You as the agent are required to ensure that your clients received this booklet and sign the EQ-Receipt as a form of acknowledgement.

 

ESD- Exempt Seller Disclosure

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ESD is required only if the seller is not required to provide a Transfer Disclosure Statement (TDS). It covers some of the similar items as the TDS however it is much more general in scope. The circumstances in which the seller maybe exempt from filling out a TDS are as follows:

• 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.

• 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.

 

ENV- Environmental Hazards Booklet Receipt

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The ENV short for Environmental Hazards Booklet is a guide for the home buyer to learn about the existence of various environmental hazards. It is not specific to one owns property but rather a general piece of educational information. It’s important for homeowners to understand how nature may affect their home which is why the receipt of this booklet has to be acknowledged via the Environmental Hazards Booklet Receipt.

 

Buyer’s Affidavit

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The Foreign Investment in Real Property Transfer Act (FIRPTA) had been put in place to help alleviate tax evasion by foreigners when selling a property in the United States. Essentially, the FIRPTA requires any buyer of a U.S. real property interest to withhold ten percent of the amount realized by a foreign seller. One of the exemptions being if the purchase price falls below $300,000. In such case, the buyer will have to sign the Buyer’s Affidavit in order to comply with the law to be exempt from withholding these taxes.

 

BIW- Buyer Inspection Waiver

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As we all know there are many inspections involved throughout the transaction however did you know that it’s in your best interest to have your clients indicate if they chose NOT to conduct an inspection? Most agents will find it suffice if their client verbally states that they are not interested in inspecting the property and call it a day. However, the verbal word can be easily understood in many different ways and buyers enjoy a great deal of protection in the state of California. Iit is absolutely prudent to get the refusal of an inspection in writing through the use of a Buyer Inspection Waiver. It clearly outlines which inspections are most important and gives the buyer to opt out to conduct any of them if they wish to do so.  

 

ABA- Affiliated Business Disclosure

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There are many moving parts when it comes to buying or selling a home. And often times it feels like there are equally many different Vendors involved. From home warranties to title insurance, the home buyer and seller will encounter numerous services they often times had no idea they needed. Often times these services come recommended by their real estate agent and this is where things can get sticky. In an effort to avoid unlawful kickbacks and incentives, RESPA (Real Estate Settlement Procedures Act) now requires for the Affiliated Business Disclosure to clearly indicate which services are inhouse (owned and operated by the same office as the representing agent).

 

AAA- Additional Agent Acknowledgement

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The Additional Agent Acknowledgment is needed whenever you have a fellow colleague jump in to help with the transaction. We see this form most commonly used in conjunction with the AVID. If for example, the selling/listing agent can’t make it to the property to conduct the walkthrough for the AVID, he/she will have a colleague step in and also fill out the AVID. However, since the actual selling/listing agent was not physical presence at the time of the walkthrough, the Additional Agent Acknowledgement Form is required to be signed by all parties.

 

The VP, what to note

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Although the VP abbreviation might be easily confused with Very Important person, it can easily be remembered as a Very Important Document :)

 

The VP, aka Verification of Property is broken out into two sections; the first section gives the buyer the opportunity to voice any concerns about unexpected physical changes of the home discovered during the his/her final walk through. This includes any items that may have been addressed via a Request for Repairs and require further attention.

 

If the home is found to be in the expected condition, and nothing is to be noted, the buyer initials the second part of VP, indicating that he/she is satisfied with the findings of the final walk through and does not require and further inspections. Keep in mind that at that point the VP will act as a waiver and hence only the buyer's signature is needed

 

RR & RRRR (that’s a lot of Rs)

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Just after everyone thinks that the home has been locked in and the final price determined, the inspection period begins and with that a whole new can of worms has opened.

 

During the inspection period the buyer is given the chance to determine the physical shape of the home he/her is about to purchase. Sure, most homes look great on those MLS pics, however an inspection can help uncover unexpected items that may require costly repairs. In such case the RR aka Request for Repairs is the agent’s weapon of choice. It is broken out into 3 sections; in the the first section the buyer can a) request items to fixed directly by the seller b) request all termite damage to be directly fixed by the seller, c) request a $$$ in form of a credit towards closing costs or d) suggest a reduction of the purchase price.

 

In the second part the seller has the options to agree with the request or counter via the use of a RRRR aka the Seller’s Response and Buyer’s Reply to the Request of Repairs (more on that in a sec).

Once an agreement has been reached, it will be concluded in the last (3rd) part of the RR by prompting the buyer to remove their Physical Inspection Contingency and therefore move the transaction along.

The RR Counter aka RRRR aka Response and Buyer’s Reply to the Request of Repairs is again broken out into 3 parts; first the seller is given the opportunity to formulate a reply to the RR. In the second part the buyer can 1) accept the counter or 2) accept the seller’s counter with certain modifications or 3) draft an entirely new request i.e. counter the counter. The 3rd part, applies if modifications to the counter have been requested by the buyer. Here the seller can either accept these modifications or reject them.

 

WCMD / CMD which one to use and why?

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There’s often confusion of which of the two, WCMD & CMD ought to be used as part of the disclosure. Below is a brief explanations of when which one to use and why.

 

This disclosures is actually a Notice with 1994 being the magic year. Prior to 1994, most homes were constructed using an outdated and inefficient plumbing system. New systems have since become available, which is why the seller/buyer of a homes built prior to this year will be required to sign the WCMD, aka the Water- Conserving Plumbing Fixtures and Carbon Monoxide Detector Notice.

This Notice is to inform the buyer 1) that he/she has been made aware that the home will have to be equipped with water-conserving plumbing fixtures after January 1, 2019 and 2) the California Law requires that  as of July 1, 2011, all existing single-family dwellings have carbon monoxide detectors installed. If the owner at that time fails to have made the instalment, he/she will in violations and could potentially face a fine of up to $200.

Naturally, if the sale involves a home that has been built after 1994, the Water- Conserving Plumbing Fixtures does not apply which why we use the CMD which only covers the Carbon monoxide detectors installation.

 

What’s the point of the TDS?

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As transaction coordinators we get asked this question numerous times which is why we decided to put together a brief explanation that you can use with your clients.

 

The TDS (aka. Transfer Disclosure Statement) gives the seller the opportunity to indicate many of the physical aspects he/she knows about the home. It also allows the seller to point out and comment on modification that have been made to the home during his/her ownership. This is not a quiz, hence there are no right or wrong answers here however the seller is expected to fill out this form truthfully to the best of his/her knowledge.

Additionally, on the last page the TDS also suggests for the buyer to obtain an inspection of the property by a professional and clarifies that the agent will only conduct a visual inspection of the accessible areas of the home.

 

We hope this summary will come in handy next time your clients ask about the need for the TDS.

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How does the SPQ help the buyer?

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“Didn’t I just fill this out?!” you will perhaps often hear from your clients when faced with the SPQ. Fear not however as the quick answer below covers the main aspects of the SPQ and why it’s important to the real estate transaction.

The SPQ (aka. Seller Property Questionnaire) gives the seller an additional opportunity to share their knowledge about their property in regards to items that have not been covered on the TDS.  Very much like peanut butter and jelly, the TDS and SPQ do NOT go without the other. While the TDS covers the disclosure of issues on a higher level the SPQ goes into further detail on particular subjects such as water/mold issues, structural defects and repairs & alterations. Importantly, it gives the seller the opportunity to disclose if anybody passed away on the property within the last 3 years.

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Be avid when filling out an AVID!

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Everyone knows about the AVID but sometimes it can be confusing how & and when to fill one out. Here’s a brief primer on how to handle the AVID:

 

The law requires that the agent conducts a reasonably competent visual inspections of the property in an effort to catch any material defects that may change the value or desirability of the home. Unless indicated otherwise on page 3 of the TDS, an AVID will be used to satisfy this requirement.

The law, however, recognizes the fact that the agent is not a professional home inspector which is why this inspection is quite limited in scope. The first page of the AVID discloses to the buyer/seller what will and what will not be included in this inspection. The second and 3rd page give the agent the opportunity to mark any noticeable defects as he/she is walking the property.

 

At the bottom of the 3rd page both parties sign the AVID, to not only acknowledge the discoveries of the inspection but also acknowledge a reminder that advises the buyer to seek out an appropriate professional for any further inspections.