Sometimes it seems as if you are shuffling and signing enough documents to paper the walls of your prospective new home. Documents for the real estate agent, for the bank, for the escrow officer.
If you are selling your old place, there are contracts, disclosures, tax statements, sign here, sign there, this is required by the local realtors board, this is required by state law, this is required by the IRS.
At last, escrow closes. You turn the key in your new front door, walk into the empty place, plop wearily on your new floor and have what may be your first chance to think about it: What was all that paper?
Longtime brokers recall when a seller filled out a one-page statement and a buyer's purchase offer was half a page long, with any contingencies written at the bottom. But buyers sometimes found nasty surprises in their new homes.
Changes in state and federal laws in the past decade have mandated disclosures about the property, the role of the real estate agent, financing terms and other aspects of the home buying transaction.
The result is twofold: "Buyers are about as protected as they can be," said Woodland Hills realtor James R. Gary. And buyers, sellers, lenders and realtors are dealing with more paper work than ever.
Here is a guide to the paper work you are likely to encounter when you sell or buy a home that will be, in industry parlance, owner-occupied:
Disclosure Regarding Real Estate Agency Relationships. This is the first paper you will see. Required by state Civil Code since 1988. It explains that the listing agency ( not the individual agent) may be representing the buyer as well as the seller. This is called "dual agency."
An example: You list your house with Joe of ABC Realty, and Sally of ABC Realty finds you a buyer. ABC Realty, then, is representing both you and the buyer. In other words, don't expect your listing agent and the buyer's agent to be adversaries. You can "elect" for your real estate agency to represent you only, but that means you must rely on agents who work for other agencies to find you a buyer, which would sharply cut the number of potential buyers for your home. Most people go for dual agency.
Seller's Affidavit of Nonforeign Status. Inspired by the Foreign Investment in Real Property Tax Act, which provides that a foreigner who sells property in the United States has to pay the same taxes on any gains as a U.S. citizen. By filling it out, you are saying that you are either a U.S. citizen or a resident alien. For a foreigner who is not a U.S. resident alien, the IRS and the state require that taxes be withheld on the sale price. If you don't supply the buyer with this affidavit, the buyer and broker are responsible for withholding about 13.3% of the sales price for state and federal taxes.
Real Estate Transfer Disclosure Statement. California law has required this one since 1987. In this fairly straightforward form, you list all the features of your home, such as built-in appliances, air conditioning, fireplace, spa, sprinklers; also, facts about utility services and the age of the roof.
This is the place to detail any problems in the home, or anything the new owner will want to know.
"I tell my sellers to be 100% brutally frank," says Annette V. Graw, broker-owner of South Bay Brokers Inc. in Manhattan Beach.
Remodeling or repairs that don't meet code? Cracks in the foundation? Train noise? Homeowners association restrictions? A pipe that has rattled once in the 20 years you have lived there? Disclose it all, Graw advises.
If you fail to mention something, you could be liable. Your real estate agent looks the property over, then makes comments on it in a second part of the form. This is coordinated with disclosures of problems that might be exclusive to your area, such as a special studies zone, bond issue assessment, Metro Rail construction, etc.
Potential Disturbance Disclosure. James R. Gary, of the Woodland Hills brokerage that bears his name, adds this to the standard disclosures. It reminds the buyer in gently mocking tones of the serious possibility of mudslides, domestic and wild animals in the area, radio and vehicle noise, crime, pollution, insects, airplanes flying over and trains going by.
Additional disclosures. Never underestimate the ability of people to find reasons to sue. With this in mind, some brokers make a point of providing information about features peculiar to their area. Gary, for instance, discloses routes being studied for future light-rail lines and freeways, flood control projects, scheduled major freeway repairs and the like. Buyers and sellers sign to acknowledge that they've gotten copies.
Seller Financing Disclosure Statement. If you plan to carry financing, this form (required since 1983) spells out the terms of the loan. In the current market, with loans plentiful, seller financing is not used as much as, say, in the early '80s when credit was tight.
Exclusive Authorization and Right to Sell. This is your contract with a real estate broker to list your home. It tells when the listing starts, when it ends, the asking price, what the agent's commission will be, whether you are willing to carry any financing, whether there will be a key box and a sign on the property, what you intend to do about pest control, and how any disputes with the broker will be handled.
There are other types of listing agreements, but this is the one used in the majority of sales.
Multiple Listing Service agreement. This one summarizes the square footage and major features of the house, for publication by the local MLS. Some local realty boards require member realtors to list all property in the MLS, unless the seller specifically forbids it. The law has nothing to do with this.
Once you've made it through these documents, the process of selling your home begins. If anything changes--a pipe bursts, or your agent persuades you to change the price, for example--new disclosures or contracts must be signed.
Then there are the papers involved when you go to buy another home. Here are the ones needed when buying a resale home:
Disclosure Regarding Real Estate Agency Relationships. Again, this tells you that the agent who shows you a house and the agent who listed the house may be working for the same broker and are not adversaries.
Additional disclosures. As a prospective buyer, you may have to sign acknowledging receipt of information about things peculiar to the area you are shopping in. Noise, fumes, possible future rail, freeway or airport projects--these are things you will want to know about, and the realtor and/or seller may want it in writing that you have been told.
Real Estate Purchase Contract and Receipt for Deposit. This is your offer, and it is a contract. It can take two hours to fill out, but don't rush through it: With this document you are committing yourself, and you had better be sure you understand everything in it.
Your offer contract has 23 items on it, and each one can be a negotiating point. "Anything you want the seller to do (such as repairs, pest inspection or financing help) has to be in this contract," Graw notes.
This specifies the down payment, the kind of loan, when you will take possession of the house, receipt of your "earnest money" deposit. The terms may change--and everything will (or should) be put in writing--during negotiations with the seller.
Typically, you will not see the seller's Transfer Disclosure Statement (TDS) when your offer is written. Once you have seen the TDS, you have three days to back out if you find something there that you don't like.
Contract Supplement. Any unusual contingencies (such as having to sell a house before you can buy one) go into this write-your-own contract for things not in the Purchase Contract form.
Model by MICHAEL HALL / Los Angeles Times