Property Disclosure Documents & Forms Required in Real Estate

Instructor: Tara Schofield

Tara has a PhD in Marketing & Management

A home or property is the largest purchase most people will make. Disclosures are necessary to help provide information, explain problems, or identify factors that may affect the transaction. Learn about those disclosures in this lesson.

What are Disclosure Documents?

Great news! A seller, Paul, has just contacted you to list his home with you. Paul is moving to another state and needs help to sell his property. Because this is your first listing, you want to review which disclosures and forms you need to fill out.

A disclosure document is a signed statement from either the buyer or seller that provides specific information about the property or the party's actions regarding the transaction.

Types of Disclosures and Forms

Disclosures and forms can be used to provide and communicate a wide variety of information. This information can help either or both parties to make an informed decision about the sale or condition of the property. Let's go over some common types of disclosures and agreements.

Affiliated Business Agreements

The affiliated business arrangement disclosure is the agency agreement that states how you will represent the buyer or seller and how you will get paid. In the instance with Paul, you identify your role as the seller's exclusive agent and Paul agrees to pay 6% of the sales price as commission at closing. This agreement states what you will do as the agent and what your client is responsible for handling.

For instance, your agreement with Paul states that you will market his property and help negotiate a sale. Paul's agreement is to work with you without hiring other agents and respond to you quickly regarding offers or negotiations for his home.

Personal Interests and Relationships

If there are any situations that could be considered a conflict of interest or may affect the transaction, you must disclose this information to your client (and the other client, if necessary). There are several situations that could require this type of disclosure.

If a person owns the property they are selling, they must disclose this information to the buyer. In the situation with Paul, if the buyer's agent worked at the same agency you work for, you must disclose this fact to Paul. There are many relationships that may fall in this area. When in doubt, disclose the information to your client, preferably in writing. If you have specific questions, talk to your managing broker to get clarification on appropriate actions.

Seller's Disclosures

You ask Paul to fill out a seller's disclosure form. This form provides the seller a chance to tell the buyer about the condition of the systems, appliances, and general condition of the home. For instance, if Paul replaced the water heater two years ago, that information is listed on the form.

Likewise, if there is a problem with the air conditioning unit, Paul can state that on the form and give the buyers a heads-up that the unit may need to be replaced soon.

This form does not replace the need for a professional inspection. But input from the seller can be helpful for buyers when they take possession of their new home.

Inspection and Walk-Through

A professional inspection is usually a good idea, especially if a buyer is getting a loan on a property or they want to know if there are problems with a home. An inspector will look at the structure to ensure the foundation is secure and there are no visible problems with the walls and roof.

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