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Real Estate Transfer Disclosure Statement

DEFINITION

A real estate transfer disclosure statement, or TDS, is a legally required document that a property seller has to provide a buyer.

EXPLANATION

A TDS is a type of seller disclosure that’s usually three pages long and is very important because it can be used by the buyer in court in case there is information that isn’t disclosed upon closing of the sale. During the contingency period, the seller is required to disclose information to the buyer. The seller is required by law to fill out the form ‘with honesty and in good faith’ regardless of whether the real estate broker will see the contents of the form or not. During the contract contingency period, the buyer has the option to decide whether or not they will follow through with the sale. The seller disclosure is a list of information about the property that includes needed repairs, safety hazards if any, history of maintenance, needs for upgrades, etc. It’s important that a buyer has as much information as possible at the time of negotiation to decide if they really want the property.

The seller has to complete the form in their own handwriting. A real estate agent is legally not allowed to do so on behalf of the seller. It’s important to understand that the seller is not offering a warranty on the property so much as an accurate description of the condition in which the property is being bought. The purpose of the TDS is to make the buyer aware of anything that may have a negative effect on either the desirability or value of the property. The TDS will contain the following kinds of disclosures and information:

–              Disclosure Date: This will be the date the TDS is completed in full, and if anything changes between the date of disclosure and the sale, a wise seller will update the TDS.

–              Occupancy: This is to show whether the seller has tenants in the space or is living at the property themselves.

–              Home Inspection: Home inspection guidelines are subject to vary from state and even from city to city. A home inspection will go over things like construction guidelines and safety hazards. A home inspection could also include pest reports, etc.

–              Section A: This section of the TDS will go over things like appliances; smoke detectors, dishwashers, rain gutters, a pool. It will also describe the water source. It will ask for information like the age of the roof, etc. It is important for the seller to be as accurate as possible here because if the property is said to have something it doesn’t, then the buyer could demand that item be purchased and be legally entitled.

–              Section B: This section goes over malfunctions in the home. If a buyer checks ‘yes’ on any part of this that means that the malfunctions will need to be described. Even if there’s a defect that seems insignificant, it should still be disclosed, especially if the seller has knowledge of it.

–              Section C: This section is composed of 16 thorough questions that the seller should consider carefully. Questions about noisy dogs, shared features like fences, drainage etc. It’s important to disclose every piece of information truthfully as a buyer will be more likely to get upset if the information is not disclosed rather than the severity of the nuisance.

–              Section D: Smoke detectors are the topic of this section, and whether they’ve been certified and are in compliance with regulations. The water heater must also comply with standard laws.

–              Agent’s Inspection Disclosure: if either the buyer or the seller is working with an agent, they will both conduct separate inspections and submit them to the buyer. There are no circumstances under which an agent should ever mark that there’s nothing to disclose. Agents will disclose what they observe, and typically not add speculation; if a floor is creaky, they won’t go so far as to say it needs to be replaced. Agents are legally required to do a walk-through of the property and make a note of everything they observe, even if it’s something as small as a crack in the driveway.

The seller must be disclosed this information by the buyer. There can never legally be an ‘as-is’ clause in real estate, because ‘as-is’ inherently implies that there is something being withheld from disclosure. A clause like this is illegal and will be considered void.

Other Kinds of Disclosures

Federal Disclosures will deal with things that are mandated by the states, like regulations on lead-based paint. This kind of disclosure also allows buyers to have 10 days to conduct their own inspection, unless they choose to waive that right in writing.

Material Facts are information that might include something like the previous owner’s death if it happened within the previous 3 years. Even if it happens outside of the three-year window, it’s better to disclose it.

Causes of Death should be disclosed, except in the case of AIDS, which might be subject to discrimination and might be categorized as a protected class depending on the state legislature.

External Disclosures might also be required depending on the state and will include information about natural hazards like flood zones, noise pollution, ground pollution, changes with zoning, earthquakes, etc.

Repairs are better not termed ‘repairs’ because that might imply that the item is permanently fixed.

Foundation Problems like wet basements should be disclosed as well. If a floor has discoloration and there’s no outward cause, it might be a good idea to examine and potentially offer the buyer a credit to replace what needs to be fixed.

All of this information has to be considered due to the number of lawsuits that come about for non-disclosure. It’s necessary to be as clear and as aware of disclosure laws as possible to avoid non-disclosure because it can result in an expensive law suit that could’ve been avoided if disclosure laws had been abided.

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