Buying or selling a Silicon Valley home? Be prepared for an onslaught of paperwork. There will be many questions you’ll be required to answer carefully (if selling) or to read and understand thoroughly (if buying) plus many other documents such as inspections, reports, and boilerplate (templated or generic) disclosures. Sometimes the language used will be technical or complicated, so you may need to do a little research as you see the questions. Here’s a list of some of what you’ll be reading or responsible for completing or ordering, not necessarily in this order:
- the purchase agreement, any addenda & contract disclosures (appx 12 -20 pages in most cases)
- a preliminary title report and possibly CC & Rs (Covenants, Conditions and Restrictions)
- if the home is a condo, townhouse or PUD, docs pertaining to the home owner’s association (can run hundreds of pages)
- the standard disclosures common in our area which require the seller to answer questions about the home, yard and area (appx 15-25 pages)
- a natural hazard report (stating whether the home’s in an earthquake zone, flood plain etc.), environmental hazard report (whether there are leaking underground storage tanks and such), tax report (any extra bonds or assessments that will show up on your property tax bill) and other area disclosures ordered by the seller and provided by a company such as JCP, Property ID and other firms (appx 80 pages)
- inspections: usually pest and home are ordered, often also chimney, roof, possibly others such as pool or other specific components of the home (varies but often at least 40 or 50 pages, frequently more)
- for buyers: disclosures on their loan
- for sellers: the listing agreement and disclosures related to it
- at the time of signing the final papers: escrow instructions and lots of forms for transferring title – you will also see the reports seen previously too
- additionally, some real estate brokerages have a lot of their own disclosure forms too
- if the sale is a relocation, there will be a lot of relo papers to complete as well
- if it is a short sale or bank owned home, you will have extra paperwork for that also
By the time it’s all said and done, you will have reviewed several hundred pages of paperwork that are several inches high if stacked. All of this can make consumers a little bit crazy, particularly when there forms which are very nearly duplicates. (It may be a little less if it’s a trustee sale or probate, but only a little less.)
Why is there so much of it?
For the most part, the disclosures, reports and inspections are consumer protection driven. It is extraordinarily important for home buyers to have a full and complete understanding of what they’re taking on when purchasing a home.
Disclosures are key: Sellers must provide information on anything which would “materially impact value or desirability“, so have disclosure forms to assist with that goal. These questions are intended to help the sellers to cover areas that might not occur to them without prompting. For example, some sellers wouldn’t think a death on the property matters, but some buyers would, so there’s a question on one of the forms about that. (The law in CA is that a death on the property within the last 3 years must be volunteered by the seller without asking by the buyer. They don’t have to offer that information if the death happened more than 3 years ago, but if a buyer asks about it, the seller is obliged to answer truthfully.)
Many of the questions, or nuances within the questions, are the result of a lawsuit at some point. So to omit some “wiggle room”, the question was added or modified (usually to make it broader). When you see questions that make you wonder, it’s pretty safe to assume that somewhere along the line, someone sued someone else over that very issue. (For example, “land fill” is now called just “fill” on a question asking about its presence since there was a lawsuit involving a Willow Glen home owner’s use of medical waste products as fill in a back yard. Gross, but true.)
Sellers sometimes do not want to answer the disclosure questions carefully or truthfully because either they don’t want to spend the time or for fear that it will put off a buyer. They sometimes think that a problem in the past was remedied so it’s no longer necessary to mention the issue. That’s just not true – the obligation includes explaining past issues that were fixed or repaired. The #1 cause of real estate lawsuit is non-disclosure by seller to buyer. The best way to keep the money you make on your home sale is to be very truthful and complete in your disclosure (not under-disclosing a problem). Plan to spend at least 2 or 3 hours responding thoughtfully to the disclosure questions and trying to recall if there’s anything else not covered in the questions which ought to be disclosed.
Buyers sometimes do not want to be bothered to carefully read and understand the paperwork they were given. Later, they may insist that they weren’t told about this or that, but a review of the disclosures or inspections may reveal that they were told but either didn’t read it or simply didn’t remember it. It is very hard to take in and retain everything when buying a house, particularly because there are so many papers to go through. But the best way to avoid an unpleasant surprise later is to take your time with the purchase paperwork now. Read it as you get it: do not ignore it and think it’ll be OK to skim it at the last minute. In some cases you may read something that will warrant further inspection, asking the seller more questions or may even make you want to run it by an attorney. If this happens you’ll need time so it’s imperative to take the info you’re given seriously and address it soon.
Buyers, this is probably the biggest purchase you will ever make. It is extremely important to take your time understanding as much as possible with the paperwork. Sellers, you want to be done when you sell the home and not have a problem arise later due to non-disclosure or under-disclosure. Be thorough and complete and you will be protecting yourself.