Disclosure Name Of The Game In Buying

Even before you sign a contract in real estate, you'll be asked to pen your John Hancock on several forms in duplicate and triplicate before you can even see one piece of property. In a litigious society, it has become necessary for real estate professionals and residual service providers to let you know about everything before you can do anything. Some of the forms are required by state edict, while others have arisen out of sheer necessity because of what's happening in the marketplace.

The latter creeps up mostly in a sellers market when buyers begin to make choices that may backfire later, i.e., no home inspection, escalating offers, eliminating appraisals, etc. The disclosure form or memo of notice, verifies for the agent that they warned the buyer of what might happen -- so that in case it does, they have escaped liability and the buyer stews in his own decision.

U.S. Legal Forms, Inc. states that "over 30 states require that a disclosure form be provided by the Seller to the Buyer as part of the real estate sales transaction. Other States use a disclosure form although not required." The libertarian side of my psyche screams "Stop the madness," while my corporate side says, "Prevent the liability."

Here are several of the disclosures you'll be looking at when you get across from your Realtor or loan officer:

Agency Disclosure. This disclosure form reveals to the buyer/seller/landlord/tenant who the subject agent works for. Most states have this form and sometimes you'll first have to sign a disclosure form saying that the agent has gone over the disclosure forms BEFORE you even sign the disclosure form itself. (This is the madness part I was talking about.) The bureaucrats have even provided a line on some forms where the agent can sign saying that while s/he disclosed it to the potential buyer, the person refused to sign the disclosure form. Sheesh.

Residential Property Disclosure. This form is referred by several names (property disclosure, residential disclosure, seller disclosure, etc.). They all disclose to the buyer information about the property. The form may include information about the home systems, possible basement problems, environmental and structural issues. In some states, however, you may see a Property Disclaimer form with the home package, meaning the seller makes no guarantees or promises about the house -- and then you'll want to get a home inspection instead.

RESPA Disclosure. RESPA is the Real Estate Settlement Procedures Act, which protects consumers from slight of hand and under the table expenses. HSH Financial Publishers reports there are several items a mortgage lender must provide to a borrower when the application is made:


A Special Information Booklet, which contains consumer information regarding various real estate settlement services. (Required for purchase transactions only).

A Good Faith Estimate (GFE) of settlement costs, which lists the charges the buyer is likely to pay at settlement. This is only an estimate and the actual charges may differ. If a lender requires the borrower to use of a particular settlement provider, then the lender must disclose this requirement on the GFE.

A Mortgage Servicing Disclosure Statement, which discloses to the borrower whether the lender intends to service the loan or transfer it to another lender. It also provides information about complaint resolution.
Lead-Based Paint Disclosure. This form is for housing built before 1978, when most paint included lead as part of the ingredients. This is a federally-required disclosure and must be included in all older homes.

Local disclosure. This one is the jackpot of all disclosure forms. They can be required by the smallest of jurisdictions, which is why you want to work with a real estate professional who can keep you away from the pitfalls. This may include disclosure of airport locations, public facilities, local building code issues, etc. The local Realtor association keeps close tabs on local disclosure requirements and places or replaces required disclosure forms in its inventory when necessary.

Published: February 4, 2005