- Dealing honestly and fairly
- Full disclosure
- Accounting for all funds
- Skill, care, and diligence in the transaction
- Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing
- Disclosing all known facts that materially affect the value of residential real property and are not readily observable
Real Estate Closings
An escalation clause is language inserted into a purchase offer for a home that’s intended to make sure a buyer is the highest bidder. It’s typically used when a buyer and their real estate agent strongly believe a house will receive multiple offers.
An escalation clause states that the buyer will pay a certain amount of money above the highest offer the seller receives. It generally includes a ceiling cap to make sure the buyer doesn’t agree to pay more money than they can afford.
An escalation clause can be a powerful technique when used correctly, but unfortunately it is seldom used as effectively as it could be. Such a clause increases, or escalates, a contract above its originally offered Sales or Contract Price when the Home Seller has received another Contract. The intent of the Clause is to crush competing contracts by automatically and incrementally increasing the buyer’s offer price by a pre-determined amount above other offer(s).
Typically, there are three distinct parts to any escalation clause that’s included in a real estate contract.
Proof of a bona fide offer: You can rest easy knowing that sellers can’t just use an escalation clause as an excuse to make you pay a higher sale price. When the contract asks for “proof of a bona fide offer,” it means that the listing agent must be able to prove that another offer came in with a purchase price higher than your original suggestion. Typically, the listing agent will send over a copy of the page from the other buyer’s purchase agreement that shows the higher price. However, any identifying information for the other buyer will be redacted.
An escalation amount: The escalation clause should also include an amount by which you’d like to outbid any higher offers.
A price cap: The price cap represents the maximum amount you’re willing to pay for the property, or how high you’re willing to allow your offer to go. If an offer is submitted that is higher than this amount, be aware that your offer may be taken out of the running.
Pros of Using an Escalation Clause
- Including an escalation clause in your offer indicates to the sellers that you’re truly invested in buying the property. It shows that you’re willing to go above and beyond what’s required in order to become the home’s new owner.
- Some buyers love the idea of negotiating; others don’t. If you fall into the latter group, including an escalation clause in your offer might be a smart idea. Since it gives the seller a solid idea of your positioning upfront, it cuts down on the back-and-forth that needs to happen between you and the sellers.
- If the market conditions are highly competitive — a “Seller’s Market” — or the particular property is head and shouldersabove the rest, or both, you as a Home Buyer are likely going to find yourself competing for the home against other would-be homeowners.
- Using an escalation clause will continually bump up the price you pay, but only if there are other offers that trigger it.
Cons of Using an Escalation Clause
- If a buyer includes a maximum price in an escalation clause, the seller will immediately know the buyer’s top price thereby compromising the buyer’s bargaining position. By providing a price cap for your escalation clause, you’re essentially telling the sellers how much you are willing to pay for the home, and there’s nothing to stop them from simply presenting you with a counteroffer at that price.
- An offer containing an escalation clause may not become enforceable until a specific price is entered into the contract and the buyer sees the price the seller has specified.
- The seller may fabricate a fictitious offer in order to drive up the sales price for a buyer who uses an escalation clause.
- Real estate brokers are prohibited from drafting escalation clauses, because doing so would constitute the unauthorized practice of law. Hiring an attorney is recommended but will increase the buyer’s costs.
- If multiple buyers were to include escalation clauses in their offers, a bidding war may follow. If no buyer is willing to commit to a specific price, then no contract is ever formed and no property is sold.
- Since the use of an escalation clause implies that a prospective buyer is willing to pay more than other buyers, it may motivate sellers to seek higher prices, a disadvantage to the buyer using the escalation clause.
- While the use of escalation clauses may lead to higher sales prices, a benefit to the sellers, they could also discourage buyers who do not want to use escalation clauses.
- A broker who discloses the price/terms of an offer without the buyer’s consent or otherwise gives one party an unfair advantage over another risks disciplinary action by the Commission. A seller’s best response in a multiple offer situation where one or more of the buyers is using an escalation clause will likely be to invite all buyers to make their highest and best offers. That way, each buyer is given an opportunity to buy the property at the price and terms he or she is willing to pay and the seller will receive the best offer from each buyer rather than an incremental offer from a buyer who wants to offer slightly more than a competing buyer.
Don’t make the mistake of thinking the Highest Contract Price will always win; other TERMS of a contract can often prove more valuable to the Sellers.
Having a knowledgeable Exclusive Buyers Agent is invaluable for situations like this and for understanding the risks and possible benefits of opening negotiations in this manner. The seller has the right not to respond to any offer, whether or not it contains an escalation clause.
Buying a home in a Seller’s market always has its challenges. But when you’re trying to do it in a seller’s market, the difficulty can reach a new level. When the market favors the seller, time is of the essence. Multiple offers happen with more regularity in a seller’s market than a buyer’s market, because a seller’s market is defined in part by low inventory and a surplus of home buyers. A beautiful home that is priced well can attract more than one offer.
In a seller’s market, you should always assume you’re competing against several other offers. However, that doesn’t mean you can’t buy a new home in a seller’s market, when there are more buyers than homes, and sellers can afford to hold out for higher offers. You just need to make sure you do it right and arm yourself with the right information:
Here are a few things to consider as you prepare your offer when buying in a seller’s market:
Choose an Experienced REALTOR: In sports and in business, it’s important to have the best players on your team when facing fierce competition. In a seller’s market, that means choosing a real estate agent who not only has proven expertise in the neighborhoods you’re interested in but is also highly responsive and efficient. Make sure to use an Exclusive Buyer’s Agent that owes you a fiduciary and works in your best interest.
Demonstrate Credit Worthiness: You should get Pre-Approved for a home mortgage with a local lender before touring homes if you need to get financing. By obtaining a pre-approval for a mortgage before you start home shopping, you’ll know how much buying power you have. Your offer may have far more credibility than competing ones where buyers didn’t take this step.
Lower Your Expectations: When the inventory of homes is limited, you probably can’t afford to wait for the perfect house to hit the market. Prepare yourself to adjust your expectations. It makes the most sense to make exceptions to your criteria for things that can be changed. For example, you can renovate or add a bathroom someday, but you can’t change the home’s location or lot size.
Make your Best Offer first, be Ready to Bid: Make your best offer but be prepared for it not to be your final offer. High home prices can lead to home appraisals that don’t climb as fast, leaving lenders to not fund the loan. Home buyers should have money set aside the pay the difference between a contracted purchase price and the appraisal.
By Prepared to Make Concessions: Your relative lack of power in a seller’s market doesn’t just affect the question of price. It carries over to every other aspect of the deal, too. Shorten the inspection period, be flexible on closing dates; you should be prepared to accommodate the seller’s needs even if it is an inconvenience to you.
Don’t be that buyer who wants to wait until the weekend to view a home in a seller’s market. By the weekend, that home could be sold. Try to be one of the first showings. Sellers usually don’t enjoy having buyers come through their homes at all hours of the day, so most would like to see their home sold quickly. If you write a good, fast, and clean offer, your chances of acceptance are far better than those of a buyer who is unprepared or is unrealistic on price.
Finally, don’t get carried away with the pressure to buy, even in a seller’s market. Remember that a home decision has a long-term impact on your financial future. It may be better to let a house go than make a poor decision that’s expensive to change.
Rates are lower than ever; when a refinancing is done right, it can save you thousands of dollars. But not every potential refi makes the cut. Sometimes the expenses just don’t justify the potential savings.
It is time to refinance your home mortgage if the terms lower your mortgage interest rate, pay off their mortgage years earlier, or saves thousands in interest over the life of the loan. You can save serious money by refinancing your mortgage. But due to refinancing fees and expenses, not every refi makes financial sense.
COVID-19 is creating changes with lenders and how they are doing business. This is resulting in refinancing taking longer and getting stricter than it has been in the past. Although the mortgage process is considered essential as a financial transaction, depending on where you live, there may be changes related to COVID-19 involving your appraisal, rate lock and closing process.
Rates are quite low and because your home is your biggest financial investment, the equity can be very useful as a resource in times of trouble. But if you’re thinking of financing your home loan there are several steps you should take to make sure that it’s the right move for you.
How Long Do You Plan On Being In Your Home?
Being able to answer this question will help you figure out the term length you want on any refinanced mortgage; but there’s another reason asking this question …
If you plan on moving within the next 5 – 10 years, it could be worth your while to look at an adjustable rate mortgage ( ARM). You get a lower rate initially with an ARM because the rate can adjust after the teaser period. But if you move before the end of the fixed-rate time frame, you don’t have to worry about whether the rate is going up and down in the end. Additionally, your payment will tend to be lower because most adjustable rate mortgages are based on 30-year terms.
Age Of Current Loan
The age of your current loan sometimes plays a role in whether you can refinance. Even if you can refinance, it does not always make sense. When you refinance you have to pay closing costs. If you are not planning on staying in the house past the breakeven point when the savings and the additional expenses paid starts to net to overall reduced costs for home ownership, the it is not the time to refinance. You may want to accelerate buying a new home to realize the saving from lower interest rates.
Plans For Monthly Savings
If you determine that you’re going to save money by refinancing based on the rate and term you can get, make sure that you have a plan for what you’re going to do with the monthly savings in order to put yourself in a better financial position. No one knows exactly when COVID-19 is going to end and how long it will take for the economy to recover. If you can save money now, you can work on establishing the savings need should the vaccine be delayed or we continue with a longer recession
You could use your savings to build up an emergency fund. Maybe you choose to allow yourself to save money in the future by paying off high-interest debt now. You can also use this to catch up on saving for retirement if you stopped contributing temporarily while dealing with the situation caused by the virus.
It’s a very volatile market right now, so we advise all of our clients to rely on the advice of their Home Loan Expert and Financial Advisors at all times.
The Mortgage Refi Process
Approving a mortgage is a complicated process, one that requires a lender to validate a borrower’s income, check the value of the home being used as collateral and scrutinize the title history of the property.
Just as refinancing applications picked up, the coronavirus pandemic dramatically changed the way everyone in the mortgage industry works. Loan officers no longer go to the office. Appraisers stopped walking through houses. And no one gathers around the title company’s closing table. The process is a little slower because everybody’s working from home right now. Things that would take an hour to do are taking a day sometimes.
It is more difficult to verify a borrower’s employment. A task once dispatched with a quick call to the borrower’s human resources department now means leaving a voicemail and waiting a day or two for a response.
Meanwhile, homeowners looking to refinance may have to get in line behind buyers who need a mortgage so they can close on a house which are a priority with lenders.
The mortgage industry already had been digitizing, and lenders quickly adapted to many changes. One stumbling block, though, is that most lenders still require some documents to be signed in the presence of a legal witness and notarized. Florida allows for mobile notaries and they are busier than ever.
Sometimes, documents are being signed remotely and online and mobile notaries are not allowed yet. You need to allow time for in person notarization and overnight mailing of documents. Digital closings may be the way of the future, but we are not there yet.
What You Can Do to Secure a Smooth Refinance
Here are a few ways you can make the refi process as smooth as possible:
— Get your paperwork in order. Don’t let something simple like a missing document delay your refinance. Collect PDFs of financial documents, including pay stubs, bank statements, tax returns and retirement accounts.
— Make sure the lender will honor your rate lock. In normal times, lenders extend rate locks for 30 to 60 days, meaning you won’t have to pay more if rates go up before your loan closes. These aren’t normal times, though, and many refinances aren’t closing within 30 to 60 days, so make sure your lender is willing to extend your rate lock if your deal is delayed.
— Keep your credit score tight. Now isn’t the time to miss a payment, take on new debt or otherwise do anything to lower your credit score. Lenders are being especially strict about borrowers’ credit histories.
The novel coronavirus (COVID-19) has put a stop to the normal routines of everyday life both in the U.S. and abroad. And while social distancing is the course of action to take until told otherwise, moves aren’t always something that can wait. Real estate is considered an essential service in all states and there are many services providers to assist you in facilitating a move to a new home.
By taking extra safety precautions and minimizing social contact, you can still move safely. If you are about to move, you can still pull it off with a little extra planning and a few precautionary steps.
Here are some tips for making your move as safe, seamless and stress-free as possible.
There have not been any notable shutdowns of service among major moving companies. That being said, decisions about closures may be left to individual franchise owners. If you have already scheduled your move and haven’t heard anything, assume that your moving company is still providing services unless told otherwise, but still call just to confirm.
If you’re worried about moving during a pandemic for a move that is still upcoming and for which you haven’t scheduled movers, it’s hard to say what will and will not be available in the months to come. For now, continue to do research on companies and ask directly what steps are being taken when you reach out. What has changed at this point is largely going to be related to the customer experience itself, including frequent hand washing among movers and no physical contact between movers and clients.
If you need to select a moving company, ask for a virtual quote and see if the company offers fully contactless service. Forgo handshakes, for obvious reasons. A smile and a generous tip (sent through Venmo, PayPal or another contactless digital platform) are a welcome substitute. These companies have virtual estimate procedures available for competitive quotes
- United Van Lines
- Allied Van Lines
- International Van Lines
- Wheaton World Wide Moving
- North American Van Lines
Moving companies are taking the coronavirus pandemic very seriously. To that end, companies across the country have put into place protocols designed to protect their employees and their customers. These include:
- Following federal and local guidelines around social distancing and sanitization
- Conducting virtual surveys instead of in-home surveys to provide estimates
- Frequently sanitizing trucks and equipment
- Practicing social distancing with customers and, as much as possible, among moving teams
- Wearing masks and gloves
- Keeping trucks stocked with hand sanitizer
All of these practices help ensure that moving services can remain available in a safe way.
Car shipping companies open during COVID-19 outbreak
|Montway Auto Transport||Open||Learn more|
|Sherpa Auto Transport||Open||Learn more|
|Ship a Car Direct||Open||Learn more|
Interstate moving companies open during COVID-19 outbreak
|Allied Van Lines||Open||Learn more|
|American Van Lines||Open||Learn more|
|Expedia Van Lines||Open||Learn more|
|First National Van Lines||Open||Learn more|
|International Van Lines||Open||Learn more|
|Interstate Moving & Relocation Group||Open||Learn more|
|North American Van Lines||Open||Learn more|
|Silver Star Moving Group||Open||Learn more|
|United Van Lines||Open||Learn more|
Same as moving companies, major storage companies continue to run operations. What you might be able to expect however is limited hours of accessibility and/or a reduction in the number of customers who are able to access their units at any one time. Storage companies should also be following proper hygiene practices, including sanitization of access pads and the requisite six feet or more of space between customer and customer and customer and employee.
Storage companies open during COVID-19 outbreak
|Extra Space Storage||Open||Learn more|
|Public Storage||Open||Learn more|
What If I’m Moving By Myself?
The process of a DIY move looks pretty much the same now as it did before COVID-19, minus the ability to have a couple friends come over and lend a hand in exchange for pizza. Some additional things that you will want to do however include keeping hand sanitizer, soap, and paper towels accessible at all times, we well as making a detailed plan for both your departure and arrival.
Major rental truck companies continue to be in service, as they are considered essential for transportation and personal mobility needs. Again, what may be different is the experience, since companies like Enterprise and U-Haul have put into place their own protocols for physical distancing. This means that your pick-up and drop-off location may not be at the branch office, and that you’ll have to make your reservation online or over the phone instead of in person.
If you rent, talk to your current landlord about how you can safely drop off keys and collect your security deposit, and talk to your new landlord about the process for a safe move in. Putting in a blueprint of steps ahead of time will help you maintain social distancing during your DIY move and answer any questions you might have about the process.
Truck rental companies open during COVID-19 outbreak
|The Home Depot||Open||Learn more|
How to Prepare For Your Move
One silver lining is that social distancing means that you might have more time to devote to organizing your home prior to your move and getting rid of the things you no longer want or need. If you plan on donating items like clothing, linens, furniture, shelf stable non-perishables, etc., call the place that you would like to donate to ahead of time and see what their policies are. While many people are in need during this time, it’s likely not going be quite as easy as just driving to your nearest donation center and dropping stuff of (but that doesn’t mean you shouldn’t do it).
Junk removal companies open during COVID-19 outbreak
|College Hunks Hauling Junk||Open||Learn more|
|Waste Management Dumpster Rentals||Open||Learn more|
To prepare for a move amidst COVID-19, be sure to keep the following steps in mind:
Contact your movers
This is important to confirm your reservation and discuss best practices for moving day. Moving companies are putting in lots of safeguards to help protect their clients, and it helps to be on the same page as them in terms of what is expected.
Buy all of your supplies at once
You are going to want to get it right with just one trip to the store, so make sure you know exactly what you’re going to need for your move. Don’t use free or recycled moving boxes. The coronavirus can live on cardboard for as long as 24 hours, so now is not the time to be picking up free moving supplies from places that are recycling them. Boxes that you already have in your home are fine, but if you need any extras then you’ll need to go to the store and buy them new (even better if you can then purchase them through self-checkout). Better yet, order all your moving supplies online and have them shipped to your residence. Clean as you pack. Use this opportunity to sanitize your belongings, wiping items down with disinfectant. If you don’t have any, you can make one with a solution of one tablespoon bleach to one gallon of water.
Finish packing at least 24 hours before the movers arrive
Coronavirus can last a long time on surfaces, including up to 24 hours on cardboard boxes. Your movers will be wearing gloves, but for everyone’s safety you should still have your boxes packed and sitting untouched at least a day before your movers arrive.
Provide hygiene products for your movers.
To aid your movers in following necessary hygiene practices, be sure to leave out products that they can use while they transport your items to and from the moving truck. That includes soap and paper towels by the sink, and hand sanitizer by the door that they’ll be entering and exiting through. If you’re concerned about having enough supplies, let your moving company know so they can be sure to bring them along for use during the move.
Be transparent and flexible
In advance of your move, reach out to your neighbors — especially if you live in an apartment building — and share the date and time you plan to move. This gives everyone in your direct vicinity an opportunity to avoid unnecessary contact and let you know if your timing is a problem.
When you move into a new home, deep clean it
Be sure to deep clean and sanitize your new home before you move into it. Here are a few resources and tips to help:
- Use disinfectant wipes for quick cleanings over the most high-touch areas – doorknobs, sinks, cabinet pulls, refrigerators, etc.
- Use disinfectant sprays for areas that can’t be wiped clean. You can use Lysol, for example, on your couches and mattresses which will touch many surfaces during a move (the ground, the inside of a truck, etc.).
- Use this CDC bleach mixture recommendation on your new tile floors. Use a disinfecting wet mop cloth on your hardwood floors As you unpack, be sure to also disinfect your computer and accessories (keyboards can get pretty gross – here’s how to clean them), your television remote controls, credit cards, wallet, and more.
If you have an extra minute, here are some additional things to consider
- Prioritize your internet setup. Scheduling an internet installation date at your new home is critical for staying connected to friends and family. There are 1-2 hour call wait times at cable and internet providers right now, as more and more people call to increase speeds and bandwidth. You can’t bank on getting an appointment as easily as you have in the past. Additionally, consider a high bandwidth plan to account for changes in working from home, video calls, multi-device streaming, etc.
- Stocking your kitchen full of groceries will feel a bit different this time around. Try Shipt or Instacart, or delivery options from your local grocery store.
- While planning your move, continue to monitor the health and safety guidelines set out by the World Health Organization (WHO)and the Centers for Disease Control and Prevention (CDC).
- For tips on infection prevention, visit gov.
Moving is stressful under the best of circumstances; this is a scary time and certainly takes moving stress to the next level. With some planning and organization, you can relocate and stay safe even in an environment with a pandemic.
FIRPTA (Foreign Investment in Real Property Tax Act) Withholding is the Withholding of Tax on Dispositions of United States Real Property Interests
The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding.
FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests.
Persons purchasing U.S. real property interests (“transferee”) from foreign persons, certain purchasers’ agents, and settlement officers are required to withhold 15% of the amount realized.
Withholding is intended to ensure U.S. taxation of gains realized on disposition of such interests. The transferee/buyer is the withholding agent. If you are the transferee/buyer you must find out if the transferor is a foreign person. If the transferor is a foreign person and you fail to withhold, you may be held liable for the tax.
One of the most common exceptions to FIRPTA withholding is that the transferee (purchaser/buyer) is not required to withhold tax in a situation in which the purchaser/buyer purchases real estate for use as his home and the purchase price is not more than $300,000. However, buyers should be aware that while they may meet the withholding exemption they are still responsible for the seller’s tax liability, interest and penalties should the seller not file a US income tax return to report the sale and pay any relevant taxes.
Note to Non-Resident Buyers – If you purchase property from a non-resident seller and an exception to FIRPTA withholding does not apply then you must ensure that FIRPTA is satisfied as part of the closing. Check your settlement statement prior to closing where you should see 15% of the sales price withheld on the seller’s side of the settlement statement. Request a copy of the withholding certificate from the closing agent and, if withholding was calculated, request a copy of forms 8288, 8288-A and front and back of cancelled check. Retain these documents in a safe place along with your settlement statement and other closing documents.
Foreign Investment in Real Property Tax Act (FIRPTA) Withholding
U.S. Tax law requires that a non-resident alien who sells an interest in U.S. real property is subject to withholding, for tax purposes, of 15% of the gross sales price (i.e. $45,000 on a property with a sales price of $300,000). The withheld amount is required to be forwarded to the IRS, by the Closing Agent, within 20 days of the date of closing. These funds are held until the IRS is satisfied that all taxes due by the non-resident are paid. In order to apply for a refund you can either:-
File U.S. tax returns for each year that rental income was received, reporting all income and expenses; file a final U.S. tax return in the year following the year of sale, to report the sale and recover the balance of cleared funds. This process can take up to eighteen months depending on when, during the tax year, the property is sold.
File prior year tax returns (where required) plus an application for early release of cleared withholding on or before the date of closing. By making this submission, the 10% withholding remains with the Closing Agent whilst the IRS processes the Withholding Application and issues a Withholding Certificate for the cleared funds – usually around 90 days.
Please note that applying for and receiving a Withholding Certificate does not eliminate your requirement to file a final U.S. income tax return to report the sale transaction. In fact, when your final tax return is filed you may receive a further tax refund depending on the number of owners and length of time that the property was held.
In order to ensure a timely release of your funds it is extremely important that the following is obtained PRIOR to closing:-
Buyer’s names, address and SSNs – if U.S. Citizens
Buyer’s names, address and ITINs – if non residents
Or, if the buyers are non residents and do not have ITINs, the buyer’s completed Form W-7 (one per buyer) and authenticated copy of the picture page of their passport(s)
Without this information the Application for a Withholding Certificate and early refund will be rejected. We suggest that you request your Realtor prepare your sales contract contingent upon the buyers providing the above information.
Who’s responsible for FIRPTA withholding on the sale of U.S. property?
Foreign Investment in Real Property Tax Act (FIRPTA) was established in 1980 to ensure the withholding of estimated amount of taxes which may be due on the gain from the disposition or transfer of a U.S. real property interest from a foreign person.
If you purchase U.S. real property from a foreign individual or corporation then you are required to make sure that the seller pays any taxes due on the property. The buyer must execute or have executed the correct forms including the sellers name, address and social security number or individual taxpayer identification number. 15% of the gross sales price must be withheld and submitted to IRS or held in escrow whilst an application for reduced FIRPTA withholding is timely filed and processed.
If the buyer does not take care of the withholding and the seller is a foreign entity who leaves without paying their tax then 15% will be taken from the buyer.
Most buyers are unaware that it is their responsibility to determine if the transferor/seller is a foreign person and subject to FIRPTA withholding. In reality, the settlement agent (Title Company or Attorney) may be instructed to deduct the 15% and submit to IRS or hold in escrow whilst an application for reduced FIRPTA withholding is submitted to IRS for processing.
Any responsible buyer wants to know everything about the home they’re buying before signing on the dotted line. After all, this is probably the biggest purchase you will ever make, so due diligence is a must. The majority of the real estate agents in Florida are Transactional Agents and do not owe the Buyer a fiduciary duty, An Exclusive Buyer Agent does and will work for the buyer to determine all the information known about the property and advise you on inspections, permit searches, etc. Reviewing the Seller’s Disclosure is the first step in this process.
A Seller’s Disclosure in the State of Florida Is a standard form that is essentially a checklist in which a seller indicates the condition of the different features of a property, any known problems affecting the property, and any pending legal issues. This could include things like knowledge of lead-based paint, water damage, pest damage, past repairs, past insurance claims, any history of property line disputes, etc.
Typically, a seller’s disclosure form is filled out by the seller along with their listing paperwork. When buyer’s agents go into the Multiple Listing Service (MLS) to look up potential properties for their clients, that disclosure statement should be available or can be requested from the listing agent.
I am increasingly running into situations wheretransactional brokerage firms are taking the position that since a Seller’s Disclosure is NOT required by law that are not asking the sellers of their listings to fill one out. The first line of the SPDR provides “Notice to Licensee and Seller”; the less they know, the easier it is to make a “deal”. They are relying on the fact that other transactional agents working with buyers will feel the same and not ask for a Sellers Disclosure.
Although sellers aren’t required to complete this specific SPDR form, a residential seller does have to comply with the rule established in Johnson v. Davis. In that case, the Florida Supreme Court held that “where the seller of a home knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer.” These material facts are sometimes referred to as latent defects. In addition, in Rayner vs. Wise Realty Co. of Tallahassee, the First District Court of Appeal provided that this same disclosure requirement applies to residential properties that are being sold as is.
In cases were the listing agent does not provide a Sellers Disclosure I request that the Seller answer all my questions in writing and provide a comprehensive list of questions that encompasses everything asked on the SPDR and more.
A seller’s disclosure form is NOT a substitute for a home inspection. Remember, sellers are required to disclosure only problems they know about. Most homeowners don’t go in their attic very often, and have probably never been up on their roof, and they aren’t required to do so before filling out the disclosure. While this document can provide a lot of valuable information, the home inspection is another layer of protection for a buyer.
The importance of this disclosure statement is just one of the many reasons why it’s critical for buyers and sellers to use an Exclusive Buyer Agent ( EBA) during any real estate transaction. EBAs are up-to-date on the latest laws and regulations and are very experienced with the complex documents and paperwork. They can help walk buyers through the disclosure so they understand all aspects of the home they’re buying and recommend the appropriate home inspections ( WDO, Radon, Leak Testing, Mold, and more) to ensure that any hidden defects are found in advance of the purchase.