The Disclosure section addresses the disclosures that the seller is obligated to deliver to the buyer according to the terms of the contract.
Section 4.a Lines 154-156
The seller is required to deliver SPDS within (3) days after contract acceptance. The buyer has until the end of the inspection period or five (5) days after receipt of the SPDS whichever is later.
Section 4.b Lines 157-161
Seller is required to provide the buyer with a written five year claims history or a claims history for the period of time the seller has owned the property whichever is less. The claims history is required within five (5) days of contract acceptance. The buyer has five (5) days or the end of the inspection period, whichever is later to disapprove any items contained on the claims history.
It is important to remember that are several forms of acceptable disclosure:
- Sellers insurance agency (aka Letter of experience)
- Insurance support organization (CLUE report)
- Consumer Reporting agency
- The seller if the report is not available from the above sources
The seller is permitted to redact any reference to date of birth, or social security information contained within the report.
Best practice tip: When representing the buyer have the buyer obtain an insurance binder during the inspection period.
Section 4.c Lines 162-166
The seller agrees to comply with IRS reporting requirements. If applicable, Seller agrees to deliver to the escrow company a certificate indicating whether the seller is a foreign person.
In general if the seller is a foreign person, the buyer must withhold a tax equal to 15% of the purchase price unless an exemption applies.
Is a resident alien a foreign person?
The most common exemptions for FIRPTA include:
- A seller signed affidavit that states the seller is not a foreign person.
- A “qualifying” statement from the IRS stating that no withholding is required.
Why do the Brokers care about the FIRPTA withholding?
Why was the IRS and FIRPTA Reporting Section in the prior version of the Purchase Contract divided into two separate sections in the new Purchase Contract and why are they not located in Section 3, Title and Escrow?
Section 4.d Lines 167-182
A lead based paint disclosure is required for any premises constructed prior to 1978.
The seller must originate the form. Under no circumstances should the buyer sign the Lead Based Paint Disclosure prior to the seller completing the disclosure section of the form.
Section 4.e Lines 183-186
State law requires the redecoration of the Affidavit of Disclosure for any real estate sold in an unincorporated area when five or fewer parcels of property other than the property is being transferred. The seller has five (5) days from contract acceptance to provide the Affidavit of Disclosure to the buyer. The buyer has until the inspection period or five (5) days from receipt whichever is later to disapprove any items in the affidavit. It is the buyers responsibility to deliver the completed affidavit to the escrow company so that it can be recorded at COE.
Section 4.f Lines 187-190
Disclosure is a process and is ongoing it is not finite. The seller is obligated to immediately notify the buyer of any changes in the seller’s disclosures. Unless the seller is already obligated to correct or repair the changed item, the buyer has five (5) days to provide notice of disapproval.