By Adam Carosso |
Property disclosure forms are seemingly the first and last item of every transaction. Disclosures are often the first due diligence item asked for by a buyer and viewed as a cumbersome, but required, homework assignment for a seller. Completing these packets of legal documents (ranging from 50-100+ pages depending on the property), with painfully small text, often require more time and effort than anyone initially plans for. However, these forms are an integral part of every property sale and hopefully you’re able to take a few things with you after reading his post.
There are many required statewide and city-wide documents to review, complete, approve and sign when selling real property. As a starting point, here’s a useful link to a “Sales Disclosure Chart” published by California Association of Realtors (CAR) and it’s updated regularly.
“The City” is one of only two major cities in the United States (other is Washington D.C.) that require property owners to submit a notice, declaring their intent to sell, to a cohort of nonprofit organizations prior to ever bringing the building to the open market. In short, COPA (the Community Opportunity to Purchase Act) grants San Francisco qualified nonprofits a right of first offer (ROFO) and a right of first refusal (ROFR) on multifamily properties, residential buildings of three units or more, and vacant lots that could be developed into residential units of three units or more, for the purpose of creating and/or preserving affordable rental housing. For more detail about the SF-COPA program visit (https://www.sf.gov/information/community-opportunity-purchase-act-copa) and our other post about this process.
Local laws affecting San Francisco real property often change throughout the year. While it is beyond the scope of this post to provide a comprehensive and up to date report of all new local laws, disclosures and processes, the latest additions and recent developments by the San Francisco Association of REALTORS® can be found at www.SFARAdvisories.com.
Sellers:
For owners, their family members and their property management teams, disclosure completion requests are sent almost immediately after or in tandem with executing a listing agreement. These requests can feel jarring and maybe out of place, especially when navigating current real estate market conditions. You may be dealing with pressing family matters or a series of other, more important, requests while bringing the property to market. Let’s face it, disclosures are not a top priority.
That said, disclosure forms could in fact be your best asset during a property sale, depending on the situation. Disclosures are tools that can not only save time in the sales process but can save you a much bigger future headache once you’ve cleared escrow and the property has fully changed hands. No one wants to deal with a lawsuit or blowback from failing to disclose a small but material fact.
When you think about, if a buyer came to the table fully aware of everything you know about the building, you’re reducing the possibility of falling out of contract or a reduction in purchase price, shortens the due diligence time, and sets the tone for the sales process after selecting a buyer. The more you disclose upfront, the more you can control the narrative when you’re deep in the sale and the higher the likelihood a buyer will remove contingencies and close on time.
Buyers:
For buyers, disclosures of are often reviewed prior to even submitting an offer or immediately after going into contract. After obtaining copies the property disclosures, you may get bogged down with more questions than answers but understand that it is your responsibility to vet these files prior to releasing contingencies. There have been many instances where a buyer fails to utilize these packets until the 11th hour of their due diligence period. This will only hurt the process, lose time when you’re in a trade or will prolong the close of escrow.
Disclosures should help dictate how you carry out building inspections and structure your contingency removal terms. It is ok to lean on your broker/agent, or the other side, to answer your questions or help uncover more context about what has already been outlined by the seller.
Brokers:
For Brokers and their teams, property disclosures are a tool for you and your clients to leverage. It is your fiduciary responsibility to ensure your client completes and approves them to the best of their ability; it is in their best interest, and they shouldn’t take this step lightly. In some cases, you may be dealing with an inexperienced trustee looking to sell, or an out of state buyer that has never stepped foot in the property. It is time to pull in all resources available, to make sure you and your client are covered after the building transacts.
Disclosures are a requirement for every transaction and an opportunity for you to help your Seller convey all material facts about the building or help your buyer discover new aspects about the property prior to the close of escrow. It is in everyone’s best interest to start the disclosure process early, communicate effectively with all parties (including the property manager who may share every maintenance request ever made) and continue to man the helm as you navigate changing tides of a property sale.
With over 70 years of combined hyper local experience in the San Francisco apartment market, our team has the in-deal reps to help guide you as a Seller and a Buyer in today’s changing market landscape. When you work with the SF Multifamily Colliers team, understand that the disclosure process is handled seriously and professionally. We’re here to help and for more feel free to reach out!