TABLE OF CONTENTS

A Licensee’s Guide To
Disclosures in a Residential Sale
Volume III
I.  Introduction................................................. 1
II. Goals and Objectives......................................... 3
III.   Risk Management Overview.................................. 5
A. Reasons for Claims
B. Misrepresentation of Physical Condition of the Property
C. Standard Form Contracts are Inadequate to Eliminate Risk
D. Misunderstanding is the Most Common Basis for Claims
E. Documentation, the Key to Risk Reduction
IV. Increased Litigation Against Real Estate Professionals....... 7
A. A Consumer-Oriented Litigious Society
B. Reasons for the Increase in Lawsuits
C. Starting Litigation
D. Frivolous and Nuisance Complaints are Not Screened
F. Risk Management is Preventative
V.  Legal Actions Against Real Estate Professionals.............. 9
A. Common Reasons for Consumer Complaints
B. Most Common Legal Basis for Claims
VI. Areas of Frequent Claims.................................... 13
VII.   Agency Relationship Disclosure........................... 17
VIII.  Agent Inspection and Disclosure Responsibilities......... 25
A. Duty of the Licensee
B. Duty to Disclose—No Duty to Discover
C. Inspection Limitations
D. Disclosure of Known Material Facts
E. Disclosure Risk Reduction
F. Written Statement
G. Statute of Limitations
H. Damage Caused by Pets
I. Permits for Additions/Renovations to the Property
J. Zoning Restrictions, Proposed Zoning Changes and Homeowner Association Rules
K. Off-site Conditions and Non-Physical Effects
L. Neighborhood Crime and Gang Activity
M. Future Development in Areas Bordering the Property
IX. Transfer Disclosure Statement............................... 33
A. Affected Properties
B. Exempt Transactions
C. Affected Parties
D. Delivery of the TDS
E. Rescission Period
F. Additional TDS Comments
X.  Additional Disclosures...................................... 41
A. Subsequent Disclosures
B. Consumer Booklets
C. Drug Lab Disclosure
D. Mello-Roos and 1915 Improvement Act
E. Military Ordinance
F. Airport Noise
G. Commercial or Industrial Zone Location
H. Megan's Law
I. Presence of Electro Magnetic Fields (EMF)
XI. Natural Hazard Disclosure................................... 49
A. Natural Hazard Disclosure Statement
B. Special Flood Hazard Areas
C. Dam Failure Inundation Area
D. Very High Fire Hazard Severity Zone (VHFHSZ)
E. State Responsibility Fire Hazard (Wildland) Area
F. Earthquake Fault Zones
G. Seismic Hazard Zones
H. Seismic Safety Element
XII.   Property Condition....................................... 57
A. Home Inspection
B. Smoke Detectors
C. Water Heater Bracing
D. Retrofit
E. Septic and Well Systems
F. Zoning and Building Codes
G. Mold
H. Property Insurance
I. Advisability of Title Insurance
XIII.  Stigmatized Properties................................... 67
A. Stigmatized Property
B. Duty to Disclose Material Facts
C. Death on Property
D. Contaminated Property
XIV.   Tax Withholding.......................................... 71
A. Tax Statutes
B. Liability for Non-Compliance
XV. Fair Housing................................................ 75
A. Discrimination
B. Senior Housing
C. AIDS
D. New Construction
E. Licensed Care Facilities
XVI.   Condo/Common Interest Subdivisions....................... 79
A. Seller Requirements
B. Association Requirements
C. Buyer Requirements
D. Agent Responsibility
E. Contractual Provisions
F. Director Liability
XVII.  Loan Disclosures......................................... 83
A. Seller Financing Addendum and Disclosure Statement
B. Mortgage Disclosure
C. Truth in Lending
D. Credit Scoring Disclosure
E. RESPA - A Federal Law Passed in 1974
XVIII. Tenant Issues............................................ 91
A. Keysafe/Lock Box Addendum
B. Lead Based Paint - Pre-1978 Properties
C. Pest Control
D. Estoppel
E. Municipal Utility Security Deposits
F. Screening Fees
G. Identified Drug Dealers
H. Handyman Work
I. Notice Requirements
J. Entry Restrictions
K. Move-Out Inspection Rights
L. Application Deposits
XIX.   Compensation............................................. 97
A. Commission Agreement
B. Cooperating Agent Compensation
C. Rebates to Buyers and Sellers
D. California Law on "Kick Backs"
E. RESPA (Real Estate Settlement Procedures Act)
XX. Minimizing Claims.......................................... 103
XXI.   Recommending Others to Provide Information or Opinions.. 105
XXII.  Tips to Minimize Risk................................... 107
Supplements Index.............................................. 109
I. Disclosures in a Residential Sale....................... 111
II. Disclosures for Lease and Rental Transactions........... 133
III.  Disclosure Required in Foreclosures and Other Special Circumstance Sales......................................... 137
IV. Disclosure Requirements for New Home Sales.............. 138
V. “Disclosure Tips for Realtors®” by CREIA................. 139
VI. Natural Hazards Flow Chart.............................. 140
VII.  Case Studies......................................... 141
VIII. Risk Management Documentation Examples............... 143
IX. Document Check List..................................... 153
X. Review Quiz Answers..................................... 155
CAR Forms Index
AC    Confirmation Real Estate Agency Relationships......... 21
AD    Disclosures Regarding Agency Relationships ........... 20
AS    Seller's Affidavit of Nonforeign Status and/or California Withholding Exemption.............................. 73-74
BMI   Buyer Material Issues................................. 63
DA    Disclosure and Consent for Representation of More Than One Buyer or Seller................................... 19
HOA Homeowner's Association Information Request.............. 82
KLA   Keysafe/Lockbox Addendum.............................. 96
MCA Market Conditions Advisory............................... 63
NHD Natural Hazards Disclosure Statement.................. 55-56
SBSA  Statewide Buyer and Seller Advisory................ 64-65
SFA   Seller Financing Addendum and Disclosure.............. 90
SDS   Smoke Detector Statement of Compliance................ 63
SPQ   Seller Property Questionnaire......................... 40
SSD   Supplemental Statutory and Contractual Disclosures.... 39
TDS   Real Estate Transfer Disclosure Statement.......... 36-38
WHS Water Heater Statement of Compliance..................... 63