Property Condition and the Disclosure Process
Most California home sellers (other than institutional type) are required by law to disclose facts and defects, which materially affect the value or desirability of their home. The Transfer Disclosure Statement (T.D.S.) helps the seller meet this requirement by providing a standardized format for most basic information. The key word in this paragraph is “Most”.
Several interesting scenarios:
1) A homeowner contacts their lender for a loan modification. They complete the necessary paperwork and to validate a lower value might provide the lender with information regarding the condition of their home. The lender denies the loan modification; the homeowner loses their home through foreclosure.
The lender lists the home with a local Realtor© as a foreclosure. The new buyer moves in and was never informed of the former owner's claims (or even written reports) regarding the condition of the home.
2) A home is listed with a local Realtor© as a short sale. A buyer is found and escrow is opened. This buyer conducts a thorough inspection of the home. After the inspection, the buyer asks for a credit and the inspection report is forwarded to the lender. The lender/seller refuses to renegotiate and the buyer does not complete the sale, the homeowner loses their home through foreclosure. The new buyer moves in and was never informed of the written reports regarding the condition of the home.
3) A homeowner has major damage to their home caused by fire, flooding, mudslide or ???. Their insurance carrier pays a claim, and because the claim is over a specified dollar amount the check must also be endorsed by the homeowner and the lender. The check is endorsed, the lender has a record of the claim. The homeowner later loses their home in foreclosure. A new buyer moves in and was never informed of the written reports regarding the condition of the home.
I am certainly not an attorney, but in each of these instances it seems that the lender would have a duty to disclose. My question: Are the lender/owners actually making these disclosures?
Several interesting scenarios:
1) A homeowner contacts their lender for a loan modification. They complete the necessary paperwork and to validate a lower value might provide the lender with information regarding the condition of their home. The lender denies the loan modification; the homeowner loses their home through foreclosure.
The lender lists the home with a local Realtor© as a foreclosure. The new buyer moves in and was never informed of the former owner's claims (or even written reports) regarding the condition of the home.
2) A home is listed with a local Realtor© as a short sale. A buyer is found and escrow is opened. This buyer conducts a thorough inspection of the home. After the inspection, the buyer asks for a credit and the inspection report is forwarded to the lender. The lender/seller refuses to renegotiate and the buyer does not complete the sale, the homeowner loses their home through foreclosure. The new buyer moves in and was never informed of the written reports regarding the condition of the home.
3) A homeowner has major damage to their home caused by fire, flooding, mudslide or ???. Their insurance carrier pays a claim, and because the claim is over a specified dollar amount the check must also be endorsed by the homeowner and the lender. The check is endorsed, the lender has a record of the claim. The homeowner later loses their home in foreclosure. A new buyer moves in and was never informed of the written reports regarding the condition of the home.
I am certainly not an attorney, but in each of these instances it seems that the lender would have a duty to disclose. My question: Are the lender/owners actually making these disclosures?
Posted by Phyllis Harb at 10/7/2009 3:00 AM 
Categories: A Buyer's Perspective
Tags: disclosures purchasing a foreclosure - beware
Categories: A Buyer's Perspective
Tags: disclosures purchasing a foreclosure - beware
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