Once you have located the desired property, carefully review the disclosures that the seller and listing agent provide.
Disclosures contain many important items, most notably the property and pest inspections, the seller’s disclosures, and the title report.
Property Inspection Report
The property inspection is the inspector’s opinion on the home’s plumbing, electrical systems, foundation, roof, and overall condition. This report will list all issues the inspector finds. The property inspector does not provide the cost estimates. Generally, items found in the property inspections are not addressed by the seller, but they are your responsibility to repair.
Pest Inspection Report
The pest report will look for any damage to wood, most likely caused by termites, as well as any water damage that may be found in the home. Unlike the property inspection report, the pest report will usually list the costs required to alleviate these issues.
The pest report describes damage as a Section I or Section II issues. Section I issues are current problems with the home, such as active termite infestation or dry wall damage in which water has rotted away at the wood underneath the flooring or walls. Section II issues are future problems with the home, ones that could lead to pest or water damage in the future, such as a lack of caulking by the bathtub that could lead to future water damage.
Generally, the seller is responsible for Section I issues, and the buyer is responsible for Section II issues. However, if you purchase the home in “as is” condition, you are responsible for addressing the Section I issues. In a seller’s market, such as the one we are currently experiencing, the vast majority of homes are taken “as is.”
The seller’s disclosures contain answers to questions, such as whether any remodeling has been done, and if so, whether the remodeling was done with permits. California is very protective of homebuyers and requires sellers to disclose all known material problems a property may have.
The title report is issued by a company, such as First American or Chicago Title, and insures that the seller can convey clear title without any liens preventing a smooth conveyance. All liens that may be on the property, such as unpaid property taxes, are listed in the title report. Problems with conveying title are rare.
Homeowners Association (HOA) Documents
If you are considering a townhouse or condominium, it is likely that the HOA documents will be included in the disclosures or be quickly forthcoming. Important issues to consider include the size of financial reserves, whether any litigation or special assessments are looming, and whether there are plans to heavily increase HOA dues. Unlike the interest on your mortgage, HOA dues are not tax-deductible. Together, you and our agent will review the disclosures and discuss any concerns either of you may have with the information contained therein. Only after you feel comfortable with the disclosures should you consider making an offer.