Shortly after your offer is accepted, you will receive a substantial amount of documents regarding your future new home. Below we’ve detailed what each disclosure means and tips for your next steps. Related reading: Steps to Buy a Home.
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What is a Sellers Property Disclosure?
- A Sellers Property Disclosure (SPD) indicates any knowledge that the present owner has of the property. The SPD is not always accurate. This could be out of a very “harmless” reason, like the owner just doesn’t know specifics about certain features of the home. For example, we had an owner indicate that the house is oil heated when it was actually a force air furnace. Other times, the owner thinks that whatever information they have is not important or applicable because the issue was fixed. Sometimes the sellers just scan the document and really do not read it. Even more important for you to review it and ask questions. An SPD can be very helpful if it is filled out accurately and thoroughly. It will have information on insurance claims, any problems with the home, and age of appliances. All this is great information to have.
- Do I have to sign the Sellers Property disclosure? The contract states “Buyer receipts for a copy of this Disclosure.” This is all you are acknowledging. Since this is NOT a state mandated disclosure you don’t have to sign it.
Buyer beware: research owner statements carefully as they are “owners’ opinions” and “owners’ current knowledge”. I advise my buyers to take the property disclosure, mark it with questions, and ask the inspector when your are doing your home inspection.
- Source of Water Disclosure (SOW). Water is a very precious commodity in Colorado and the value of your home may depend on the statement in this disclosure. It describes who provides your water (utility company) or how you might obtain it (well or cistern). You will receive this, if the seller chose not to fill out or you do not want to sign a SPD, as the disclosure of your water provider or your source of water is mandatory by state legislation. The SPD has a section describing where you can sign up for your water utility. Some agents prefer to keep the the SPD and the SOW separate or fill out only one of them.
- Lead Base Paint Disclosure. LBPD is mandatory WITH your offer (not after the contract has been signed) for all homes built prior to January 1st, 1978. Please choose your options and sign. Failure to fill out and sign this disclosure by all parties by the deadline will render your contract void.
- All other disclosures (mold, addenda, etc) do not have to be signed unless they are listed in the contract or counter and are agreed upon. As your buyers agent, I will ensure that you know what each of these documents are so that you can make an informed decision.
2. Title Commitment
The engaged title company will function as the closing agent as well as the insurer of your title (your ownership). Therefore the title company will do some research and then send you the information they find in the public recorder’s office.
A title commitment will state the title company’s willingness to insure your property under certain conditions. Most of the time you will receive a link to click which will then open up to other documents. Make sure you review all the information. To do so, click on the (generally blue) links (usually “book #”) to see the original documents that were recorded.
Please know that after every change you’ll receive a new, updated title confirmation. The latest version is the most updated version. You may keep all versions in your file, but at least keep the most recent one.
There are requirements, exceptions, plats and usually covenants of the subdivision. If your home is in an older part of town you might not have covenants at all. “Exceptions” will be particularly important to you. If you have questions in regard to title and record issues, feel free to call your title company or consult legal counsel.
Click here to view infographics about Title Insurance and Title information
3. Protective Covenants
Please be advised that many properties you may consider are located within subdivisions governed by recorded restrictions and protective covenants. Ownership of your new property would be subject to the conditions established in these restrictions and protective covenants.
It will be your responsibility to investigate how these restrictions or protective covenants will affect the intended use of your property.
Most likely you will receive the CIC (Common Interest Community) documents via your title information since these are publicly recorded. Expect to see links in your title document emails to these documents.
4. Home Owners Associations
Some single family, condominium, and townhouse subdivisions have mandatory membership to owners associations with accompanying fees and/or assessments (special and regular). These fees may pay for maintenance and upkeep of common portions of the subdivision. The owner of real property located within one of these subdivisions is required to be a fee-paying member of the association.
If the subdivision in which you have decided to purchase a home has an active HOA, you will receive links or attachments to all of their rules and regulations, meeting minutes, financials, and so on. Read and review these documents to make sure you agree with all and you are satisfied with the financial standing of the HOA.
Please know that you will have to pay the HOA fees separately. They will not be rolled into the mortgage payment. At your closing you will fill out your information to be forwarded to the HOA and they then will contact you. Your HOA fees will be paid up for 2 or 3 months so there is plenty of time to get it all settled in.
If you have any questions or need HOA contact information, give me a call or text and I can get it for you.
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Things to consider:
- Are only certain dog breeds or sizes allowed?
- Are trucks prohibited from parking in front of the home?
- Would you like to store an RV on your lot? This might be prohibited.
- Financial questions: Does the HOA have proper book keeping and reporting? Have they increased their fees constantly – do you have to expect increases? If you are not sure – call them!
- You want to make sure that your lender allows this specific subdivision for the loan you are requesting.
- If you are intending to rent the property right away, please consult the HOA rules to ensure that this is not going to be a problem down the road. Some subdivisions have rules restricting or prohibiting rental properties.
- Section 7.1 “Owners’ Association Documents” of the Purchase Contract provides for you to obtain, investigate, and satisfy any questions as to any owners association, its organization and charges. Rely on experts of your own choosing in investigating any such owner’s association.