With the recent spike in home sales, buyers and sellers alike are feeling the pressure to quickly close on their purchase transaction before mortgage rates go up and demand for new homes slip. But before rushing to “ink the deal,” understand that real estate professionals are required to provide written disclosures to their clients on a variety of important items necessary to the transaction, as they directly affect the buying or selling decision. Here are 8 areas where written disclosure should be or are required:1. Affiliate Disclosures. These days, it’s common for a mortgage company to have a business interest in a title company or a real estate brokerage to also own a mortgage company. These are called “affiliate” relationships, and the relationship must be disclosed to the potential end users of these services. For instance, a mortgage company must disclosure in writing to its loan applicants that is also owns a title company that will close on the mortgage and purchase transaction. A loan applicant is not required to use the “affiliate” title company and can use another suitable title provider instead. Most importantly, a home seller or buyer cannot be pressured to use an affiliate service or be prevented from seeking a loan or making an offer on a home, just because one chooses to do business with an “unaffiliated” business.2. Third- party services. Similar to the above paragraph, a home seller and real estate agent cannot require someone to use a third party service in order to purchase a home. A third- party could mean a lender, a title co, an appraiser or inspector. However, one can give better pricing to a buyer who uses their services. For example, a lender can waive fees if the buyer uses one of their “affiliates,” however, they cannot prevent you from making a loan application or denying a loan for refusing to use their business affiliates.3. Real estate agent disclosure. If a real estate agent is selling a home that they own, they must disclose that they are a licensed real estate agent. Some states limit this disclosure to only an agent’s primary residence. Other states require the disclosure for any properties that the agent owns.4. Dual agency. A seller’s agent or “listing agent” represents the seller. The seller’s agent does not have any professional duty to a buyer who is not represented by their own agent. The buyer should hire their own agent. A dual agent is an agent or real estate broker that represents both parties in the transaction. Agents must provide written disclosures to both a parties when they act as dual agents. In theory this disclosure is supposed to make a dual agent in a transaction neutral. However, a real estate deal is never without some controversy and give and take, and therefore this writer suggests that a prospective purchaser hire their own “buyer’s” agent.5. Title agency. A title company’s function is to insure that the ownership to a specific property is valid according to public property records so that a lending institution can provide a mortgage on the property or a purchaser can take proper title from the rightful owner. Title agents represent the insurance companies that provides this coverage. They do not dispense legal advice to buyers or sellers. They do not represent lenders or real estate brokers. Title companies must disclose when they have an affiliate relationship with a property service provider, meaning that they are owned by the lender or real estate brokerage, or even an appraiser.6. Provide all offers. A real estate agent is required to provide its sellers with all offers. Unless a seller specifically instructs an agent not to bring certain offers, say one below a certain price or time frame, the agent must present the offer. Therefore, if a buyer feels that an offer was not presented, they should contact the agent’s broker. In some states, it’s customary for a buyer or their agent to present the offer directly to the seller. But nothing prevents an enthusiastic buyer from directly speaking with a seller, it’s just not commonplace.7. Terminating a real estate agent. It is a common misconception among sellers that they cannot fire or terminate their listing agent. They can. However, the best way to still market one’s property without bad feelings is to approach the agent’s broker and have the broker assign a new agent to the listing. Understand that the agent and broker still have a “protection period” that protects them against the seller closing a transaction with a buyer that the agent, through their business efforts, had previously procured. The period is usually for 180 days, but at time of listing a property this period can be negotiated down to 90 or even 60 days. Regardless of the time limits, it is wrong for a seller to take advantage of the agent’s efforts and is grounds for legal action.8. Attorneys. Like a property agent, an attorney cannot represent a buyer and a seller in a transaction unless the attorney discloses the conflict in writing and both parties sign the disclosure. If two parties to a transaction have completely different versions of a transaction, then it’s time that one party hires their own attorney.In a residential real estate transaction written disclosures comprise most of the real estate package. For those new to real estate, hire the right adviser to guide one through a successful transaction. But make sure to read and understand the disclosures and how they apply to one’s deal, as they are there for the buyer or seller’s benefit.
Real estate investments are surely providing steady flow of income and returns, only if they are appropriate, strategic and really sound. As a new investor, how could you guard yourself against unlikely real estate investments? It would be helpful if you would take a look at this simple checklist for real estate investments. If you would buy an investment property, better check out the following factors.Location – Market valuation varies depending on the venue of the property. Of course, valuation of real estate in expensive markets is higher compared to similar properties located in cheaper and less lucrative markets. Globally, Moscow, London and Seoul are among the most expensive cities where valuations of real estates are at their highest. Properties in New York, California, Paris and Rome, among some, have always been on top of their ranges.Tenant credit risk – You should know that the valuation of real estate can very much depend on the expected rental income of the property. If the real estate is not likely to generate significant rental income, then its valuation would surely decline.Physical characteristics – When buying a property, check out the utility and type of building as these should affect valuation. Of course, condominiums are expensive compared to apartments because the formers are of course more secured, more developed and are provided with better amenities.Tax implications – Real estate valuation is directly affected by tax implications. Take note that properties are imposed with stamp duties and property taxes, on top of the income tax, which could be computed from the capital gains and rental income.Higher investment costs – Always remember that real estate investments are practically higher and more expensive than almost all other types of investments. For example, you can easily buy and own stocks. By just investing a few hundred or thousand dollars, you can already build up your own stock portfolio. That is not the case about real estate assets. Not too many people are able to invest in properties simply because they do not have appropriate resources to do so.Legal issues – Most real estate investments are not as secured as stock investments. Stock exchanges secure and guarantee legitimacy and safety of investments. In real estate, such regulating body is not present, although a real estate regulator is exiting to rule about real estate practices and at times, prices.Liquidity – Real estate assets are usually not easily and rapidly liquidated. Transactions cannot be completed overnight or within hours. Market conditions would have to be considered as they would influence and regulate the length and duration of the real estate transaction.