Are you serious?

Upon seeing an especially large disclosure statement for a tenancy-in-common (TIC) unit, I found myself thinking that if disclosures could eat they must live on Big Macs because they keep growing in size as time passes.

Realtors all tell their sellers, “Disclose everything you know about your home.” Detailed seller disclosure forms plus updated and changing laws have gradually increased the size of the disclosure package.

First, what is a disclosure package? The short answer is that this is a group of documents completed by the seller that provides the buyer with all of the information the seller knows about the property. Looking at it in pieces makes it easier to understand.

Included in a disclosure package is information provided by the seller, the agents, the title company, and state and local governments. Different counties have different forms, so do not expect all disclosures to be exactly alike.

If you are thinking about buying or selling a property, you will come in contact with a real estate disclosure package and will probably take one look and ask, “Are you serious?”

Sellers will ask this when requested to fill out the required questionnaires that need to be included in a disclosure package. The seller must also pay for an earthquake hazard report, JCP (natural hazards) report, 3R public records report documenting building permit activity, and required inspections related to energy- and water-conservation laws. TICs, condominiums and stock cooperatives require additional documentation. In addition, the seller’s agent may recommend a pest inspection.

By the time all of these reports and questionnaires are put together, the disclosure package on a single-family home will be about 100 pages; for a TIC, it may be as many as 300 pages! TICs, condos and stock cooperatives must include all legal documents and meeting minutes for one year prior to the listing date. If new information becomes available while the property is on the market, this must be added to the disclosure.

The first time a buyer receives a disclosure package, even if they have been warned to expect more information than imaginable, they often ask, “Are you serious?” This is frequently followed by, “You want me to read all of this?” Well, yes, I do. For almost everyone, buying a home is the biggest financial decision they will make in their lifetime. Even a new home may have some issues and it is important to understand what you are buying, the work that has already been done on the home, and what work or maintenance may be necessary in the future. Home ownership always has a surprise or two for a new owner, but hopefully these are minimal when a disclosure package is complete and the buyer reads it carefully.

Sellers are the lucky ones. They only need to fill out the forms once, pay for the reports, and they are done. Buyers on the other hand, unless they are extraordinarily lucky, must read two or three disclosures (or more) before they decide to make an offer on a home and successfully negotiate a deal. The good news for buyers is that much of the information in a disclosure is boiler plate and after reading the first one, buyers quickly learn what to look for in a disclosure and how to spot red flags.

If you are a buyer and worried that you won’t have time to read and understand a disclosure package before you make an offer, why not take a test run? Ask your agent for a sample disclosure package to review. This will go a long way in helping you get ready for the main event when you make an offer on the home you want to call your own.

In a perfect world, when submitting an offer the buyers will include a disclosure package that is “signed off.” This means they have read it and don’t have further questions. What if you want to make an offer but don’t have time to review the disclosures, or the agent does not have the complete disclosure information available? There is no need to rush through reading and signing off on a disclosure package at the risk of missing important information. Both the San Francisco Association of Realtors purchase contract and the California Association of Realtors purchase agreement include language giving the buyer time to review and approve the disclosure once the contract is ratified.

There is no way to put the disclosure packages on a diet. Less is not more when it comes to disclosures. Take a deep breath when your agent hands you or e-mails you the package. Set aside a few hours to read through it with your highlighter in hand and some sticky notes to mark pages and write down questions. When you are done, ask your agent to explain the real estate jargon and answer your questions. Before you know it, you will be ready to write your offer and tell friends all about flood zones, liquefaction and the difference between dry rot, termites and wood-boring beetle damage.