Chapter 3 Power Point

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MANDATORY DISCLOSURES
CHAPTER 3

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These Disclosure laws apply to residential
properties of one to four units.
Agency Disclosure
Real Property Transfer Disclosure
WHAT MUST BE DISCLOSED?

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A material fact is any fact that would affect the
decision of the buyer or seller in completing a
transaction.
Full Disclosure means disclosing all material
facts in a transaction.

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Full Disclosure will:
1. Protect the principals
2. Establish and build trust and
confidence.
3. Satisfy the law.
4. Protect the agents.

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A Mandated Disclosure is an item of information
required by law to be conveyed from one entity
(buyer. seller or agent) involved in a real estate
transaction to another entity in the same
transaction.

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The phrase required by law means some
obligation imposed by a legal authority.
Information means some type of material data,
facts, news or figures.
An agent’s fiduciary responsibility to his/her
principal is one of binding trust.
OTHER TERMS

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FIDUCIARY RESPONSIBILITY
AND DISCLOSURES
.
The word agent is synonymous with the employing
broker.
A salesperson always works under the authority of
a designated broker

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AGENCY DISCLOSURE
A relationship that is created between agent,
broker and principal is referred to as an agency.
Agent – One who represents another, called the
principal, in dealings with a third person.

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The licensee who lists the seller’s home is called
the listing agent.
A real estate broker acts as an agent for the
principal who wishes to sell to, buy from, or
exchange real property or a business opportunity
with a third party.
The licensee who brings the buyer into the
transaction is called the selling agent.

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Brokers may choose to work as associate
licensees under the authority of another broker.
Designated broker may be held legally liable for
misdeeds of associate licensees per legal theory
of respondent superior.

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Department of Real Estate (DRE) regulation
mandates a written employment contract between
all sales associates and the employing broker.
Any licensee must disclose his or her agency

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The agent who represents the buyer is called the
buyer’s agent.
An agent who represents the seller is called the
seller’s agent.
When an agent represents both buyer and seller it
is known as a dual agency.
TYPES OF AGENCY

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SINGLE AGENCY
Exclusive representation of the
buyer.
Or
Exclusive representation of the
seller.

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DUAL AGENCY
.
Representation of the buyer and seller in
the same transaction
Informed and consensual dual agency is
lawful

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The licensee who brings the buyer into the
transaction is called the selling agent.
The licensee who lists the seller’s home is called
the listing agent
NOTE: An agent can receive a commission from a
seller but still be the buyer’s agent.

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AGENCY RELATIONSHIP
SELLER BUYER
Listing Agent
1. Seller’s Agent
2. Dual Agent
Selling Agent
1. Seller’s Agent
2. Buyer’s Agent
3. Dual Agent
Sub-Agent
MLS

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All Disclosures should be in writing.
Any licensee must disclose his or her
agency and it must be in writing.
AGENCY DISCLOSURE

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SUB–AGENT
Agents must have the authority of the principal
to appoint sub–agents.
Refers to other brokers who are appointed by an
agent to help carry out the purpose of the agent.

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Great care must be taken NOT to permit
unlicensed assistants to perform licensed
activities.
Hired by licensees to assist in the business of Real
Estate.
A licensed assistant can do any task that you can
do.
UNLICENSED
ASSISTANTS

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EXPRESS AUTHORIZATION
Power of Attorney (two types):
1. Special power of
attorney. A listing is a
special power of
attorney.
2. General power of
attorney. Has to be
recorded.

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ORAL AGREEMENT
Lawful, and just as binding as
a written agreement.
As per Statute of Frauds, oral
commission agreements are
not enforceable.

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DISCLOSURE
Compliance With Agency Law Requires Three–
Step Process
STEP 1 DISCLOSE
Licensee will educate the his/her principal on the
different types of agency. This step will be in
writing (on the disclosure form).

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Seller:
1. Receives unsigned statutory
disclosure regarding agency
relationships mandatory form
from listing agent before entering
into listing.
2. Receives unsigned statutory
disclosure regarding agency
relationships form from selling
agent before offer is presented, if
from another office.

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Buyer
Receives unsigned statutory
disclosure regarding agency
relationships form from listing
broker before entering into
offer.

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STEP 2 ELECT
Because circumstances may change throughout
transaction, this should be an informed mutual
decision between seller and agent, as well as
buyer and agent.
The agent and principal decide on which type of
agency will be used.

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STEP 3 CONFIRM
The confirmation of the type of
agency elected in Step 2 must
be in writing.

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1. Buyers and sellers confirm agreed-upon
agency relationships in writing.
2. May be on separate confirmation form.

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LISTING AGENTS NOT SELLING THEIR
OWN LISTINGS.
In these cases agents should provide the disclosure
to the seller before entering into the listing
agreement, elect as soon as is practical and confirm
the agency prior to or coincident with the seller’s
acceptance of the purchase contract.

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LISTING AGENTS SELLING THEIR OWN
LISTING
In this case the agent should
disclose, elect and confirm to
the seller and buyer.

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SELLING AGENTS WORKING WITH A
BUYER
Selling agents who are not listing agents
always should disclose as soon as is practical
and prior to a buyer’s making an offer. They
should elect as soon as is practical and confirm
prior to or coincident with a buyer’s and a
seller’s execution of the purchase contract.

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SELLING AGENTS WORKING WITH A
SELLER
Selling agents who are not listing agents should
remember to disclose to sellers as soon as is
practical. They should elect as soon as is practical
and confirm prior to or coincident with a buyer’s
and a seller’s execution of the deposit receipt.

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TRANSFER DISCLOSURE
STATEMENT
The term transfer applies to a sale, exchange,
sales contract, installment sale, option, lease
option, and so forth.
A real estate transfer disclosure statement must
be given by the transferor (seller).

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If two agents are involved, it is the responsibility
of the selling agent to deliver it to the buyer.
A copy of the form must be delivered to the buyer.
If only one agent is involved, that agent must
deliver it to the buyer.
THE FORM

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If the seller has not filled out the disclosure
statement, the buyer should be notified in writing
of the buyer’s right to receive such a statement.
The disclosure statement should be delivered as
soon as practical and before the execution of the
offer to purchase.

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Part I
COORDINATION WITH OTHER
DISCLOSURE FORMS
This Real Estate Transfer Disclosure Statement
is made pursuant to Section 1102 of the Civil
Code. Other statutes require disclosures,
depending upon the details of the particular real
estate transaction (for example: special study
zone and purchase–money liens on residential
property).

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Part II
SELLER’S INFORMATION
The seller must fill out Part II of the form. The
seller must disclose all of the known defects in the
home.

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The following are representations made by the
seller(s) and are not the representations of the
agent(s), if any. This information is a disclosure
and is not intended to be part of any contract
between the buyer and seller.

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Part III
AGENT’S INSPECTION
DISCLOSURE
The agent(s) uses Part III. If the seller uses an
agent to sell the property, the agent must fill out
Part III.
Pass out a copy of the following problem and
blank form [Transfer Disclosure Statement
(TDS)].

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TRANSFER DISCLOSURE
STATEMENT – (TDS 11)
Mr. & Mrs. Henshall are selling their home at
123 Bailey Court, Greenville, CA 12345, for
$300,000. Mr. & Mrs. Jameson are making a full
price offer on the home. The selling broker,
Ronald DeClair needs to have the Sales fill out a
Transfer Disclosure Statement (TDS–11). The
Sellers are represented by broker Grace Wilko.
The Sales fill–out their TDS. The buyer’s agent:
Dave Simpson, who works for Redfield Homes,
Inc.

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You are given the following information:
The subject property has the items checked blow: Range, Washer and
Dryer Hookups in the garage, Burglar alarm, Central Heating,
Patio/Decking, Hot Tub with Locking Safety Cover, Security Gates,
Attached Garage, Pool/Spa Gas Heater, Water Heater with Gas
Supplied by the City, Water Supplied by the City. All window have
screens, Oven, Trash compactor, Smoke Detector(s), Satellite Dish,
Central Air, Sprinklers, Pool with Child Resistant Barrier, Automatic
Garage Door Opener(s), and Water Heater.

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Window Security Bars with Quick Release on the bedroom windows ,
Microwave, Garbage Disposal, Rain Gutter, Fire Alarm, Intercom,
Public Sewer System, Spa with Locking Safety Cover, the number of
remote controls are 3, Exhaust fans in the Kitchen, Down Stairs
Bathroom, The home has a 220 volt line in the garage and Patio, there
is a fireplace in the living room with a gas starter, the roof is tile type
roof, which was replaced 2 years ago. All above is in operating order.

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Are you (Seller) aware of any significant
defects/malfunctions in any of the following? The
seller answers No.
In section C: Are you aware of any the following?
The answer to all of these questions is “NO”.
Complete the Transfer Disclosure Statement
(TDS).