Real Estate Principles Chapter 13,14,15,16,17,18

Dam failure

results in flooding when an earthquake ruptures a dam which serves as a reservoir

Ground failure

seismic hazard which refers to landslides and liquefaction. Liquefaction occurs when loose, wet, sandy soil loses its strength during ground shaking

In response to an inquiry the seller's agent needs to:

• identify the source of information if they have not confirmed its accuracy or correctness; or title conditions Encumbrances such as liens, conditions, covenants and restrictions and easements which affect title to property. Respond fully and fairly In response to an inquiry • condition the response in such a way as to prevent the prospective buyer from justifying their reliance on the information without further investigation.

Seismic Hazard Zone

• strong ground shaking • ground failure, such as liquefaction or landslides • tsunamis • dam failures

visual inspection and investigation of one-to-four unit

• the inspection of areas reasonably and normally inaccessible to the broker; • the investigation of off-site areas and areas surrounding the property; and • the inquiry into or review of public records or permits concerning title or use of the property

material fact

A fact that, if known, might cause a prudent buyer or seller of real estate to make a different decision regarding what price to offer or demand for a property or whether to remain in a contract or cancel it

Transfer Disclosure Statement (TDS)

A mandatory disclosure prepared by a seller and given to prospective buyers setting forth any property defects known or suspected to exist by the seller, generically called a condition of property disclosure

home inspection

A non-invasive examination of the mechanical, electrical and plumbing systems of a dwelling, as well as the components of the structure, such as the roof, ceiling, walls, floors and foundations.

home inspector

A professional employed by a home inspection company to inspect and advise on the physical condition of property improvements in a home inspection report for reliance by the seller, the seller's agents and the buyer as a warranty of the condition of improvements

further-approval contingency

A provision in an agreement calling for the further approval of an event or activity by the seller, buyer or third party as a condition for further performance or the cancellation of the transaction by a person benefitting from the provision

Natural Hazard Disclosure (NHD) Statement

A report provided by a local agency or NHD vendor and used by sellers and seller's agents to disclose natural hazards which exist on a property held out for sale

Chapter 14 Summary

A seller's agent owes a limited general duty to any prospective buyer to voluntarily provide information on the property which may affect its value, collectively called disclosures. These disclosures are to be sufficient to place the buyer on notice of facts that may affect the property's value or the buyer's use. This non- fiduciary duty of good faith and fair dealing prevents the seller's agent from exploiting a prospective buyer by: • providing less than the minimum required disclosures; • giving unfounded opinions or deceptive responses; or • stifling the buyer's attempts to learn more about the property. All property information received from a seller is reviewed by the seller's agent for inaccuracies or untruthful statements. However, a seller's agent need not investigate the seller's claims any further before using the information to market the property so long as they are not known to the agent to be false. A seller's agent owes a duty to the prospective buyer to conduct a reasonably diligent visual inspection of the property for defects which adversely affect the value of the listed property. The seller's agent notes on the Transfer Disclosure Statement (TDS) any defects observable or known to the seller's agent which are not already noted by the seller or are inconsistent with the seller's disclosures. The TDS is handed to prospective buyers as soon as practicable, putting the buyer and the buyer's agent on notice of physical defects in the property which are observable or known to the seller or the seller's broker and their agents.

carcinogen

A substance which causes cancer in human beings

Annual Property Operating Data Sheet (APOD)

A worksheet used when gathering income and expenses on the operation of an income producing property, to analyze its suitability for investment

as-is clause

An unenforceable provision stating the buyer accepts the property without a full disclosure of known conditions. Properties are sold "as-disclosed," never "as-is."

lead-based paint hazard

Any condition that causes exposure to lead from lead- contaminated dust, soil or paint which has deteriorated to the point of causing adverse human health effects

Hazardous waste

Any products, materials or substances which are toxic, corrosive, ignitable or reactive.

lead-based paint

Any surface coating containing at least 1.0 milligram per square centimeter of lead, or 0.5% lead by weight

Chapter 13 Summary

Brokers and agents are to disclose to all parties involved in a real estate transaction all significant physical aspects of a property which may affect the property's market value or a buyer's decision to purchase. Property disclosures will be made to the buyer before offers are prepared and prices agreed to. A broker is obligated to disclose the physical condition of soil and improvements of a property, the land use and title conditions, the operating income and expenses of the property, and location hazards and the impact of the surrounding area. Further, the actual legal size and boundaries of a property need to be disclosed by a broker. A broker needs to also accurately represent the title restrictions and potential future use of real estate to a prospective buyer or tenant. A broker marketing property as an income-producing investment owes a duty to a buyer to research whether the property produces adequate income to meet expenses.

title conditions

Encumbrances such as liens, conditions, covenants and restrictions and easements which affect title to property

Chapter 16 Summary

Environmental hazards are noxious or annoying conditions which are man-made hazards, not natural hazards. As environmental hazards, the conditions are classified as either: • injurious to the health of humans; or • an interference with an individual's sensitivities. Environmental hazards are defects which, if known, are disclosed as material facts as the hazards might affect a prospective buyer's decision to purchase the property, and on what terms. The seller's agent needs to competently conduct a visual inspection of the property for environmental hazards before preparing the Transfer Disclosure Statement (TDS) and advise prospective buyers of their observations (and knowledge) about conditions which constitute environmental hazards. The notice of any environmental hazard to be delivered to a buyer by a seller is delivered in writing. The TDS and purchase agreement are currently used as the vehicles for written delivery. Further, the seller's agent delivers, or confirms the buyer's agent has delivered a copy of the environmental hazard booklet approved by the California Department of Health and Safety (DHS) to the buyer. The seller has no obligation to hire an expert to investigate and report on whether an environmental hazard is present on or about the property. It is the seller's and the seller's agent's knowledge about the property which is disclosed on the TDS.

Chapter 18

Lead-based paint, defined as any surface coating containing at least 1.0 milligram per square centimeter of lead, or 0.5% lead by weight, was banned by the Federal Consumer Product Safety Commission in 1978. A lead-based paint hazard is any condition that causes exposure to lead from lead-contaminated dust, soil or paint which has deteriorated to the point of causing adverse human health effects. An owner of residential property built prior to 1978 cooperates in the LBP disclosure and their agent's other marketing efforts by: • filling out and signing the federal LBP disclosure form required on all pre-1978 residential construction; • filling out and signing the TDS containing the lead-based paint, environmental and other property conditions; • making a physical home inspection report available to prospective buyers as an attachment to the TDS form; and • providing the seller's agent with copies of any reports or documents containing information about lead-based paint or lead-based paint hazards on the property. A prospective buyer of a residence built prior to 1978 is put on notice of LBP conditions by handing them the disclosure forms before they make an offer. The disclosures advise them they have a 10-day period after their offer is accepted to evaluate the lead-based paint risks involved. Exempt from the Federal LBP disclosures are foreclosure sales of residential property. Yet, a foreclosing lender still has a common law duty to disclose property defects known to them at the time of the foreclosure sale.

Alquist-Priolo Maps

Maps which identify earthquake fault areas available from the State Mining and Geology Board and the city or county planning department

Environmental hazards

Noxious or annoying man-made conditions which are injurious to health or interfere with an individual's sensitivities

natural hazards

Risks to life and property which exist in nature due to a property's location. • special flood hazard areas, a federal designation; • potential flooding and inundation areas; • very high fire hazard severity zones; • wildland fire areas; • earthquake fault zones; and • seismic hazard zones.

fiduciary duty

That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over their principal by the slightest misrepresentation, concealment, duress or undue influence

termination

The cancellation of a transaction before escrow has closed or a lease has ended.

Chapter 17

The existence of a hazard due to the geographic location of a property affects its desirability, and thus its value to prospective buyers. A seller of property is to disclose any natural hazards affecting the property known to the seller, as well as those contained in public records to the buyer. Natural hazards are disclosed using the statutory Natural Hazard Disclosure Statement (NHD). The NHD Statement discloses risks to life and property which exist in nature due to the property's location, risks known and readily available from the public records (planning department) and are unrelated to the risks to life and property from man-made physical and environmental conditions disclosed by a TDS. The NHD assists buyers determine whether they are to buy the property, and if so, on what price and on what terms. To obtain the natural hazard information to disclose to prospective buyers, a seller and their agent consult publically available records themselves. The use of an expert to gather information from the public record and prepare the report relieves the seller's agent of any liability for errors not known to the agent to exist. Sellers and seller's agents of any type of real estate are to disclose whether the property is located in: • an area of potential flooding; • a very high fire hazard severity zone; • a state fire responsibility area; • an earthquake fault zone; and • a seismic hazard zone.

restoration

The return of funds and documents on a rescission of a purchase agreement or transaction sufficient to place all the parties in the position they held before entering into the agreement or closing the transaction

eminent domain

The right of the government to take private property for public use on payment to the owner of the property's fair market value

Chapter 15 Summary

The seller of a one-to-four unit residential property completes and delivers to a prospective buyer a statutory form called a Transfer Disclosure Statement (TDS), more generically called a Condition of Property Disclosure Statement. The failure of the seller or any of the agents involved to deliver the seller's TDS to the buyer will not invalidate a sales transaction after it has closed. However, the seller and the seller's broker are both liable for the actual monetary losses incurred by the buyer due to an undisclosed defect known to them. If the TDS is belatedly delivered to the buyer — after the buyer and seller enter into a purchase agreement — the buyer may elect to cancel the purchase agreement under a statutory three-day right to cancel. As an alternative remedy to cancelling the purchase agreement on receipt of an unacceptable TDS, the buyer may make a demand on the seller to cure any undisclosed material defect affecting value that known to the seller or the seller's agent prior to entering into the purchase agreement.