Buyer Advisory Part 2: Paperwork

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DOCUMENT INSPECTION AND INVESTIGATION

 

Information Generally

Information from third parties contained in the many documents associated with a real property transaction is not independently verified by real estate licensees.  It is the responsibility of the buyer to read the documents provided and ask questions if uncertain or concerned.  Interpretation of many real property transaction documents involves the practice of law and is, therefore, beyond the scope of a real estate licensee’s expertise.  BUYERS UNCERTAIN ABOUT THE LEGAL EFFECT OF DOCUMENTS SHOULD CONSULT AN ATTORNEY.
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MLS Information

Most properties marketed for sale by real estate licensees are listed in a Multiple Listing Service (MLS).  Information about the listing, provided to the MLS by the listing broker, is made available to all subscribing members of the MLS.  This information is typically contained in what is called an MLS “printout” or “data sheet.”  Most of the information contained in an MLS data sheet or printout is obtained from the seller or third-parties like the county assessor’s office or other governmental entity.  MLS data may be incomplete, an approximation or otherwise inaccurate. Personal property cited on the MLS data sheet should be included in the purchase agreement if the buyer wishes to have the personal property included in the sale.  BUYERS SHOULD NOT RELY ON MLS- PROVIDED INFORMATION IF THAT INFORMATION IS CONSIDERED IMPORTANT UNLESS THE BUYER VERIFIES THE INFORMATION.
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Seller’s Property Disclosure Statement

In most cases, residential property sellers in Oregon must provide a Seller’s Property Disclosure Statement to each residential buyer who makes a written offer.  The form used by the seller is mandated by state law.  The seller’s representations regarding the property are based upon the seller’s actual knowledge at the time the disclosure statement is made and are not the representations of any financial institution that may have made or may make a loan pertaining to the property, or that may have a security interest in the property, or any real estate licensee engaged by the seller or buyer. Licensees are not responsible for misrepresentations by the seller unless they know of the misrepresentation and fail to disclose it.  A buyer should carefully review the seller disclosures and verify, or ask their licensee to verify, any statements of concern.  REVIEW OF THE SELLER’S PROPERTY DISCLOSURE STATEMENT IS NO SUBSTITUTE FOR PROFESSIONAL INSPECTIONS.
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Real Estate Sale Form (Sale Agreement)

A contract for the sale of real property must be in writing to be enforceable in an Oregon court.  A VERBAL OFFER OR ACCEPTANCE SHOULD NOT BE MADE OR RELIED UPON.  Contracts for the sale of property are often called “earnest money” or “sale” agreements. They are legally binding contracts.  Buyers and sellers should seek competent legal advice before signing any contract they do not fully understand.  Sale agreements usually include provisions concerning who will hold the earnest money and under what conditions it may be refunded to the buyer or forfeited to the seller.  Both buyers and sellers should carefully review these provisions.  The amount of earnest money pledged and the conditions under which it may be refunded or forfeited are important matters that should be carefully negotiated between the buyer and the seller.

Most sale agreements are written using a standard form.  In Oregon, most licensees use a form developed specifically for Oregon real property transactions.  Many of these forms contain dispute resolution provisions that require mediation or arbitration of disputes.  Arbitration and mediation clauses can affect legal rights, including the right to a judicial determination of a claim and the right to appeal.

 

BUYERS AND SELLERS ARE RESPONSIBLE FOR SELECTING THE TERMS AND CONDITIONS OF THEIR AGREEMENT.  REAL ESTATE LICENSEES CAN GIVE BUYERS IMPORTANT MARKETING, BUSINESS AND NEGOTIATING ADVICE AND INFORMATION AND CAN ASSIST IN PREPARATION OF THE SALE AGREEMENT BUT ONLY PURSUANT TO THE CLIENT’S INSTRUCTIONS. REAL ESTATE LICENSEES ARE NOT ATTORNEYS AND ARE PROHIBITED BY LAW FROM GIVING LEGAL ADVICE. To obtain a referral for a real estate attorney, visit the Oregon State Bar at http://www.osbar.org/public/legalhelp.html or contact by phone at 503-684-3763 (Portland metro) or 800-452-7636 (greater Oregon).
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Financing

The buyer’s ability to finance the property is an important contingency in most residential transactions.  Buyers must act in good faith and use best efforts to obtain a loan if the sale is contingent upon obtaining a loan. Buyers often seek pre-approval from a lender prior to writing an offer.  A pre-approval letter should state that the lender has reviewed the buyer’s credit report, income requirement and cash to close and pre-approves the buyer for the loan, subject to an acceptable appraisal of the property. The appraiser will normally work for the lender, not the buyer.  To check the status of an appraiser, visit the Appraiser Certification and Licensure Board: http://oregonaclb.org/aclb_prod/index.php   Once the appraisal has been received, the underwriter authorizes final loan approval. Only when the underwriting process is completed will an actual loan be secured. The entire financing process normally takes approximately 30-45 days.  If the seller is asked to finance any part of the transaction, the buyer’s financial status will become material to the transaction.  Any material defect in the buyer’s financial status must be fully disclosed to the seller.  Because of the risks involved for the seller, the buyer should anticipate that the seller will fully investigate the buyer’s credit worthiness prior to agreeing to carry financing for the buyer.  A real estate licensee cannot hide material information from any party to a real estate transaction and should not be asked to do so by the buyer or seller.
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Title Report and Commitment

The title report, or commitment to insure, produced by a title insurance company contains important information that must be reviewed by the buyer.  In particular, the report will list certain “exceptions” to the policy the company will issue. Buyers should request copies of any documents mentioned in the report that are not understood or raise concerns about the state of the title.  General information about title issues can be found at: http://www.titlelawannotated.com. Questions about the title report and associated documents can be directed to the title or escrow officer issuing the report or to the buyer’s attorney or surveyor.  Review of title reports for legal deficiencies involves the practice of law.
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Homeowners’ Insurance

The insurance claims history for a home may affect the cost of homeowners’ insurance, or even its insurability.  Most insurance companies use a database service called the Comprehensive Loss Underwriting Exchange (CLUE) to track claims made.  Depending on the content of the CLUE report, and the insurance company’s policy, home insurance may prove more difficult to get than expected.  The buyer’s claims history and credit report may also be used to determine insurability.  Insurers have used CLUE reports and other information, coupled with termination provisions in the policy, to cancel coverage after closing.  IT IS CRITICAL THAT BUYERS ARRANGE FOR HOMEOWNERS’ INSURANCE EARLY IN THE PROCESS OF PURCHASING PROPERTY RATHER THAN WAITING UNTIL CLOSING TO GET INSURANCE.  If difficulty is experienced in obtaining the insurance, the buyer can ask the seller to furnish them with a copy of the CLUE report on the property.  Homeowners can obtain a copy of the report for their property online at: https://www.choicetrust.com/servlet/com.kx.cs.servlets.CsServlet?channel=home&product=ror&subproduct=order Buyers may want to talk to the licensee they are working with about whether obtaining suitable homeowners’ insurance should be made a contingency of the sale. More information on homeowners insurance in Oregon can be found at: http://www.insuranceoregon.org/home/ .
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Home Warranties

A home warranty is an insurance contract. Home warranties for existing homes are common in today’s real estate market. The warranty generally covers the repair and replacement of equipment and appliances such as dishwashers, plumbing systems, electrical systems, and so on. Optional coverage may be available at additional costs for pools, built-in spa equipment, well pumps and other systems. Coverage and price vary considerably among warranty companies. A home warranty can be included as a term of a purchase agreement.  Buyers should discuss home warranties with their agent prior to purchasing a home. Your agent can provide you with information on companies offering home warranties for purchase.
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Square Footage and Acreage

The square footage of structures and acreage data found in MLS printouts, assessor records and the like are usually just estimates and should not be relied upon. Many Oregon properties have not been surveyed and their exact boundaries are not known.  If square footage or land size is a material consideration in a purchase, all structures and land should be measured by the buyer or a licensed surveyor prior to entering into a sale agreement, or should be made an express contingency of the agreement. You can find a licensed surveyor in your area by visiting their website at:  http://www.osbeels.org/ .
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Homeowners’ Association Documents, Covenants, Conditions and Restrictions

Covenants, conditions and restrictions, called “CC&Rs,” are formally recorded private limitations on the right to use real property.  Often, but not always, CC&Rs are enforced by a homeowners’ association.  Review of the CC&Rs is typically part of a real estate sale. Although real estate licensees are familiar with common CC&R provisions, determining the legal effect of specific provisions is considered the practice of law in Oregon and, therefore, beyond the expertise of a real estate licensee.  If the subdivision in which the property is located is governed by a homeowners’ association, the CC&Rs may be very restrictive.  Homeowners’ associations are often governed by their own articles of incorporation, bylaws, rules and regulations.  Homeowners’ association rules and regulations can significantly impact a buyer’s plans for the property the buyer wants to purchase.  Planned communities and condominiums are very likely to have detailed homeowners’ association governing documents, mandatory fees and ongoing homeowner obligations.  Governing documents, fees and homeowner obligations should be reviewed by the buyer during the transaction.  If you have questions about CC&Rs or your legal rights and remedies under homeowners’ association governing documents, you should have your attorney review the documents for you.  A real estate licensee is prohibited by law from giving legal advice. For more information on homeowners’ associations and CC&Rs, visit http://www.realtor.com/BASICS/condos/ccr.asp.
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Lead-Based Paint Disclosure Form

Residential property built before 1978 (called “target” housing) is subject to the Residential Lead-Based Paint Disclosure Program administered by the Environmental Protection Agency (EPA) and the Department of Housing and Urban Development (HUD).  The Act requires sellers of target housing to provide the buyer with a lead-based paint disclosure and the pamphlet entitled Protect Your Family From Lead in Your Home.  Information about the requirements and samples of the forms can be found  at: http://www.hud.gov/offices/lead/healthyhomes/lead.cfm
If you make an offer on a home built before 1978 and do not receive the disclosure and pamphlet, you should ask your real estate licensee about lead-based paint disclosures.  For more information and to locate companies certified and licensed to conduct lead-based paint testing or perform abatement, visit http://www.dhs.state.or.us/publichealth/leadpaint/index.cfm for the Department of Human Resources.

 

If you are planning renovation, repair, or painting (RRP) on a home built before 1978, you should be aware of EPA rules that require such work be done by certified contractors who must follow EPA work guidelines.  This may complicate or add expense to such projects.  RRP rules in Oregon are jointly administered and enforced by the Construction Contractors Board (CCB) & the Department of Human Services (DHS). For information visit: http://www.oregon.gov/DHS/ph/lead/Renovation_Repair_Painting_Rule.shtml

Homeowners who do their own work in their own home are exempt from RRP rules.   EPA does, however, urge homeowners to read EPA’s Renovate Right: Important Lead Hazard Information for Families, Child Care Providers, and Schools.  Homeowners can also call the National Lead Information Center at 1-800-424-LEAD (5323) for more information or visit EPA’s website at: http://www.epa.gov/lead/pubs/renovation.htm
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Historic Property

It is important for the buyer to determine whether a property is considered a historic property and therefore subject to a special assessment providing for tax benefits to the owner of the property.   These properties are listed on the National Register of Historic Places. For more information on this please click here:   http://www.oregonheritage.org/OPRD/HCD/NATREG/index.shtmhttp://www.oregonheritage.org/OPRD/HCD/NATREG/index.shtm  It is important for buyers to understand how to retain the tax benefits afforded to the property.

The newest version of the Historic Property Tax Benefit Program not only reduces the benefit from 15 to 10 years but provides increased accountability on owners.  Additionally, the law allows for a second 10-year renewal of the benefit so long as the local government has not passed a resolution prohibiting the renewal.   The lack of a renewal of the special assessment or failing to comply with the requirements and deadlines contained in the law could result in the loss of the special assessment and a substantial increase in the new owner’s property taxes as well as potential fines.   For more information on the Historic Property Tax benefit Program including statutes, rules and applications please click here: http://www.oregon.gov/OPRD/HCD/SHPO/tax_assessment.shtml
Buyers should carefully review closing documents and inquire into all requirements of the Historic Property Tax Benefit Plan when presented with a Historic Property Addendum.  Real estate licensees are not trained or licensed to provide tax advice.
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Property Taxes
“Real property in Oregon is taxed under a complicated formula that involves more than just valuation of the property.  Some properties (typically, but not exclusively, farm or forest) are specially assessed and taxes deferred.  The sale of such property can result in changes in the tax status and result in the levy of additional taxes.  If a new home is being constructed and the closing precedes completion of the home, the full taxes that will be due upon completion may not be reflected in the closing statement.  Buyer’s should carefully review closing documents and property taxes and seek the advice of a tax professional if concerned about the valuation, the taxes assessed or potential changes in the tax status.  Real estate licensees are not trained or licensed to provide tax advice.
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Tom Ramsey
www.PortlandHouseListings.com

Oregon Real Estate Principal Broker

John L Scott Real Estate

Phone: 503-481-0501

Fax: 503-775-0754 
PortlandHouseListings Blog 

 

Earth Advantage Certified Broker

 

 

 

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About PortlandHouseListings.com - Tom Ramsey, local Realtor

Local Portland Realtor with 10 years experience specializing in residential sales and investment property. Tom Ramsey Oregon Real Estate Principal Broker John L Scott Real Estate Phone: 503-481-0501 tomramsey1@gmail.com www.PortlandHouseListings.com
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