True or False: Banks Don’t Have to Provide Disclosures

False!

We are about two years into the housing market correction, and we still hear REO Listing Agents tell us that banks and their asset managers do not have to provide disclosures. They say the bank is exempt because they acquired the property through foreclosure.

What is the Only Disclosure Banks Do Not Have to Provide?

In California, the fact is the only disclosure the bank does not have to provide is the Seller Transfer Disclosure Statement known in the business as the TDS-14. This is the mandated seller disclosure form created by the State Legislature.

What Must Be Disclosed to the Buyer?

All other disclosures or advisories must be provided. The real estate agents must make a visual inspection of the accessible areas and document their observations. Natural hazards, such as, flood zones and earthquake faults must be disclosed. And, if the property is a condominium or planned development the Home Owner’s Association Documentation must be delivered to the buyer.

The bank and the listing agent must disclose known facts. Any prior inspection reports, investigations and bid proposals for repairs must be turned over to the buyer.

Even though the property is being sold AS-IS the bank must properly strap the water heater and install proper smoke detectors.

Will the Industry’s Failure to Disclose Lead to Lawsuits?

Failure to disclose or suppression of known facts is too common an occurrence for the lawyers not to find this fertile ground for future lawsuits. Disgruntled, unsuccessful bidders may choose to make information they discovered available to the new owner, and disappointed Buyer’s Agents may seek to even the score by slipping information to the new owner about defects or other material facts that may not have come to the owner’s attention.

Banks have deep pockets and often times the theme “follow the money” drives lawsuits.

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