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WHERES YOUR BUYER'S DISCLOSURE STATEMENT?

By
Real Estate Broker/Owner with Realty One Group

One of the most important and yet least used disclosures in a real estate transaction could be used to help buyers, sellers, and even real estate professionals better understand the immediate

Created in 2006 and also known as FAR form BDS-1x, the Buyers Disclosure Statement was designed to assist the a property seller in evaluating a buyer's ability to purchase a property.  The form is broken down into 5 sections, providing separate individual disclosures to the buyer and seller, and also contains several yes and no questions that directly pertains to the buyer's current residential status as well as financing.

The questions regarding Personal Residence Status are as follows:

*Do you currently rent or own your current residence? 

*Have you ever owned a home before?

*If you own a home, is it currently for sale?

*If you own a home, must you sell it to qualify for a new loan?

Depending on how each question is answered, a follow up question is likely to occur.  For example, if a buyer is renting, the next question may be when is the lease for your current residence due to expire?  If the buyer has several months left on the lease, signing a purchase contract now may be premature, unless the buyer can be released from their current lease.  If a potential buyer currently owns a home, and needs to first sell their home to qualify for a new loan, signing a purchase contract again may be premature.  Signing a purchase contract without first asking these questions could end up being nothing but a complete waste of time for both buyer and seller.

The next set of questions deals directly with financing.  The following are some of the questions that are asked:

*Have you made application with a lending institution or mortgage company yet?

*Have You been prequalified? Pre-Approved? Approved?

*Can you provide documentation for any of the ‘yes' answers above?

*Do you know the difference between the three possibilities above?

 

These are truly some of the most important questions to ask, especially since many buyers begin the home buying process by looking for homes first.  Many buyers who think they are pre-approved for financing are only pre-qualified, which can create real problems for the buyer if they cannot fulfill their end of the purchase agreement.  If a buyer is only pre-qualified, they are really in no position to make an offer to purchase a home, since they only have a verbal assurance from a bank or mortgage lender that, based on their monthly dent obligations and their monthly gross income, that they ‘afford' a monthly payment to purchase a home is a set price range.  Only if a buyer is pre-approved for financing are they truly in a position to make an offer to purchase a home.  A pre-approval means they have made application with a mortgage lender, provided sufficient documentation to support their monthly income, have acceptable credit for a given mortgage loan program, and also have sufficient monies to cover their down payment and closing costs.  A buyer can prove they are pre-approved with a letter from a bank or mortgage lender that states that they are in fact pre-approved for a set loan amount.  To be approved for financing, in the minds of most buyers, means basically the same as being pre-approved.

When utilized properly, the Buyer's Disclosure Statement can be of great benefit to the buyer and the real estate professional as a pre-screening tool to determine the buyer's immediate needs.  If a buyer has not been pre-approved for financing, it would help the real estate professional tremendously to encourage the buyer to get pre-approved for financing before any homes are shown to the buyer.  This way, both the buyer and the real estate professional will know exactly how much home the buyer can afford, saving valuable time to looking for homes in their price range.  A real estate professional should strongly consider using this form with first time home buyers, as it helps get their buyers on the right track from the beginning.  Depending on how the questions are answered by the buyer, the real estate professional can help guide the buyer to right bank or mortgage lender, getting their buyer pre-approved quickly with the right mortgage from the start.

The Buyer's Disclosure Statement is a tremendous tool that makes the home selling and home buying process much easier, yet it seems that most real estate professionals do not consider using this disclosure for a variety of reasons.  Many real estate professionals feel that asking these questions may be too personal, that these questions should left up to the bank or mortgage lender to address with the buyer. The questions asked on this disclosure are easily answered by most buyers, and should be asked upfront as a part of the pre-screening process.  I for one will only show homes to buyers that I know are in a position to purchase the homes that I show to them. 

Proper use of the Buyer's Disclosure Statement will a long way towards improving communication between buyer, sellers, and real estate professionals, helping pave the way for more real estate closings with fewer problems.    For a free copy of the Buyer's Disclosure Statement, please call 941-206-6000.

 

Mike Sikorski, GRI

Licensed Real Estate Broker

Licensed Mortgage Broker

Loss Mitigation Specialist

Florida Realty Network LLC

22079 Kimble Avenue

Port Charlotte, Florida 33952

Phone 941-206-6000

Email: Mike@FloridaRealty.net