This article seeks to be understand how these two real estate disclosures might affect a Buyer in a real estate transaction. For example, a buyer might ask what these terms mean or stand for? Or, why isn't the Seller disclosing them to me?

As a real estate professional, I see these words every day on the PLANO in many listings in the MLS telling me to place this verbiage into the contract I am about to prepare. Unfortunately, as I mentioned before, there seems to be a trend in real estate that stems from sellers and their agents making this ever more commonplace and acceptable. As a result, that is what motivated to me write this article because it is crucial for my clients, and you, my future client, to read, and re-read until you understand how these two disclosures play into the overall real estate transaction and how it might affect you when it comes time for you to enter a transaction.

In this short article, I explain exactly what a Seller's Property Disclosure Statement (SPDS or “SPUDS”) and the Comprehensive Loss Underwriting Exchange (CLUE) reports are at a very simplified and easy to understand level. Your agent can respond to your specific questions later or expound on this article.

A SPDS and CLUE report is typically provided from the seller to the buyer in a real estate transaction. The SPDS discloses to the buyer many things about the property but especially focuses on Yes and No questions in 6 different sections:

1. Ownership and Property.
2. Building and Safety Information.
3. Utilities.
4. Environmental Information.
5. Sewer/Waster Water Treatment.
6. Other Conditions and Factors – Additional Explanations.

Remember, it is a property disclosure from the seller so it should contain any important information concerning the property that might affect the buyer's decision-making process, the value of the property, or its use, and to make any other necessary explanations. For example, if the seller had to treat for termites last year then that information should be in the SPDS for the buyer to review.

The CLUE report is simply a snapshot of any insurance claims made against the building in the past five (5) years. This again, confirms disclosures made to the buyer in the SPDS or it may even confirm visual evidence obtained by the buyer of a past problem, repair, or remodel that has occurred as a result of a past event.

Now, terms have been defined, short explanations made; however, why is the seller not providing a SPDS or CLUE re

port?

1. Bank-owned: The property has been in Foreclosure and now the bank is selling it. When a bank repossesses and then sells real property due to a foreclosure, they have no idea about the history of the property, its past problems, past repairs, past updates, when they were made, etc. So they make this disclosure when they are placing it on the market for a new buyer. It is then up to the buyer to carefully inspect the property during the home inspection (or due diligence period) to insure they are comfortable moving forward with the purchase of the bank owned property. You can ask your own home insurance officer whether the home has had a past fire or flood in case it was not disclosed.

2. Flip property: Investors have purchased the property at a discount, then they have

turned around and renovated or upgraded the property in a relatively short amount of time. They do not provide these disclosures for some of the same reasons the bank does above because they have no or limited knowledge about the property itself. Although all brokers do not require these disclosures to be made on these types of properties, my broker does because again, most

of the form is just Yes and No questions and sellers should acknowledge and disclose any and all information they have about the property. I totally support and agree with this position. Lines 169-171 of the purchase contract even stipulate that sellers have disclose all material and latent defects of the property.

These are the most common situations a buyer might face where they might not receive a SPDS or CLUE. All other real estate transactions, should contain these important disclosures.

Whenever you waive a SPDS or CLUE in a contract, be sure to have your agent explain the consequences and be sure you sign a blank SPDS form so you know exactly what you are waiving. If your agent has not shown and had you sign the form you are agreeing to waive, and it turns out you start having major problems with your home; then tough questions might lead quickly to a lawsuit against your agent and the possibly the seller for not disclosing all known issues and facts regarding the property.

Real estate is not something you should jump into on your own. Make sure you are working with an agent that has your best interest, regularly buys and sells properties themselves and understands the contract. Most agents do not until they mess up and find themselves in a lawsuit over something they did not know or forgot to advise their clients about. Contact me today at 480-773-5195 or email mark@sellingmesahomes.com if I can help you in your next transaction.

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