Our proposal: Mandate sellers disclose to prospective buyers the full cost of owning and operating a single family residence (SFR).
Why: Currently, disclosure of a property’s estimated operating costs are customary for income properties through the Annual Property Operating Data sheet (APOD), but rarely discussed for owner-occupied SFRs. In the context of income property sales, the APOD discloses expected maintenance and operating expenses to help the investor-buyer determine whether the investment is worthwhile.
However, buyers of residential property are not typically provided the same analysis to understand the full scope of their investment as homeowners. Yet, much like an income property, a residential household is a heavy consumer of electricity, gas and other fuel sources. The existence and cost of utilities consumed by a home are material facts a prospective buyer needs sufficient information about to consider before purchasing. Thus, an SFR’s estimated operating and maintenance expenses need to be required as critical information affecting the cost and desirability of the property.
First-time homebuyers transitioning from renting are especially in need of this analysis to understand the full costs of owning and operating a home before committing to a purchase. Utility costs may make a difference for a budget-conscious buyer who is unfamiliar with the costs of maintaining a home.
Further, mandating an operating expense disclosure places little burden on an agent, since operating costs are readily available and providing the disclosure helps an agent meet their duty to a buyer.
What you can do: Though disclosing an SFR’s operating costs is not currently mandated, you can still provide the disclosure as part of the marketing package provided to prospective buyers. Use Form 306 – Property Expense Profile by Realty Publications, Inc. (RPI) to disclose operating costs to buyers. [See RPI Form 306]
The form discloses the costs of:
- utilities, such as gas, water, phone, internet and electricity;
- lawn and gardening;
- homeowner association (HOA) fees;
- property taxes;
- insurance; and
- expected maintenance and repairs.
As a buyer’s agent, discussing the content of the form with your buyer client will provide a more comprehensive analysis of the property and better prepare them for homeownership.
Stupid idea, is this an April Fool’s Day re-post? Just opens up the transaction to one more layer of lawsuits. Property taxes are already a matter of public record, insurance is a personal decision based on desired coverage, utilities are personal based on use and one of purposes of a home inspection is to understand what maintenance might be needed in the near future. Any agent worth their fee will already be working with their first time home buyers to come up with the costs associated with home ownership. Dumb, dumb, dumb dumb idea.
THE ATTORNEYS LOVE IT. TO MUCH PAPERWORK. WE GOT ALONG FINE WITH A TWO PAGE DISCLOSER. NOW THERE ARE SO MANY PAGES NOBODY READS THEM. WE NEED TO GET RID OF TWO LAWS FOR EVERY NEW ONE. THE GOVERNMENT TREATS US ALL AS IF WE ARE STUPID
A totally meaningless disclosure as previously stated, there are too many variables. Size of family, habits, etc. Some people are at home all day, others are not – some run AC all day some do not. It’s not even close to compare things that are so variable. It can only lead to further legal issues and more money spent on doing nothing.
Sounds good to me. I’m a lawyer and expanding the scope of disclosures puts a heavier burden on the seller, increasing liability, lawsuits, and attorney’s fees. Perfect!
Exactly.
This is an inappropriate burden onto a seller, expanding the seller to potential litigation if the disclosure is inconsistent with the habits and preferences of a new owner. Moreover, this makes a presumption that all categories mentioned are outsourced and may be different in representation to existing law (i.e., Prop. 13 valuation for for property taxes). This potential mandate will take the buyer and buyer’s agent farther from the responsibilities of subjective investigation. Will case law result in seller disclosure controlling over buyer investigations? Please stop this before it goes too far. TY
It’s an excellent idea. A more informed buyer is more likely to close a deal and less likely to be foreclosed on in the future. A further step should be buyers’ education in financing, not having their initial exposure from a commisioned lender.
This is totally absurd. Everyone knows that there are operating costs associated with the purchase of a home. There are too many variables as to what level of utility use a particular family will deem appropriate to make sense out of this. Think about it. Do you think there will be a difference between the operating costs a retired widow or widower will pay versus a young family of 5 will pay on the same residence? How can you possibly think that there is a need for this meaningless disclosure. Think of the conflict resolution debacle this would create. “You disclosed a cost of X and I find out after 1 year that my cost is Y. I am entitled to compensation.” This is a ridiculous idea.
Mu sentiments EXACTLY. First Tuesday, where are you going with this??? Most buyers already pay for their utilities, trash, sewer, etc and WiFI when renting. Taxes and Insurance mortgage HOA are all disclosed prior to closing an escrow. Why further muddy the waters when not necessary?
What is going on with First Tuesday? I enjoyed my classes from a few years ago and loved their somewhat anti-Association of Realtor stance (that took me by surprise, but anything that makes you think is good). Then we got a political opinion piece a few weeks ago, and now they want MORE useless regulation?? If someone can’t figure out their own home ownership operating costs, they have no business owning a home.
We do not need more disclosures to be responsible for; that people barely read and that a realtor can’t enforce,. Then we may end up in a lawsuit over sellers falsifying a utility bill. Good grief when are people ever going to take responsibility for their own actions and decisions!