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.