Our proposal: We propose to require a statement disclosing the operating expenses a potential homebuyer may expect when purchasing a specific single family residence (SFR).
Why: Prospective homebuyers — especially first-time homebuyers — need to be informed about the full cost of owning and operating a home prior to purchase.
Some dollar amounts are readily available to a homebuyer, such as their potential mortgage payment, taxes, insurance and any homeowners’ association (HOA) fees. But other information is unknowable without the seller’s willingness to share their personal knowledge of the property. This information includes the average costs of:
- monthly utilities in each season;
- pool maintenance, if applicable;
- water, sewage and trash;
- any bonds or assessments; and
- optional services present in the home, such as:
- a home security system; or
- a solar lease. [See RPI Form 306]
Since these costs can vary depending on the property, the true monthly cost of homeownership may affect how much a buyer is willing to pay for the property. In other words, these costs ought to be considered material facts and thus disclosed.
In practice, this disclosure would be similar to the Annual Property Operating Data (APOD) Sheet ubiquitous in transactions for income-producing property. [See RPI Form 352]
We propose this disclosure be delivered to a potential homebuyer as soon as practicable, and at latest upon commencement of negotiations.
Under our proposal, it is the seller’s agent’s role to guide their seller client through the process of collecting this information and filling out the disclosure, as well as ultimately delivering it to the prospective buyer.
While the disclosure of operating costs is not currently mandated, real estate agents and brokers may choose to use RPI Form 306: Property Expense Profile to disclose this information in any transaction. Seller’s agents may elect to include it as part of their marketing package to potential buyers. Alternatively, buyers will find it useful to request the seller fill out a property expense profile in order to get a firmer grasp of the true costs associated with owning a particular home.
Greater transparency will ensure more informed — and more successful — homeowners in the future.