We have been advised and cautioned repeatedly about buying bank-owned properties. In many instances, REO properties are in bad shape, to say the least. Added to this is the fact that disclosures are limited. But what limited disclosures are there?

If you are considering foreclosed properties in your purchase, you need to be aware of what limited disclosures are to be made available to you once you are in contract. As well, don’t expect certain information such as Mello-Roos tax to be part of the bank’s disclosures.

Below is a list of California’s required disclosures for REOs.

• Agent’s Duty to Visually Inspect and Disclose – an agent is required to do a visual inspection of the property and disclose all known material facts affecting the property’s value.
• HOA docs – applies to condominium or townhouse.
• Flood Insurance for Disaster Relief Assistance – must disclose required flood insurance if condition for obtaining federal disaster relief assistance.
• Natural Hazard Zones – whether property is located in any of the following:

• Special flood hazard area
• Area of potential flooding
• Very high fire hazard severity zone
• State fire responsibility area
• Earthquake fault zone
• Seismic hazard zone.

• Lead-Based Paint Hazards Disclosure – required for properties built before 1978.
• Material Facts.
• Megan’s Law Disclosure – availability of a database of registered sex offenders.
• Meth Lab Clean-Up Order – must disclose a pending order prohibiting the use or occupancy of a property contaminated by meth lab activity.
• Smoke Detectors – applies only to single family residences; must disclose compliance with smoke detector law.
• Water Heater Bracing - must certify that the water heater is braced, anchored and strapped property.
• Water Conserving Fixtures – for properties built before 1994, must be in compliance by 2017.
• Advisability of Title Insurance Notice – if no title insurance will be issued to the buyer.
• Agency Disclosure Statement.

On the other hand, there are certain information that are not required to be disclosed about REO properties:

• Airport in Vicinity.
• Farm or Ranch Proximity.
• Home Energy Rating System Booklet.
• Industrial Use Zoning.
• Mello-Roos Tax Notice.
• Military Ordinance Location.
• Private Transfer Fee Notice.
• Supplemental Property Tax Notice.
• Transfer Disclosure Notice – although exempt from disclosing the features and condition of a property, and REO seller must still disclose any material facts affecting the value and desirability of the property.

Make sure you work with a trusted and knowledgeable Realtor® who will advise about the REO buying process.

It is best to be informed!