QUESTION: Why do I have to sign so many forms, documents, disclosures and other papers?
ANSWER: As you begin the search for a new home, you may have questions about the many forms and documents which the real estate agent asks you to sign. Many new home purchasers are concerned that they must review and sign so many forms, even before the search for a house begins. Generally, the purpose of these initial forms is to help you understand the transaction. Most of the forms are required under Maryland law. After you carefully read the forms, you will see that the information disclosed in the documents will help you to become better informed about your real estate transaction.
1. Understanding Who Real Estate Agents Represent — This form was designed to help buyers and sellers understand who the real estate agents represent. As you review the form, you will see that there are agents who represent either the buyer or the seller, and in some limited situations, both the buyer and the seller. When you sign this form, you are simply acknowledging receipt of the disclosure. You are not signing a contract obligating you to purchase a house. The sole purpose of the form is to let you understand the different types of agency relationships, as well as who the specific real estate agent you are speaking with is representing.
2. Consent for Dual Agency — The real estate agent may ask you to sign this form. Dual agency can occur when you are interested in a property which is listed by a certain real estate company, and your buyer’s agent also works for the company which is listing the property. If the buyer’s agent and seller’s agent both work for the same company, then a potential conflict of interest may exist. Under Maryland law, as long as all parties to the transaction understand and consent to the fact that the buyer’s agent and seller’s agent both work for the same company, then the transaction may proceed. You are not required to consent to a dual agency. If you do not consent in writing to a dual agency, then no such relationship will exist. A dual agent must keep all information confidential regarding your negotiating position or desire to purchase a given property. A dual agent must also disclose all material facts about the property to the other party. However, a dual agent does not exclusively represent the buyer or seller.
3. Exclusive Retainer Agreement — If you elect to hire the real estate agent to exclusively represent you as a “buyer’s agent,” then, prior to writing a contract offer, Maryland law requires that you and the agent must enter into a written agency relationship, or retainer agreement. This agreement does not require that you buy a specific house. Instead, it will establish the buyer’s and the agent’s respective rights and responsibilities to each other.
4. RESPA Disclosure — The Real Estate Settlement Procedures Act requires that certain brokers must make disclosures to you regarding their business relationships. Specifically, certain brokers may have an ownership interest or affiliation with a mortgage lender, settlement company, homeowners insurance company or other related businesses. If such a relationship exists, the Real Estate Settlement Procedures Act requires that this information be disclosed. The broker/agency is also required to disclose to you the approximate costs for services. You should understand that the disclosure is designed to inform you of the business relationships. Unless otherwise disclosed, the real estate agent does not receive any financial benefit when you choose any of the related companies. You are also free to choose a different service provider if you so desire.
5. Some Information Relative to the Purchase of Real Estate — The agent may ask you to sign this form which provides general information regarding the purchase of real estate. This form is not a contract to purchase a house. It is designed to help you understand some of the various rights and options which you may have. For example, disclosures are made regarding financing, property condition, hazardous materials, equal housing opportunity and information regarding the location of airports. This form is extremely valuable in that it neatly and concisely summarizes some of the most important information regarding real estate transactions.
6. Property Condition Disclosure Statement or Disclaimer Statement — Under Maryland law, the purchaser is entitled to receive from the seller a written Residential Property Condition Disclosure Statement or a written Residential Property Disclaimer Statement. This form is designed to help you understand the condition of the property before signing a contract. It is possible that when you first visit a house, this form will be delivered to you for your review and signature. This form is not a contract to buy, nor does it obligate you in any way to purchase the house. It is designed to help you become better informed about the condition of the property.
7. Lead Paint Hazard Notification — Recent Federal and State legislation requires the disclosure of certain information regarding lead paint and lead poisoning. The agent may ask you to sign a form acknowledging that you have received and read a copy of the notice regarding the dangers of lead paint. Again, this form does not mean that lead paint necessarily exists in the house, nor does this form obligate you to purchase the property.
As you can see, most of the above forms are mandatory disclosures and are designed to help you become a more knowledgeable purchaser. None of the forms obligate you to purchase property. If the real estate agent asks you to review and sign the forms, you should carefully read each form before signing them. However, if you still have questions regarding these mandatory disclosures, please feel free to call any of the attorneys at Village Settlements, Inc. If you have questions or concerns regarding any of the documents which you are asked to sign, please feel free to contact our office for your free contract and/or document review.