I often joke that every page in a disclosure package represents a lawsuit. I assure you that the next document in our look at a typical disclosure package, the “Notice to Buyers and Sellers Regarding Preliminary Title Reports (possible re-sale restrictions for San Francisco Affordable Housing Programs)” originated with a lawsuit. Let’s just call it the “Notice Regarding Preliminary Title Reports” document.
// This post is a part of our series: Your Guide to a San Francisco Disclosure Package //
The Notice Regarding Preliminary Title Reports is a *general* disclosure.
A law-enforcement official purchased a condominium home (with a buyer’s agent representing them) and paid market rate for the residence. So what’s the problem?
The problem came about when they sold it, and discovered that the home was a “Below Market Rate” (aka Inclusionary Housing Program) condominium, which is a property with deed restrictions that limit the price at which it can lawfully be sold and also sets requirements the buyer must meet to be eligible to purchase the property. Needless to say, the market rate paid by the seller was far above the “below market rate” they discovered they could sell it for.
Below Market Rate homes – because they have numerous documents recorded against the property record – typically have preliminary title reports with a rather long list of exceptions (these exceptions being all of the documents that place the home in the BMR program). And sometimes the exceptions are pretty clear, and sometimes they make reference to maps with 4-point type. It’s always the 4-point type you’ve got to look out for, right?
So the moral of the story is this: understand the exceptions that are listed on your preliminary title report, and don’t sign off on the prelim until you are certain you understand all of the documents referenced in the list of exceptions. Because otherwise, you might just have paid market rate for a below market rate home!