California real estate disclosure laws California Real Estate Disclosures | Page 40

SECTION III
DISCLOSURES REQUIRED WHEN FINANCING REAL PROPERTY
This section deals primarily with disclosures a real estate licensee or a
lender must make to a prospective borrower in certain real property secured
loan transactions. Disclosures required in certain defined seller “carrybacks” are also included.

A. Advance Fees
Unless an appropriate exemption applies, should any kind of fee or charge
be contracted for or demanded, imposed, or collected by a mortgage broker
(but not a lender) in advance of providing the service or closing the loan,
California law requires that the broker use with the public an “advance fee”
agreement which has been pre-approved by the Real Estate Commissioner.
The advance payment of appraisal and credit report fees collected by the
broker for payment in the same amount to third-party service providers do
not require a prior approved advanced fee agreement.
Advance fees must be deposited into the broker’s trust account and
disbursements from the trust account may only be made consistent with
applicable law, including the requirements set forth in the Commissioner’s
Regulations.
(CAL. BUS. & PROF. §§ 10026, 10085, 10085.5, 10146; COMMISSIONER’S
REGULATIONS 2970 and 2972)

B. Seller Financing Disclosure Statement
Some sellers participate in financing the sale of their property by extending
credit to the buyer in the form of a seller “carry-back.” This is usually in the
form of a promissory note secured by a deed of trust. The state legislature
enacted a disclosure law to ensure adequate disclosure and to prevent abuses
involving seller-assisted financing plans. This law applies to real property
transactions involving residential dwellings of not more than four units when
the seller extends credit to the buyer through a written agreement which
provides for either a finance charge or more than four payments of principal
and interest, or interest only, excluding the down payment.
Unless an exemption applies, written disclosures required by this law are to
be delivered to the seller and are the responsibility of the arranger of credit.
An “arranger of credit” is defined as a person who is not a party to the
transaction (except as noted below), but is involved in negotiation of the
credit terms and completion of the credit documents. Unless performing as a
defined principal, the arranger must be compensated for arranging the credit
for the transaction.
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