California real estate disclosure laws California Real Estate Disclosures | Page 42

forwarding the payments is not a neutral third party, a warning that the
principals may wish to designate a neutral third party;
•

A complete disclosure about the prospective buyer, including credit and
employment information along with a statement that the disclosure is
not a representation of the credit worthiness of the prospective buyer; or,
a statement that no representation regarding the credit worthiness of the
prospective buyer is being made;

•

A warning regarding possible limitations on the seller’s ability, in the
event of foreclosure, to recover proceeds of the sale financed (Code of
Civil Procedure Section 580b);

•

A statement recommending loss payee clauses be added to the property
insurance policy to protect the seller’s interest (e.g., Board of Fire
Underwriters’ Endorsement No. B.F.U. 438) and advising of the
existence or availability of services which will notify the seller if the
property taxes are not paid;

•

A statement suggesting or acknowledging that the seller should file or
has filed a request for notice of delinquency (Civil Code Section 2924e)
and a request for notice of default (Civil Code Section 2924b) in case
the buyer fails to pay liens senior to the financing being arranged;

•

A statement that a title insurance policy has been or will be obtained and
furnished to the buyer and seller insuring their respective interests, or
that the buyer and seller should each obtain title insurance coverage;

•

A disclosure whether the security documents for the financing being
arranged have been or will be recorded, and what might occur if the
documents are not recorded; and

•

Information as to whether the buyer is to receive any “cash back” from
the sale, including the amount, source, and purpose of the cash refund.

The requirement of a seller financing disclosure statement also applies to
transactions by real property sales contracts (as defined in Civil Code
Section 2985) and to leases with option-to-purchase provisions where the
facts demonstrate intent to transfer equitable title. If the extension of credit is
subject to a balloon payment, a balloon payment notice is to be included on
the face of the promissory note or other evidence of debt.
An arranger of credit must inform the seller that a buyer who intends to
occupy the real property involved may have the right to homeownership
counseling in the event of a default in the mortgage payments, including the
payments being made on the seller “carry-back.” The person collecting the
payments, whether the seller or a loan servicing agent, has the duty to inform
the defaulting homeowner of the availability of such counseling. The duty to

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