HOUSE BILL REPORT

HB 1892

BYRepresentatives Nutley and Winsley

Requiring disclosures on real estate contracts.

House Committe on Housing

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (8)

      Signed by Representatives Nutley, Chair; Leonard, Vice Chair; Winsley, Ranking Republican Member; Anderson, Ballard, Inslee, Rector and Todd.

Minority Report:  Without recommendation.

      Signed by Representative Padden.

House Staff:Charlie Gavigan (786-7340)

AS REPORTED BY COMMITTEE ON HOUSING FEBRUARY 24, 1989

BACKGROUND:

The sale of real property is usually accomplished using a mortgage, deed of trust, or real estate contract.

When a sale is made using cash, a mortgage, or a deed of trust, the buyer acquires ownership of the property through a statutory warranty deed.  If a mortgage or deed of trust is used, it acts as a lien or security for repayment of a loan made in conjunction with the sale.  The county real property records would show the purchaser as owning the property.

When a sale is made using a real estate contract, the ownership of the real property remains in the name of the seller until the last payment on the contract is made by the purchaser.  (The seller may not "own" the property if the seller is purchasing the real property by real estate contract).  Although the seller is required by law to pay the excise tax due on the sale, the real estate contract is not required by law to be recorded.  If the seller does not record the real estate contract, the real property records would not show the purchaser as having any interest in the property.

SUMMARY:

SUBSTITUTE BILL:  All real estate contracts on the sale of one to four-unit single family residences on up to five acres must contain a disclosure displayed conspicuously on the face of the contract.  The disclosure informs the purchaser that the seller retains title to the property until the purchaser makes the final payment due under the contract, and that if the real estate contract is not recorded the purchaser's interest will not be shown in the public records.  The disclosure also suggests to the purchaser that he or she consider recording the contract to protect the purchaser's interest, and consider taking steps to ensure the purchaser owns the property once the last payment due under the real estate contract is made.

If the seller does not make the required disclosure to the purchaser, the seller is liable for any damages that the purchaser suffers because the contract was not recorded within 30 days of taking effect.

The act applies to all real estate contracts entered into on or after January 1, 1990.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The substitute bill clarifies that the disclosure is only required on residences on property that is not more than five acres.  The disclosure is simplified by the substitute bill.  Finally, a purchaser's right to rescind the contract if the disclosure is not made is removed and replaced with a remedy that allows the purchaser to recover damages actually suffered if the disclosure is not made and the contract was not recorded.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    None Presented.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    None Presented.

House Committee - Testimony Against:      None Presented.