Paperwork mounting for home sales

The idea behind the government's Paperwork Reduction Act hasn't touched the realm of residential real-estate transactions. Just the opposite, in fact.

In his nearly four decades in the real-estate business, Harold Craft, of Seattle, has seen a 733 percent increase in the number of pages of documents needed to complete a home sale.

"Twenty years ago, it was three pieces of paper, and today it's 25 pieces," said Craft, a real-estate broker and agent.

Why the dramatic increase in paperwork?

Changes in state and local laws, the increased sophistication of buyers and sellers, and the need to spell out in detail things that could end up in a lawsuit, according to the Northwest Multiple Listing Service.The real-estate association in Kirkland has a membership of 31,000 brokers and agents in 19 counties in the state, mostly in Western Washington.

Among its many services, the NWMLS creates and sells the forms to agents for real-estate transactions.

Opening an old file folder in his office in the Eastlake neighborhood of Seattle, Craft reviewed the paperwork from a 1988 transaction.

The deal Craft put together then was for a house in Madison Valley listed for $59,500. In his file were a two-page Purchase and Sale Agreement, the standard document specifying the price and closing date, and a one-page Financing Addendum. The financing form assured the seller that the buyer would secure a home loan within a specified time period.

Today, the standard Purchase and Sale Agreement is five pages long, and must be accompanied by numerous other forms. The total can vary, depending on the situation.

While Craft finds some of the newer forms helpful, he said a return to the old way "would simplify the transaction."

Craft said he can fill out all the necessary forms for an offer on a house in as little as an hour, but that's only if his clients don't want all of the details.

"Now if I've got to explain all this to the buyer, paragraph by paragraph," he said, motioning to a stack of forms, "it could be hours."

Do Craft's clients take the time to examine the fine print?

"Most don't," he said.

Another longtime Seattle real-estate agent, Loie DiJulio, appreciates the additional forms. In the real-estate business since 1974, DiJulio was one of the first 10 agents at Windermere Real Estate.

DiJulio considers the more detailed forms a benefit to both buyers and sellers.

In the past, any additional aspect of a home sale not covered in the standard Purchase and Sale Agreement was handwritten by agents on a few blank lines on the form.

"As issues came up, agents were attempting to address them by creating addendums [to the Purchase and Sale Agreement] which they wrote up themselves," DiJulio said. "Some were poorly drafted and did not protect the client."

Making it clearer

The standardized forms, DiJulio believes, have made transactions clearer and have eliminated the potential for confusion or error in an offer, the negotiation between buyer and seller, and the final sale.

When DiJulio and her husband purchased their own home in 1970, there was just the simple Purchase and Sale Agreement. There was no home inspection.

After the deal closed, the seller invited the DiJulios over for tea to tell them about the "idiosyncrasies" of the house.

"That's the word she used," DiJulio recalled.

Over tea, the DiJulios found out that the seller's young son had once become stuck in the house's laundry chute, a feat later repeated by their daughter.

Back-and-forth process

What do all these forms really do?

The Purchase and Sale Agreement, along with its accompanying addendums, is the mechanism by which a potential buyer makes an offer on a home for sale and the terms of that sale are negotiated.

First, buyers and their agent fill out and sign the P&S Agreement and attendant forms with the price they want to pay and the terms, and keep copies of what they've signed.

Their agent then presents the offer to the seller.

Sellers may choose to make changes to the price, closing date, terms, or any item detailed in the forms. They sign and keep copies. This is a counteroffer.

The sellers' agent returns to the buyers with the terms of the counteroffer.

This back-and-forth continues until there is one set of forms, with a price and terms that both buyers and sellers agree upon. All must sign and receive copies of all pages.

In addition, to seal a deal, "consideration" must change hands, meaning, the buyer must present a sum of money. This is called earnest money.

Needed to close

Here is a partial list of the forms used to close a residential real-estate transaction in Washington state. All forms must be filled out by hand.

• Purchase and Sale Agreement: Five pages, covers the names of a property's buyer and seller, its address, included appliances, offered purchase price and closing date, among other details.

• Financing Addendum: Two pages; specifies the type of home loan the buyer will secure, by what date, and the amount of the down payment offered.

• Identification of Utilities: One page; requires the seller to list the providers of water, sewer, electricity, gas, garbage collection and other utilities to the home.

• Optional Clauses Addendum: Two pages; directs buyers to verify size of land and building, and directs sellers to maintain property and grounds until closing, and/or addresses ownership of items left by seller on closing date, among other items.

• Inspection Addendum: Two pages; allows buyer to make an offer contingent upon satisfactory outcome of a home inspection, or to waive such an inspection.

• Inspection Notice: One page; permits the buyer to ask for remedy to any defect found as a result of a home inspection. It also provides for the seller to respond to buyer's request and the buyer to reply to the seller's response.

• Title Contingency Addendum: One page; permits buyer to make offer contingent upon satisfactory outcome of title research.

• Addendum/Amendment to Purchase and Sale Agreement: One page; blank form allows handwritten additions of any item not covered in other addendums.

• Seller Disclosure Statement: Five pages; requires seller to disclose knowledge of title, structural, sewer and other issues.

• Disclosure of Information on Lead-based Paint and Lead-based Paint Hazards: Two pages; requires seller to provide any knowledge of lead-based paint in a house built before 1978.

• Agency Disclosure: One page; requires agents to identify who they represent in the transaction.

• Commission Disbursement Form: One page; used by agents to agree upon how and what agents are paid.

• Northwest Multiple Listing Service Status Change: One page; used by agents to inform Northwest Multiple Listing Service that a property is pending sale or sold.