BE PRIOR RECORDED LIENS AND ENCUMBRANCES WHICH AFFECT YOUR INTEREST IN THE

BE PRIOR RECORDED LIENS AND ENCUMBRANCES WHICH AFFECT YOUR INTEREST IN THE
PROPERTY BEING ACQUIRED. A NEW POLICY OF TITLE INSURANCE SHOULD BE OBTAINED IN
ORDER TO ENSURE YOUR INTEREST IN THE PROPERTY THAT YOU ARE ACQUIRING.”

This requirement is also of interest to a real estate broker conducting an escrow pursuant to the exemption set
forth in Financial Code Section 17006(a)(4).

Disclosure of Sale Price Information

Within one month after the close of escrow for the transfer of title to real property (or the sale of a business
opportunity) through a real estate agent(s), the agent(s) must inform the buyer and seller in writing of the
selling price. In the case of an exchange, the information on the selling price is required to include a description
of the property and the amount of added money consideration, if any.

If a transaction is closed through an authorized third party escrow holder, a closing statement from said escrow
holder will be regarded as compliance with the requirements of this law.

Seller Financing Disclosure Statement

Some sellers of residential properties participate in financing the sale of their homes 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. To ensure adequate disclosure and to prevent abuses involving some of these seller-assisted financing
plans, the state legislature enacted a disclosure law which applies to real estate transactions involving
residential dwellings of not more than four units if 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), not including the down payment.

Written disclosures required by this law 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, and who is compensated for arranging the credit or

for facilitating the transaction. A real estate broker may be deemed an arranger of credit. The duty to provide
the disclosures also applies to an attorney or a real estate licensee who is a principal in the transaction.

Disclosures pursuant to this law are not required to be given to a buyer or seller who is entitled to receive (in
connection with the credit being extended) a disclosure under any of the following :

• Federal Truth-in-Lending Act;

• Real Estate Settlement Procedures Act (RESPA);

• A mortgage loan disclosure statement (Business and Professions Code Section 10240) or a
lender/purchaser disclosure statement (Business and Professions Code Section 10232.4); or

• Section 25110 of the Corporations Code or exemption therefrom relating to the sale of qualified securities
under permit or exempt securities or transaction.

The disclosure statement required by this law must be delivered as soon as possible before the execution of any
note or security document. The statement must be signed by the arranger of credit and the buyer and seller, who
are each to receive a copy. Should there be more than one arranger of credit, the arranger obtaining the offer
from the buyer is responsible for making the disclosure unless another person is designated in writing by the
parties to the transaction.

The disclosure statement will include comprehensive information about the financing, cautions applicable to
certain types of financing, and suggestions of procedures which will protect the parties during the term of the
financing. The disclosures include:

• Identification of the note, or credit, or security document and the property which is or will become the
security;

• A copy of the note, or credit, or security document, or a description of the terms of these documents;

• The terms and conditions of each encumbrance recorded against the property which shall remain as a lien

or is an anticipated lien which will be senior to the financing being arranged;

• A warning about the hazards and potential difficulty of refinancing and, should the existing financing or
the financing being arranged involve a balloon payment, the amount and due date of any balloon payment
and a warning that new financing may not be available;

• An explanation of the possible effects of an increase in the amount owed due to negative amortization as a
result of any variable or adjustable-rate financing being arranged;

• If the financing being arranged involves an all-inclusive trust deed (AITD), a statement of the possible
penalties, discounts, responsibilities, and rights of parties to the transaction with respect to acceleration
and/or prepayment of a prior encumbrance as the result of the creation and/or refinancing of the AITD;

• If the financing involves an AITD or a real property sales contract, a statement identifying the party to
whom payments will be made and to whom such payments will be forwarded, and if the party receiving
and 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;

• A statement recommending loss payee clauses be added to the property insurance policy to protect the
seller’s interest and advising of the existence or the 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 and a request for notice of default 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. The collector
of the payments, whether the seller or a loan servicing agent, has the duty to inform the defaulting homeowner
of the availability of such counseling. Loss of or reduced ability to make payments on a residence may entitle
the homeowner to the aforementioned counseling. The duty to inform a defaulting homeowner of the
availability of counseling is operative regardless of the nature of the credit transaction or the presence of an
arranger of credit.

Disclosure of Roles when Arranging Financing

When an agent undertakes to arrange financing in connection with a sale, lease, or exchange of real property, or
when a person or entity arranging financing in connection with the sale, lease, or exchange of real property
undertakes to act as an agent with respect to that property, that agent, person, or entity shall, within 24 hours,
make a written disclosure of those roles to all parties to the sale, lease, or exchange, and any related loan
transaction. For purposes of this section, "agent" has the same meaning as defined in subdivision (a) of Section
2079.13 of the Civil Code. (Business and Professions Code Section 10177.6)