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Department of Real Estate Budgets and Process (DRE) 101

Posted on 2 years ago
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Advice

Did you know….

Murow DC provides Budget Document Management and Processing to support your team’s Department of Real Estate (DRE) requirements.  Here’s a quick overview of the process:

  • The DRE’s main role is to protect the homebuyer from misrepresentations and fraud as well as ensure that Developers are properly disclosing and representing information about the property. All new developments in California are required to go through the DRE review and approval process for all homes/units to be sold to a homebuyer. The DRE will review all governing documents (CC&Rs, Access Agreements, Easements, etc.) and HOA budget documents for the development. A home/unit cannot be legally sold or closed without a public report issued by the DRE.
  • The City/County often requires a review of the draft CC&Rs for a project as a Condition of Approval (COA) or step to Final Map. Many times, a rough draft is provided to satisfy the condition with a more complete draft provided for City/County review concurrently with the initial DRE review.
  • A Preliminary Public Report (pink report) is the first step of the DRE review process. The Developer submits the initial application and documents to DRE to open the overall project file. A preliminary public report is then issued, within (10) days after initial submittal, for the entire development as well as allows the Developer to advertise and take reservations (fully refundable deposits). The Developer cannot enter legally binding contracts.
  • A Conditional Public Report (yellow report) requires the Developer to submit a complete set of governing documents as well as a draft HOA budget to the DRE for review and approval. A Conditional Public Report is typically issued within (60) days and allows the Developer to enter binding purchase contracts but cannot close escrow. Each Conditional Public Report is issued for a smaller number/phase of homes, determined by Developer, and coincides with the HOA budget phases.
  • A Final Public Report (white report) requires the Developer to address all comments, make corrections from DRE review of the governing documents and HOA budget documents. A Final Public Report is typically issued within (30) days of the Developer providing the final, executed versions of the governing documents to DRE. A Final Public Report is required to close an escrow for a home. Each Final Public Report is issued for a smaller number/phase of homes determined by the Developer and coincides with the HOA budget phases.
  • It is important to note that a tentative tract map can be submitted to obtain conditional public reports, but a final map is required before a final public report can be issued.

DRE Budget Preparation – Tips and Trends to look for in a consulting firm:

  • Work with an independent Budget Preparer to build checks and balances into your process.
  • Due Diligence budgets are often credited to full DRE Budget preparation.
  • For Common Area takeoff, capability and knowledge are keys to accuracy and improve efficiency related to phasing and site changes.
  • Provide amenity and service level analysis to accurately calculate budget through each phase to buildout.
  • For balcony inspection estimates, it’s best to work with independent inspection entities with engineers to get proper pricing for the budget.
  • For solar installed on the common area, even if the homeowner is responsible, consider including removal and reinstall in the HOA’s roof replacement reserves.
  • Cost Centers & Special Benefit areas are being accepted more by the DRE. This often results in cost savings because of not having to form a sub-association.

At Murow DC, we are proud to have assisted the following Builders/Developers to prepare their budgets and/or manage the DRE Document Process:

  • KB Home
  • Taylor Morrison
  • City Ventures

Blog Written By: Wendy Bucknum, Director of HOA/Community Associations in collaboration with Susan Finley and Amber Turner

Comments or questions? Please feel free to contact Wendy at wbucknum@murowdc.com

 

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