Per California Civil Code Section 1102, residential property sellers in the state of California are required to make disclosures, in writing, detailing about the property they have placed on the market. These mandated disclosures apply to nearly all California residential property, including but not limited to, standalone homes, high-rise condo units, or a manufactured or mobile homes.
Why is Disclosing Important?
The reason why these disclosures are so important is because potential buyers need to know as much as possible about the property in order to evaluate whether they really want to buy it and if so, how to determine their purchase offer. This includes offering an appropriate purchase price and knowing about any potential repairs or upgrades needed to be made to the house.
The disclosure obligations also remind California home sellers that they have a legal responsibility to be open about a property’s condition and can be sued for hiding problems or defects.
When Must Sellers Provide Disclosure Information?
In California, a seller needs to provide these disclosures to a prospective buyer as soon as possible before transfer of title. Although this language is a bit vague, the intent is to get the disclosure to the buyer in a timely fashion. Thus, as a practical matter, this usually happens early in the purchase process.
As an example, some sellers will line up all disclosures, inspections, and other paperwork prior to listing their property, so that everything is ready for serious offers to be accepted. Other sells may make a copy of the disclosures, with the option for the buyer to back out or renegotiate if the disclosures bring about any unexpected facts about the property.
If a seller does not provide the required disclosures to the prospective buyers by the time the two of them have signed the purchase agreement, the buyer then has the option to terminate the deal.
Thus, it’s important that a seller provides these disclosures to serious potential buyers as soon as possible so that they decrease the likelihood of a buyer cancelling the offer later due to information found in the disclosure.
How to Fill Out the Standard California Disclosure Forms?
In California, seller disclosure requirements are strict and thorough. California provides a standard format, as referred to in Civil Code Section 1102, which sellers must use when making these disclosures. The resulting form, called the “Transfer Disclosure Statement,” can be obtained from your California real estate agent.
The Transfer Disclosure Statement form covers a broad range of topics, from structural information about the home, such as a leaky roof to whether any deaths occurred on the property in the last three (3) years. Additionally, the seller will need to include information about all appliances in the home, including those that are part of the sale as well as whether they are operational. The seller will also need to disclose any room additions, damage, or neighborhood noise problems. Lastly, the seller will need to certify that they have complied with various California law, such as that requiring smoke detectors as well as that the water heater has been braced, anchored, or strapped to resist falling or moving horizontally in an earthquake.
Sellers in California must also complete an additional disclosure form, called the Natural Hazard Disclosure Report/Statement, prior to any home sale. The California Natural Hazard Disclosure Statement possess several “yes/no” questions regarding things like whether the property is located in a special flood hazard area, in an area with a substantial forest fire risk, or in an earthquake fault zone. The local government of your city or county can provide further information about these classifications, as can your real estate agent.
Additional disclosure statements, such as those pertaining to special study zones or purchase money liens, might also be required, depending on the location and details of your real estate transaction. Your local real estate agent can help determine whether any additional disclosures are required.
Finally, the seller must also let the buyer know information regarding the location of registered sex offenders is available from local law enforcement agencies and can be found online at the state-operated website.
How Complete Should a California Seller’s Disclosures Be?
Although some California sellers think that providing complete disclosures is a lot of work and not worth it, buyers can ultimately cancel the sale agreement altogether up to the last moment of negotiations should disclosure statements not be provided. That would mean that the entire home sale, as well as all the work the seller has placed into it, could fall through. Thus, as mentioned previously, it is important to err on the side of disclosure so as to not scare away potential buyers.
While the Transfer Disclosure Statement presents a fair number of “yes/no” questions, sellers will need to provide details on some of their responses. This does not mean describing every little bit of chipped paint or every scratch on the linoleum. On the contrary, the seller is only expected to disclose only “material” defects or facts. “Material” in this sense simply means something that is important for or determinative in the buyer’s decision to purchase the home.
For instance, one question on the Transfer Disclosure Statement asks whether there are any significant defects/malfunctions with the floors of the home. If the kitchen floor needs to be cleaned more often than the bathroom floor, this would not be considered “material” and would therefore not need to be disclosed. If, however, the floor in the kitchen were buckling, crackling, or disintegrating, this would be “material,” and the seller would definitely need to disclose it.
A few examples of things that are considered “material” are if the structure is in violation of any building codes (see, Pearson v. Norton (1964) 230 Cal.App.2d1, 8-11), if the property is on land that is often flooded or has a high chance of being flooded (see, Stowe v. Nieto (1945) 71 Cal.App.2d 375, 377), or if the public sewer system does not connect to the property (see, McCue v. Bruce Enterprises, Inc. (1964) 225 Cal.App.2d 21, 28).
Details that do not need to be disclosed include, whether a prior occupant had Acquired Immune Deficiency Syndrome (AIDS) or whether someone dies on the property, as long as the death occurred more than three (3) years before the current potential buyer’s purchase offer. If, however, a potential buyer asks the seller a question about any deaths on the property, the seller must truthfully answer even if the answer involves an occurrence more than three (3) years in the past. (See, California Civil Code Section 1710.2.)
What If the Seller is Unsure Whether They Need to Disclose a Defect?
As a general rule, the more the seller discloses, the better it is for both the seller and buyer. Remember, just because the seller discloses an issue does not mean they are obligated to repair or correct it. The buyer also has the option to correct a problem or to overlook it, if the issue is a minor one.
In fact, disclosing more than the seller necessarily has to can help the deal go through: the buyer’s real estate agent, and therefore the buyer, will be happy to see that the seller has provided a fully complete Transfer Disclose Statement form. It shows that the seller is thorough and are taking the home sale seriously.