You don’t want to get caught with your pants down when you’re trying to sell your property. That’s why it is imperative that you always follow the state laws for disclosing information about any residential property in California and these rules apply to nearly all California homeowners selling their property, whether it’s a standalone home, a high-rise condo unit, or a manufactured or mobile home. Sellers must follow the state’s disclosure laws to avoid a later lawsuit by a buyer who claims they weren’t told about certain defects with the property.
But what exactly are seller disclosures in California? Are sellers required to disclose information that a buyer might not want to hear? And what if the house sits on a fault line and there’s a high risk of earthquakes?
Yes. You do. California law requires sellers to disclose all material facts about their homes that might affect a buyer’s decision to purchase or not to purchase the home, such as any serious defects with the house itself or its surrounding property.
What are Material Facts in California Home Sales?
Any fact, circumstance, situation, or other issue that could affect a buyer’s decision to buy a house is considered material when it comes to home sales. Material facts include information about any problems with the structure of the home, that the seller knows, such as faulty wiring or roof leaks; any problems with the property itself, such as a nearby landfill; and any problems affecting the neighborhood, such as inadequate sewage or water supply.
Without these disclosures beforehand, and especially when inspection contingency has been waived, buyers have little to no recourse if they are uninformed about these defects when making their decision to buy the house. Sellers can be held liable for damages in later lawsuits if they don’t disclose a material fact about a home that the buyer should have known before purchasing it.
Sellers are required to provide buyers with all material facts about their property within their knowledge. Material facts include any issues that could affect the safety, health, or enjoyment of future occupants, as well as any problems affecting other properties in the neighborhood. Sellers must give buyers a written disclosure form called the Transfer Disclosure Statement (TDS), which is prepared by their real estate agent. This provides a list of all known material facts regarding the property and it’s condition, along with any disclosures required under state and local law.
What if a Seller Doesn’t Know About Defects in the House?
It’s important to understand that while sellers don’t have to disclose their personal opinion about the state of the property, they only need to disclose any facts that they know about the property and its condition.
If a seller knows, for example, that there are nuisances, such as traffic noise and congestion in the area, then they are required to disclose this fact under California law.
Most sellers are eager to make sure their homes are in the best possible condition before selling them. But sometimes problems occur after they’ve moved out or they aren’t aware of existing issues.
If a situation arises where a seller lacks full knowledge of the condition of their property, they may be protected from liability if they disclose this fact to buyers.
In cases where sellers don’t know about defects or damage in their homes and can’t reasonably obtain this information in time for disclosures, California law requires them to provide every buyer with an “as-is” clause in their sales contract. This protects sellers from buyers filing lawsuits later on about problems that weren’t disclosed or weren’t known at the time of sale.
Filling Out the Standard California Disclosure Forms
Your realtor will provide you with the standard disclosure forms which includes the Transfer Disclosure Statement and Seller Questionnaire. The forms will give you a list of questions regarding known material facts about your home and surrounding property. Both forms provide the option to disclose additional material facts by answering marking “Yes” or “No” next to specific questions and providing additional details. You are required to fill out everything that pertains to your sale.
What if you are unsure whether you need to disclose a defect?
As a rule, the more you disclose, the better it is for both you and the buyer. Remember, just because you disclose an issue doesn’t mean you 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.
What if a Seller Has an “As-Is” Clause?
An as-is clause gives sellers the legal right to sell their property without making any repairs.
Sellers can offer an as-is contract if they haven’t yet moved out of a house and they don’t know about any defects or damage that would affect a buyer’s decision to purchase the property, such as a broken furnace or leaky roof.
If buyers accept an as-is contract and later discover problems with their house, they can’t hold sellers liable for repairs under California law.
When writing an as-is clause into a sales contract, keep in mind that you cannot exempt yourself from disclosing material facts about a property’s condition if buyers would expect this information to be disclosed and you have actual knowledge of such fact.
Statements that the property is being sold “as-is” or “with all faults” do not protect sellers from disclosing material facts about their property. This includes disclosures required under federal, state and local laws.
And not to scare you but remember, sellers who don’t disclose known defects or damage that could affect the safety, health or enjoyment of future occupants can be held liable for undisclosed problems that buyers may file lawsuits about later.
Watch our video to know more about disclosures.