We all know the expression Caveat Emptor, which means “Buyer beware”. It’s a basic truism that in any sale the buyer should do their due diligence before handing over their money. In California the state has established rules for what the seller must tell the buyer before the sale is made
Some of these items are completely obvious, items like Asbestos and cracks in the foundation but others are not so obvious. Did you know in the state of California you must disclose if your house is haunted or if a murder or death has occurred in your house. We’ll talk about a few other things later in this article.
1. It’s the law.
Every state has laws regarding disclosure and, as you can imagine, the mandatory items vary from state to state.
California has a very clear law that states the current owner/seller must disclose anything about the home “That may affect the buyers desire to buy the home or affect the amount they are willing to pay”. These are often referred to as ‘Material Facts” and, as you can imagine there are severe penalties if this law is not followed.
These facts are most often disclosed on a form called the “Transfer Disclosure Statement,” or “TDS”.
2. Write it down
Some states allow a verbal disclosure but in California you have to draft a TDS and include any and all of the problems with the home. If you’d like to find out more information on the rules and regulations surrounding disclosure you can find a helpful pdf here.
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3. A pre-sale inspection.
Of course the buyer will get the property inspected. However today many sellers are also getting an inspection before they put their home on the market. This accomplishes two things
- They can be alerted to issues that might reduce the sales price and (if they are cost effective) they can be fixed and
- It enables the owner to claim due diligence and present the buyer with a comprehensive and accurate disclosure.
The other thing that an inspection does is give the seller the appearance of due diligence; If any issues arise later in the process he can claim, correctly, that he made every effort to find, correct and disclose any problems with the house.
4. It’s the right thing to do
I and all reputable realtors insist on a full and honest disclosure. Not only is it the ethical thing to do but it will diminish the possibility of future lawsuits. It also fosters trust between you and the buyer. No home is without problems so if you disclose nothing this will send up red flags in your buyers mind.
As of January 1, 2019 Assembly Bill (AB) 1289 made several changes to real estate disclosure requirements.
A new section entitled Seller and Buyer Responsibilities says:
Either the purchase agreement or a separate document will contain a confirmation of which agent is representing you and whether that agent is representing you exclusively in the transaction or acting as a dual agent. Please pay attention to that confirmation to make sure it accurately reflects your understanding of your agent’s role.
This basically means that it is now mandatory that an agent must disclose if he is working for both the buyer and the seller.
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5. Big picture
Don’t itemize every imperfection in your home. A crooked tile or a chipped cabinet are perfectly fine to overlook but things that need major repair should be listed. The rule of thumb is that if it will cost more than $150 to fix it should be disclosed.
6. Things you MUST disclose when selling a house in California
Yes you must disclose if your house is considered haunted… and before you chalk this up the “those flaky Californians” know that this is the case in many other states.
In California Civil Code 1710.2 says that any death on a property does not need to be disclosed if it occurred more than three years prior to the sale of the home. But read the fine print: If a buyer specifically asks, the seller is obliged to disclose any death on the property even if it occurred more than 3 years ago.
It comes as a shock to most people that asbestos is not actually banned in the United States. However in 1973 the EPA did ban most spray-applied asbestos products. Asbestos is a highly toxic carcinogen and must be disclosed.
Obviously cracks in the foundation are a serious issue and could compromise the structural integrity and therefore the safety of the house. If you have cracks in the foundation the question you should be asking yourself isn’t “Should I disclose these?” It’s “Should I be living here?”
Radon is a radioactive gas that occurs naturally in many areas and can cause lung cancer. Whether you are selling your house or not you should test for Radon in your home and you will absolutely have to tell any buyer if there is Radon present.
Urea formaldehyde foam insulation is injected as a mixture of urea formaldehyde resin, an acidic foaming agent, and a propellant, such as air. It was commonly used in the 1970’s and it’s presence in a home must be disclosed as it is linked to some forms of cancer
Mold is not as big of a concern in California as it in in many states. The Dry climate does not promote growth but if your house has water damage or is close to the ocean mold is a definitely a concern, and if found it should be disclosed.
Lead-based paints were banned in 1978. If your house was built before 1978 it’s likely to contain some lead-based paint. However, it is the deterioration of the paint that causes the real problem.
Apart from desert downpours Southern California is not a particularly flood-prone. However if your house has had a burst pipe or water heater you need to let the buyer know.
7. Earthquakes and natural hazards
A natural hazard disclosure report is mandated by California state law, and tells the buyer if a home lies within an Earthquake fault zone or Seismic hazard zone. It also mandates the disclosure of these other conditions;
- A Special Flood Hazard Area
- Dam Inundation
- Very High Fire danger
- Wild land fire danger
- Radon Gas exposure
- Airport influence area
- Megan’s Law disclosures
- Military ordinance
It’s a straightforward one-page form, containing several yes or no questions about your property. On the disclosure form, you must indicate whether or not each threat applies to your property. The form costs approximately $125, a fee that’s usually paid by the seller at the close of escrow.
In conclusion
Answer all questions to the best of your ability. If you don’t know the answer to a question answer “Do Not Know.” But not having precise facts about defects you know exist does not permit you to answer “Do Not Know” to every question. This will always raise a red flag. Just use your common sense and ask yourself “Would I want to know that if I was buying this home?”.
