Understanding Seller Disclosure Obligations in California
When you are selling your home, part of the process entails describing the condition of the property for the buyer, including any problems. The intention is to provide meaningful information. Though the buyer has a responsibility to investigate and inspect the property, it is the seller’s obligation to disclose any material information they have knowledge of. As a seller, you can not lie about, or minimize, any defects; in fact, the advice to home sellers is, “when in doubt, disclose.” In this blog post we will discuss the duty to disclose, and how to properly fill out the Transfer Disclosure Statement.
What is a Transfer Disclosure Statement (TDS) and who must complete one?
Apart from the Purchase Agreement itself, the second most important document in a real estate transaction is the Transfer Disclosure Statement, commonly called a “TDS.” Unless an exemption applies (such as probate sales and bank-owned property), sellers of residential 1-4 unit properties must complete a TDS and deliver it to the buyer.
California home seller’s duty to disclosure
Sellers in California have an affirmative duty to disclose to buyers all material conditions or defects known to them which can affect the value or desirability of the property. Failure to do so can lead to liability from the buyer for damages as a result of the lack of disclosure. Most real estate lawsuits in California involve a buyer claim that the seller did not disclose material facts. Many issues, which a buyer would have accepted if known upfront, learned about after close of escrow becomes the basis for a very expensive claim.
The TDS Form
- Section A of the TDS form asks you to check boxes regarding appliances, fixtures, and items on the property, and whether any are not in operating condition.
- Section B asks if you, the seller, are aware of any significant defects or malfunctions in the identified areas of the property. If you check any of the boxes, provide as much information as you can, using additional sheets if necessary.
- Section C asks sixteen questions regarding the property and surrounding areas. These questions are in the form of: “Are you (Seller) aware of any of the following?” A “Yes” answer means you are aware of something which is the subject of that question. A “No” answer means you are not aware of something which is the subject of that question. DO NOT LEAVE ANY OF THESE QUESTIONS BLANK.
Completing the TDS form
It is important that you complete the TDS (and any supplement to the TDS required by the purchase contract) as completely, fully, and as honestly as you can. To that end, we strongly recommend that you consider the following in making your disclosures:
- Spend some time with the TDS, walking through your property and trying to remember issues, repairs, leaks, or other damage to the property. Add any of these to your TDS.
- If you had a repair to, or remodel of, the property, identify the issues (water leak, remodel, etc.) and the repairs or remodels in the TDS, even if you believe that the problem no longer exists. You should also disclose and include copies of any contracts, estimates or bids for the work if you still have them.
- You should attach additional sheets to the TDS, if necessary, to fully disclose and to paint a complete picture of the property.
- Even if you disagree with them, disclose whether you are aware of any issues or disputes with neighbors regarding lot lines, fences, encroachments, or other neighborhood issues.
- Disclose all old reports, disclosures, inspections, surveys, bids, correspondence, public records, etc., that you possess regarding the property, even back to when you bought the property.
- Disclose any lawsuits, past or present, which affect, or have affected, the property even if they have been resolved.
- Disclose any neighborhood nuisances, such as noise or odors, which affect the property.
- Disclose any repairs or additions to the property known to you that were made without permits, or if the property is in violation of zoning or other laws or regulations.
- Disclose any changes or construction in the neighborhood known to you, such as changes to roads or other construction which may affect traffic, views, or can cause noise and other issues.
- If you were told information which you were not able to verify regarding something related to the property, or something about, or someone in, the neighborhood, discuss that with your agent.
- The question you need to ask yourself when trying to decide what needs to be disclosed is “Is it possible that any prospective buyer might find this information of material importance?” Remember, the best advice is “When in doubt, disclose.”
Talk to your agent
If you discover information after the TDS has been completed which renders the disclosures incomplete or inaccurate, please notify your agent, as an amendment to the TDS disclosure may have to be made to the buyer.
Questions about disclosures or selling your property? We are experts at helping people buy and sell homes in San Francisco, and we are always ready to help. Reach out to us! Call us at 415-735-5867 for a no-obligation consultation.
