23 Feb Seller Disclosure Obligations in California
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.
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, if learned aboutafter close of escrow becomes the basis for a very expensive claim.
Section A 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, as seller, are aware of any significant defects or malfunctions in the identified areas of the property. If you check any of the boxes, please 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 subject of that question. A “No” answer means you are not aware of something which is subject of that question. DO NOT LEAVE ANY OF THESE QUESTIONS BLANK.
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:
1. 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.
2. 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.
3. You should attach additional sheets to the TDS if necessary to fully disclose and to paint a complete picture of the property.
4. 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.
5. 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.
6. Disclose any lawsuits, past or present, which affect, or have affected, the property even if they have been resolved.
7. Disclose any neighborhood nuisances, such as noise or odors, which affect the property.
8. 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.
9. 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.
10. 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.
11. 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.”
If you discover information after the TDS is completed which renders the original TDS disclosures incomplete or inaccurate, please notify your agent as an amendment to the TDS disclosure may have to be made to the buyer.