Understanding Disclosures in California Real Estate: A Guide for Sellers and Buyers

In the process of buying or selling a home in California, real estate disclosures are one of the most important legal requirements. They ensure that buyers are informed of the property's condition and any issues that could affect their decision to purchase. For sellers, providing accurate and honest disclosures protects them from potential legal complications down the road.

This guide will walk you through the basics of real estate disclosures, what sellers are required to disclose, and what buyers should be looking for.

What Are Real Estate Disclosures?

Real estate disclosures are formal documents that outline any known problems or material facts about a property. They provide transparency in a real estate transaction by informing the buyer of any defects, hazards, or important information that could affect the property's value or safety.

For buyers, these disclosures help make an informed decision. For sellers, they are a legal obligation designed to prevent lawsuits for non-disclosure of property conditions.

Key Disclosure Forms Required in California

In California, sellers are required by law to complete several disclosure forms, depending on the type of property and its condition. Here are some of the most common forms:

• Transfer Disclosure Statement (TDS): One of the most important forms, the TDS outlines the overall condition of the property, including the roof, plumbing, electrical systems, appliances, and more. The seller must also disclose any known hazards or defects. Buyers rely heavily on this document to understand the home’s current state.

• Natural Hazard Disclosure (NHD): California has areas prone to natural disasters such as wildfires, earthquakes, and floods. Sellers must inform buyers if the home is in one of these high-risk zones by providing the NHD form.

• Lead-Based Paint Disclosure: If the property was built before 1978, federal law requires sellers to disclose any known information about lead-based paint and associated hazards. This is a critical disclosure to protect buyers from health risks, especially in older homes.

• Mello-Roos Disclosure: For homes in districts where Mello-Roos taxes are assessed, sellers must disclose this additional property tax, which helps fund public services such as schools and infrastructure. This is especially relevant for newer developments in California.

• Seller Property Questionnaire (SPQ): In addition to the TDS, this form delves deeper into potential issues like renovations, legal disputes, or other property-related concerns.

Material Facts: What Sellers Must Disclose

In California, sellers are required to disclose all known material facts—information that might affect the buyer’s decision or the property’s value. Even if a buyer doesn’t ask specific questions, the seller must still disclose any problems or concerns about the property.

Some key areas of disclosure include:

• Structural Issues: Problems with the foundation, roof, walls, or other structural components must be reported.

• Pest Infestations: Sellers must disclose any history of termites, rodents, or other pest problems.

• Water Damage or Mold: Any signs of past or current water damage, leaks, or mold should be disclosed.

• Environmental Hazards: Whether it’s lead-based paint, asbestos, or living in a wildfire zone, these issues must be included.

• Legal Disputes or Zoning Issues: Any boundary disputes, easements, or zoning problems affecting the property must be shared with potential buyers.

What Happens if Sellers Fail to Disclose?

Failure to properly disclose material facts can result in serious legal consequences for the seller. In California, if the buyer discovers undisclosed issues after purchasing the property, they can sue the seller for damages, which could include the cost of repairs or even the reversal of the sale.

For sellers, transparency is critical. Being upfront about any issues with the property will protect you legally and avoid future disputes.

How Buyers Should Review Disclosures

For buyers, disclosures are an essential tool in evaluating a property. Here’s what you should look for when reviewing the disclosure documents:

• Red Flags: Pay close attention to sections in the TDS and SPQ that mention major repairs, ongoing issues, or known defects. This can give you insight into potential future expenses.

• Natural Hazards: Review the NHD carefully to understand the risks associated with the property’s location. If you’re in a wildfire or flood zone, make sure you are aware of what this means for insurance and safety.

• Lead-Based Paint: For homes built before 1978, it’s important to understand the potential hazards of lead-based paint, especially if you have children or plan to renovate.

• Consult Experts: If something in the disclosures raises questions, consider consulting a real estate attorney or a property inspector for further clarification.

How Disclosures Affect the Sale

Disclosures can impact the negotiation process. If the buyer finds issues in the disclosures, they may request repairs, price reductions, or credits before agreeing to close on the home. In some cases, they might even walk away from the deal if the issues are too significant.

Sellers should be prepared to negotiate based on the disclosed issues, whether that means making repairs or offering concessions.

What Happens After Disclosures Are Submitted?

Once the buyer receives the disclosure forms, they typically have a window of time (usually three days) to review them. If the buyer is uncomfortable with anything they find, they can raise concerns or back out of the contract, depending on the terms of the agreement and the contingency period.

Final Thoughts: The Importance of Disclosures

For sellers, disclosures are a legal obligation that ensures you remain protected after the sale is complete. For buyers, they offer transparency and peace of mind, allowing you to make informed decisions about the property.

Being open and honest about the condition of a property helps build trust between buyers and sellers and ensures that both parties are entering the transaction with a full understanding of the home’s condition.

If you have any questions or need assistance with disclosures in your real estate transaction, feel free to reach out. I’m here to guide you every step of the way!

Contact Information
Melody Amirehsani
Realtor, East Bay Area Specialist
Phone: 510-866-6100
Email: homesbymelodya@gmail.com