California Real Estate Disclosure Requirements

House for sale.
House for sale. (Image: Ryan McVay/Photodisc/Getty Images)

No matter how badly you want or need to sell your home or other property, the law requires that you come clean with potential buyers regarding anything that might detract from its salability. This is true everywhere, but the exact rules for disclosure can vary from state to state. California requires disclosure if you’re selling residential property with up to four living units, and the state provides special forms you can give to potential buyers.

Physical Defects

One of California’s forms is the Transfer Disclosure Statement. It lists specific questions to guide you so you don’t have to wrack your brain trying to figure out whether that scratch on the bathroom mirror must be mentioned. The basic rule is that if a physical defect is “material,” you must mention it, and "material" means it could make a difference when the buyer is trying to decide whether he wants to purchase the property. Think of it in terms of whether the defect would force the home’s new owner to spend money to remedy the situation. He wouldn’t necessarily have to spend money on cosmetic issues like a scratch unless it presents a potential safety hazard, but you’d want to mention if the home’s foundation floods with heavy rains, or that the refrigerator is on its last legs if it comes with the home. California law also requires that you disclose the presence of vermin and pests.

Environmental Hazards

California also requires that you give potential buyers a Natural Hazard Disclosure Report/Statement. This is exactly what it sounds like: It divulges things like whether your property’s area is prone to flooding or forest fires, or if it’s in an earthquake fault zone. If you’re unsure and you’re not working with a real estate agent who would know local natural hazards requiring disclosure, check with city hall.

Federal Law

If your home was built before 1978, the issue of lead paint becomes an issue. The federal Residential Lead-Based Paint Hazard Reduction Act requires that you inform buyers of lead-based paint in the property if you’re aware of it, and that you give them 10 days to have the property tested if you’re not sure. You must also provide potential buyers with a pamphlet made available by the Environmental Protection Agency that explains the dangers of such paint.

An Unsavory Past

Some houses have things that go bump in the night and California law requires that you let buyers know if anyone has died on your property within the last three years. Even if a death occurred more than three years ago, you might not be off the hook. Under California law, this just means that you don’t have to volunteer the information. If you’re asked pointblank, you must be truthful. You’re not expected to know if there are any known sex offenders in the area, but you must inform buyers that they can check with law enforcement to find out. You must disclose that nuisance neighbor who tends to throw loud, all-night parties once a week, or any other issues in the neighborhood that might affect a buyer’s willingness to purchase the property.

Protecting Yourself

If you’ve been living in your property for any length of time, you’re probably aware of most structural problems and nuisances. This may not be the case if you’re selling a rental home where you never resided. In either case, you can protect yourself by having a home inspection done before you put the property up for sale. If you fail to disclose lead paint issues, for example, the buyer can sue you for treble damages – three times the amount of what the problem actually costs him. Failure to disclose allows buyers to back out of deals in California, and even if your buyer doesn’t do this, he can sue you to recover any money he must spend to set things right after the deal closes.

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