What are the most important real estate disclosures in California?
Answer: Items On The Transfer Disclosure Statement (TDS)
In California, one of the most important real estate disclosures is the Transfer Disclosure Statement (TDS). The law requires sellers of residential property to complete this form before closing escrow. More specifically, California Civil Code §1102 et. seq. requires the TDS in transactions with one-to-four units. Sellers fill out this document revealing material property details. It generally does not apply to commercial properties or apartment buildings with 5 or more units.
The TDS requires the seller to disclose any known material defects or conditions that could affect the value or desirability of the property. This includes things like structural damage, water damage, and pest infestations. Additionally, it includes other issues that could affect the property’s habitability or safety.
The TDS also requires the seller to disclose any known hazards on the property, such as lead-based paint, asbestos, or mold. Additionally, the TDS requires the seller to disclose any disputes or legal issues that could affect the property, such as boundary disputes, easements, or liens.
Overall, the TDS is a critical disclosure document in California real estate transactions. The document seeks to fully inform buyers about the condition and history of the property. We advise having this disclosure filed out and delivered prior to reviewing offers. Be sure to discuss this and other disclosures with your agent to learn more about their strategy for handling unfavorable disclosure items prior to opening escrow.
Are there situations where a seller doesn’t have to provide this real estate disclosure?
There are certain situations where sellers may be exempt from filling out the Transfer Disclosure Statement (TDS). The following are some common exemptions:
- Foreclosure: Properties often sell through the foreclosure process. Here, the foreclosing party is not required to complete a TDS.
- Court-ordered sale: If a court orders the sale, the seller may be exempt from completing a TDS. These include proceedings such as divorce or probate.
- Transfer between co-owners: Co-owners also often transfer property interests to each other. This includes gift and inheritance transfers. In these cases, the law does not require the seller or transferor to complete a TDS.
- Transfer to a spouse: A spouse transferring all or part of a property to the other is generally not required to complete the TDS. This also applies to transfer to a former spouse in connection with a divorce or legal separation.
- Transfer to a government entity: If the property is being transferred to a government entity, such as in a sale to a housing authority, the seller is not required to complete a TDS.
Important Real Estate Disclosure Caveat
One common misconception is that a seller who owns a property in their trust is always exempt. Sometimes, they are, but there is a caveat. The exception here is when the property is held in a revocable trust and the trustee is a natural person who is also either the former owner or an occupant within the year preceding the transfer (See Cal. Civil Code §1102.2(d)).
The law still requires sellers to disclose any known material facts. This applies whether or not they are exempt from competing the TDS. Basically, anything that could affect the property’s value, desirability, or safety. In general, it’s wise for sellers to be as transparent and forthcoming as possible with buyers. Buyers rarely cancel a transaction because of something disclosed on the TDS. If you have to think about whether to disclose it, then do it.