The Transfer Disclosure Statement Explained

What California real estate disclosure forms must the seller provided?

The real estate transfer disclosure statement tds in California is the second most important document next to the purchase agreement.

What is a seller property disclosure statement?

BEVERLY HILLS, CA - This website will help you better understand one more component of California’s complex real estate sales process. Marc Anthony Estates at Coldwell Banker Realty in Beverly Hills, California, the number one real estate office in Beverly Hills, is prepared to guide you through the most important facts on real estate transfer disclosure statements in California.

In addition, at the bottom of this page, you will find the California real estate disclosure forms with links directly to the real estate disclosure documents you need to sell your home successfully.

Imagine for a moment that you are preparing to sell your home. As you organize your personal property and prepare to begin the overwhelming sale process with your real estate agent, you recall a kitchen sink repair that was made years ago. You start thinking more about if it makes any sense to share the repair info with a buyer because the issue is fixed.

What about the disaster of a home inspection report from when you originally purchased your home? You may even be inclined to think the buyer should complete their own damn investigation before they open escrow, caveat emptor, right?

Ruth Krishnam, a San Francisco real estate agent suggested, “Disclose all old reports, disclosures, inspections, surveys, bids, correspondence, and public records, that you possess regarding the property, even back to when you [originally] bought the property.”

Real estate disclosures are required by law in most states; however, that was not always the case. Before the law required real estate disclosures forms from sellers in California, buyers were expected to do everything necessary to protect their own best interests.

Caveat emptor, qui ignorare non debuit quod jus alienum emit translates to, “Let a purchaser, who ought not be ignorant of the amount and nature of the interest which he is about to buy, exercise proper caution.” Many years ago, caveat emptor was the norm in transactions; the courts didn’t believe it was their obligation to mandate that sellers disclosure property defects while selling property.

Industrialization, more residential construction, and modern consumer protection laws paved the way for stricter obligations on sellers to disclose defects before transferring real estate.

“The California Appeals Court’s landmark decision in Easton v. Strassburger [1984] which expanded seller disclosure requirements to include real estate brokers spurred a wave of statutory enactments across several states beginning with the California Act that have substantially scaled back, and in some cases entirely uprooted, the original caveat emptor standard for residential real estate transactions.”

Since Easton v. Strassburger, disclosure requirements have become more extensive than ever before, especially in California. California has some of the strictest requirements for seller disclosure in the nation. For example, Ohio law mandates one Residential Property Disclosure document in addition to the federally mandated lead-based paint disclosure. At the same time, the State of California requires many disclosures, including but not limited to the Transaction Disclosure Statement (TDS), Seller Property Questionnaire (SPQ), and Natural Hazard Disclosure Report.

States and real estate brokerages often have statutory and contractual disclosure requirements based on the law or the Residential Purchase Agreement in California. For more information, review California civil code 1102 here.

Sellers and buyers should pay special attention to the amount of time allowed to provide specific disclosures based on individual purchase agreements so that they comply with the purchase contract. If contractual deadlines are not met, the other party may have the right to cancel the deal.

California law requires sellers to disclose to potential buyers, in writing, any details about the property that could affect a potential buyer’s desire to purchase it or the amount the potential buyer is willing to pay. (See, California Civil Code § 1102.) Thus, these material fact disclosures play an important role in real estate sales.

Nolo Law suggests, “That doesn’t mean describing every little bit of chipped paint or every scratch on the linoleum. You are expected to disclose only “material” defects or facts. “Material” in this sense means something that is important for or determinative in the buyer’s decision to purchase the home.”

“A few more examples of things that are considered “material” are if the structure is in violation of any building codes (see, Pearson v. Norton (1964) 230 Cal.App.2d 1, 8-11), if the property is on land that is often flooded or has a high chance of being flooded (see, Stowe v. Nieto (1945) 71 Cal.App.2d 375,377), or if the public sewer system doesn’t connect to the property (see, McCue v. Bruce Enterprises, Inc. (1964) 225 Cal.App.2d 21, 28).”

A material fact would be important to a reasonable person in deciding whether to engage or not to engage in a particular transaction, an important fact as distinguished from some unimportant or trivial detail. Therefore, material facts must be disclosed when selling residential real estate in California. The suppression of a material fact would result in a different decision by the buyer.

Latent defects must also be disclosed by sellers of real property in California. According to the Merriam-Webster dictionary, a latent defect is a defect not discoverable by reasonable or customary inspection.

It is illegal to knowingly conceal a defect by leaving it off a property transaction disclosure statement.

Different types of disclosures happen during real estate transactions in California. In addition the the transaction diclosure statement, other disclosures exist like the Natural Hazards Report. Real estate agents and brokers must also disclose real estate agency to consumers at the first substantial contact with a client. The Agency Disclosure signed by buyers and sellers discusses the different kinds of agency possible in a transaction, such as a buyer agency, seller agency, or potential dual agency situation. Other potential real estate disclosures may include local disclosures, escrow or mortgage affiliation disclosure, bed bug disclosure, or other acknowledgments.

Seller disclosure is required by law in most cases when it pertains to single-family homes, condominiums, or other residential properties with fewer than four units. However, there are exemptions where a seller is not mandated to disclose defects such as bank foreclosure transactions, estate sales, and transfers between spouses and business partners.

Real estate agents and the department of real estate in your state can provide you with the most up-to-date disclosure forms available. For example, a great real estate agent usually offers sellers a disclosure checklist but should never complete the form on behalf of a seller. In California, real estate agents do conduct their own visual inspection disclosure to disclose any defects they observe.

In addition to state law on real estate property disclosure, federal real estate disclosure requirements also apply to the residential real estate transactions. Homes built before 1978 are required by federal law to disclose any possible existence of lead paint hazards. Homebuyers are offered a 10-day period where they may preform or waive lead based paint testing.

The California real estate sellers disclosure checklist here includes a links to each document for your review.

Disclosure Regarding Agency Relationships

The Transfer Disclosure Statement (TDS)

The Seller Property Questionnaire (SPQ)

The Natural Hazards Disclosure is usually paid for by the seller but maybe negotiated

The Lead Paint Disclosure (Built before 1978)

Possible Representation of more than one Buyer or Seller

Real estate statenemt disclosure issues can quickly become a big problem for unscrupulous sellers. The best real estate agent recommends acting honestly and in good faith when completing disclosure documents. Failing to disclose facts that must be disclosed may also sabotage your transaction before it gets off the ground when the prospective buyer cancels the agreement based on their own investigation.

Real estate agents are held to a higher standard than the general public and should never offer to put you at risk with ill and illegal advice. By appointing the best real estate agent in your neighborhood, you will likely avoid more headaches and time-consuming litigation from the sale of your estate. Real estate agents always have a duty to disclose material facts that may affect the value of a property even if the item is not found on the disclosure report.

Buyers and sellers should always discuss specific concerns with a licensed real estate attorney and error on the side of caution. Despite strict real estate disclosures requirements in many states, buyers should carefully hire the best professional to investigate the property and review all seller disclosure statements provided.

The information discussed here is not legal advice. If you are involved in a challenging disclosure situation, or just unsure about your liability, Marc Anthony Estates and Coldwell Banker Realty always advises that you contact an attorney to clarify any grey areas. As a rule, if you are unsure about whether you should disclose an item, you probably should reveal it.