If you are a home buyer looking at properties in California, you will receive written disclosure statements from the sellers of properties that you’re interested in (or from their real estate agent).
Typically provided on standard C.A.R. (California Association of Realtors) form, such disclosures are mandated by law and designed to provide you, the buyer, with detailed information to help you make an informed decision about your property purchase. The disclosures in California can be very extensive and are mainly related to the seller's knowledge of the physical condition of the property. (See, California Civil Code Sect. 1102.)
Types of Disclosures You Might Receive
California law requires that sellers be thorough in their disclosures, so you may receive a wealth of information even before you're sure you're definitely interested in a property. This is actually a good thing!
Receiving disclosures does not mean there is a serious issue with a home: Sellers often choose to “over-disclose” to ensure that you have as much information as possible, and to make sure they’ve covered their legal requirements.
A couple of forms you should expect to receive are:
Transfer Disclosure Statement (TDS) - this covers a broad range of topics about the home, from structural information to whether there have been any deaths there in the last three years.
Natural Hazard Disclosures Report/Statement (NHD) - which provides information about the property’s location in relation to earthquake faults, flooding zones, and other natural hazards.
What to Look for in the Disclosures
The seller should be disclosing “material facts,” or, things that you would consider important in deciding whether to purchase the home. For example, the square footage of a structure and whether it has any structural defects qualify as material facts.
Depending on the details of a home, including its location and history, you may also receive disclosures regarding the presence of hazardous or toxic substances or supplemental property taxes. Further, common disclosures can include work and upgrades that a seller has performed on the property, and even the existence of pets. Additionally, the known existence of termites, neighborhood nuisances, a history of property line disputes, and any malfunctions with a home’s major appliances will be items you might find addressed in a seller’s disclosures.
When reviewing the disclosures, bear in mind that the seller may not know everything about the property. For instance, a seller who has been living in the home might have a more detailed knowledge of the property than one who just recently inherited it. And even sellers who has lived in the home for years may have become blind to its problems or, for example, may have never looked into the attic or crawlspace.
The bottom line is that sellers who check “No” in answer to the many TDS questions about whether they are aware of particular problems haven’t given the property a definitive clean bill of health. They’ve only stated the limits of their knowledge. A long-time homeowner can accidentally overlook potential issues to which he or she has become accustomed.
Using the Information in the Seller’s Disclosures
Based on the information you receive in the disclosures, you’ll likely want to perform some follow-up research. To start, you should hire a home inspector to inspect the entire property. Be sure to make him/her aware of the information in the disclosures, most likely by providing a copy of the forms. This will let the inspector know about any particular areas of the property that might need a closer look.
Another important follow-up step to receiving these disclosures is to ask questions – let the disclosures work for you! If you need clarification on something in a disclosure document, or if a particular disclosure raises a new question or concern in your mind, ask your real estate agent or broker, or the seller’s agent for further information to help you sort things out. You can also ask your home inspector or other professionals such as a plumber or roofer.
Remember, just as California law requires a seller to provide you with disclosures, you are also required, as a buyer, to pay attention to details of the property through your own observations as well as through other readily accessible information. It is never a good idea to solely rely on the seller discloses but it is always a good strategy to use this information in performing your own research and obtaining your own inspection(s).
For further information, a local California real estate broker is qualified to advise you on real estate matters. For legal advice, consult your attorney.