If you’re selling a house, you have to obey the law and follow the rules, and some of the most important laws pertain to disclosure.
You are obliged as the seller to notify a potential buyer of any material facts relevant to the condition of the property. California imposes guidelines that require specific disclosures (and prohibits a few).
But what about those factors that may not be addressed? How do you determine what you have to disclose — especially if a disclosure is likely to scare off your buyers?
California Real Estate Disclosure Requirements
Federal laws only dictate the requirement for disclosing the presence of lead paint. Otherwise, disclosure laws are established by the state.
In California, sellers must provide a Transfer Disclosure Statement (TDS) to any potential buyer whose offer has been accepted. This form asks specific questions about defects or malfunctions the seller may be aware of. It asks about the condition of the roof, the electrical wiring, appliances, smoke detectors and other relevant features of the property.
You must also provide several supplemental disclosures (noting whether the house is in a flood zone, for example). Your Realtor® can provide specific information on your disclosure requirements as well as the forms you need to use.
The most important concept to keep in mind is that you must disclose any material facts that you are aware of, even if they are not specifically addressed by the standard forms.
What Is a Material Fact?
The law broadly defines a material fact as any piece of information that might affect a potential buyer’s decision to purchase.
For example, California requires that, when selling a home, you disclose if someone has died on the property in the last three years. But what if you know someone died there four years ago? Legally, you are not specifically required to disclose this fact, and if the person died from natural causes, it may not be material to a potential buyer.
But what if that person died in a violent home invasion? In that case, you can easily see how this could be very material to a potential buyer.
What if the house next door to your property is being run as a halfway house? Would you disclose? The answer might depend on who is housed there. White-collar criminals and tax cheats might pose less of a threat to a potential buyer. Sex offenders, on the other hand, would be material to virtually any buyer.
What if You Don’t Disclose When Selling a House?
If you are aware of a material fact when selling your house and you choose not to disclose it, your decision may soon come back to haunt you.
Even if the buyer conducted a home inspection, as they should, some conditions may go undetected until later. But eventually, the buyer will discover the problem, and when they do, they probably won’t be happy about it. If the issue is significant (and sometimes even if it isn’t), they are likely to pursue legal action against you.
The court will attempt to determine whether you knew about the problem or whether, as a reasonable person, you should have known about the problem. If they find in the buyer’s favor, they may compel you to compensate the buyer for their losses, or in some cases, refund the buyer’s money.
You can read more about disclosure requirements from the California Department of Real Estate. However, for the most reliable information specific to your property, ask your Realtor® to explain the process
One more important point about disclosure: Your Realtor® is held to an incredibly high standard of ethics, and disclosure obligations are taken seriously. Even if you don’t share information about a defect or material fact, your Realtor® is obligated to share the information with the potential buyer and their agent. Even if you explicitly direct your agent not to discuss the issue, he or she must disclose it.
Honesty is the best policy in all aspects of a real estate transaction. Although it may reduce our selling price somewhat, that may be small change compared to legal fees and the inevitable fraud settlement.
In Yorba Linda and the surrounding communities, the Edie Israel Team can assist you in understanding the disclosure laws that apply to your transaction. Contact us today to learn more about this important legal and ethical aspect of selling a house.