23 min read May 24, 2022

Seller Disclosures California: A Guide To Ace Your Disclosure Process

✍️ Editor’s Note: Understanding and dealing with seller disclosures California can be intimidating for home sellers. Here’s Houzeo’s guide to help you ace your disclosure requirements.

» REST ASSURED: Americans listed $ 3.5 billion worth of properties on Houzeo.com in 2021. Houzeo simplifies figuring out your seller disclosure requirements. Start your FREE listing NOW!

Seller Disclosures California

Real estate disclosures in California are one of the most complex disclosure processes in the USA. Most sellers are left scratching their heads while filling out the numerous forms of seller disclosures in California. They’re not only unending, but also quite complicated to understand for someone with no understanding of the field. But worry not, we are here to make that process easier when you want to sell a house in California.

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    Houzeo offers the best possible alternatives for you to deal with disclosures.

      💲 List your property with Houzeo’s Freemium Plan

      💲 Purchase the “Contract to Close Upgrade Package”. A Licensed broker will review your paperwork to make sure it is appropriate.

      In addition, you should also have the settlement agent review the paperwork so you cover all bases.

    » More: Start your FREE listing NOW!

*Seller disclosures are exclusively the responsibility of a home seller. Regardless of the service, you engage in, you are required to ensure seller disclosures provided by you are complete and accurate to your best knowledge. Houzeo is not a brokerage or a licensed agent. It is a tech platform, and the tips presented here should not be construed as advice for which a real estate or attorney license is required.

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What Are Seller Disclosures?

The real estate transfer disclosure statement California is a standard checklist form containing material defects and features of the property. It specifically provides information about the property that may negatively affect the value of the house.

If there are material defects in a property that may impact the value of the property and the seller is aware of them, then the seller must disclose them. However, sellers should report these defects to the best of their knowledge and understanding.

📝 Note: You shall disclose any known information about your California house from pest infestation to pending legal issues. Consequently, this will help you avoid future disputes.

Usually, the disclosure form is completed along with the listing paperwork – especially in the Multiple Listing Service (MLS) provided by the listing agent.

» More: Paperwork for Selling a House Without a Realtor

Importance Of Seller Disclosures

Sellers’ disclosures serve the following purpose in real estate transactions:

#ImportanceDescription
🔎Give Complete Information About The PropertyDisclosures help communicate the defects present on the property. They ensure that all the stakeholders involved in the transaction are well aware of the property's history.
⚖️Protects Sellers Against Legal LiabilitiesOnce you disclose all the known defects present in the house or which come to light during the inspection, you may be exempted from any future liability against those defects.
👍Develops CredibilityHonesty, accuracy and transparency are of utmost importance when selling your house. Disclosures are a way of achieving all of these and thereby enhancing your credibility.

Real Estate Disclosures California

California real estate disclosure law is governed by the California Civil Code. It mandates all home sellers to complete certain documents and submit a copy to any prospective buyer before execution of the sale deed.

Section 1102 of the California Civil Code (the ‘statute‘) sets out the regulations for disclosures that are to be made upon transfer of residential property. The section goes in-depth about what is to be disclosed, when to disclose as well, and how to disclose it.

In order to make a seller’s job easy, the California Department of Real Estate has formulated a booklet, which covers all the common disclosures mentioned in the statute. Here’s a comprehensive list of the necessary clauses covered by the section:

1] Termination Right

The Termination clause states that a seller shall furnish the disclosure statement before the transfer of title, the mention of which is to be made in the sales contract.

The right of termination lies with the buyer, wherein they can choose to terminate the offer after receiving the disclosures. The time within which the seller can cancel the offer also depends on the mode in which the disclosures were sent to him, ranging between 3 to 5 days. To summarize, it means that a buyer has a right to end the contract after he finds any unwanted elements in the disclosures.

2] Real Estate Transfer Disclosure Statement California (RETDS)

A seller has to reveal all the material defects their property may have in the California Real Estate Transfer Disclosure Statement, also known as TDS. Basically, it describes the condition of the property, amenities, and appliances available with the sale.

    🚩 Note: Material defects are the ones which are not apparent or visibly recognizable defects, but they significantly affect the value of the property negatively. Generally, these defects involve an unreasonable risk to the occupants.
The Disclosures in the Real Property Transfers booklet contain the Transfer Disclosure Statement. A brief explanation of what information goes into the disclosure is as follows:
Coordination with other disclosure formsThe seller mentions any home inspections carried out before making the offer. A copy of all the inspection reports has to be given with the sales contract.
Seller’s informationIn this section, the seller makes a representation of the systems or appliances which are a part of the sale. These items include kitchen appliances, HVAC systems, water supply, etc. You also mention the working condition of these items and known material defects.

The second part of this section contains material defects related to the property borders, known encroachments or easements, etc. Also mention the known presence of hazardous substances like asbestos, formaldehyde, radon gas, etc.

A seller also discloses problems related to floods, soil problems, or zoning violations. Any lawsuits which affect the seller’s title or allege a defect in the property or common areas must be disclosed.
(Seller) Agent’s inspection disclosure This section is to be completed only by an agent who represents the buyer. FSBO sellers need not complete this section. Here, the agent adds any additional disclosures which are not mentioned in the rest of the form.
(Buyer) Agent’s inspection disclosureThis section is to be filled by a buyer’s agent. The agent adds any additional disclosures that they found necessary and are not mentioned in the rest of the form.
Professional advice or inspectionsIf a sales contract needs any special provision with regards to the sale with the help of a professional, it must be mentioned in the contract. Likewise, the reports of any extra home inspections carried out must be attached to the contract.

» Explore: What is the California Real Estate Transfer Disclosure Statement?

3] Local Option Disclosure Statement

Also known as Local Option Real Estate Transfer Disclosure Statement, this section helps a seller disclose any local or county regulations which may apply to the property. The seller mentions the concerned locality or county, as well as the details of the regulation which applies to the property.

Further, disclosure of airports in the vicinity and their effects are also to be given to a buyer. It can be a local disclosure, or it can be mentioned in the sales contract, if not prescribed by the city or county.

4] Natural Hazards Disclosure

The seller must give notice in writing to a buyer about the property which is in one or more of the following zones:

Mentioning these hazards is necessary because they may put certain limitations on making developments, taking out insurance, or receiving assistance after a disaster. The information regarding whether your property falls within any of these zones is available at local county offices.

These disclosures are made on the Natural Hazard Disclosure Statement (NHDS) which is found in the booklet itself, or the Local Option RETDS depending on the local regulations.

5] Mello-Roos Bonds & Taxes

The Mello-Roos Community Facilities Act authorizes local governments to sell bonds for funding public improvements. For that purpose, several tax assessment districts have been created in the state of California under the Act.

A seller has to provide a notice if their property comes in one of these districts. The notice shall contain the details of special taxes or fixed lien assessments that are collected in installments to secure bonds. These disclosures can be obtained from the local agencies that levy taxes under the Mello-Roos Act.

6] Property Taxes

The seller furnishes a disclosure notice that contains the title ‘Notice of Your Supplemental Property Tax Bill.’ The notice is a set format, which intimates the buyer that he will need to revalue the property from a tax assessor when the ownership changes.

The buyer pays certain supplemental taxes under the title change. These tax bills are sent directly to the buyer, which he must pay to the local tax collector.

7] Ordnance Locations

Federal and State agencies have identified certain areas as ‘Ordnance Locations.’ These areas were used for military training in the past, so there’s a possibility of live ammunition being present in the area.

A seller whose property is located within 1 mile of such areas must notify the buyer before the transfer of title.

8] Window Security Bars

A seller makes a mention of the existence of security bars on windows and whether any safety release mechanism is present on them. This notice is to be made in the Real Estate Transfer Disclosure Statement California.

9] Industrial Uses

Under CCP § 731A, several areas in the state are designated for industrial use. a seller shall notify the buyer if the property falls in such zone, is adjacent to such zone, or is affected by nuisance resulting from use of such zone.

10] Methamphetamine Contamination

The effects of methamphetamine contamination on the property pose a risk to the health of the occupants. If your property has been assessed in the past for methamphetamine contamination, you must provide the disclosure under the California Health & Safety Code, containing the reports of such assessment.

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Additional Disclosures

Apart from the above disclosures, California home sellers also need to disclose whether their property complies with certain federal or state-specific regulations. These disclosures also include notices, guides, or informative pamphlets related to certain aspects of the property. Briefly summarized, these include:

1] Earthquake Guides

The California Seismic Safety Commission has developed a “Homeowner’s Guide to Earthquake Safety.” This guide specifically covers topics like geologic and seismic hazards, structural and non-structural hazards, and tips on mitigating the effects of an earthquake.

A seller provides this disclosure in cases where the property for sale is of conventional light-frame construction built before January 1, 1960. The seller discloses known defects that occurred in the past and repairs that were done on it. Generally, these repairs cover the absence of foundation anchor bolts, unbraced or inappropriately braced perimeter cripple walls or first-story walls, etc.

2] Smoke Detector Statement Of Compliance

The California Health & Safety Code mandates homeowners to install smoke detectors in multiple strategic locations throughout the house. Moreover, the alarm is to be approved and installed as per the State Fire Marshal’s regulations.

For this purpose, California home sellers are required to furnish a written statement implying that their home complies with the safety regulations. Generally, this notice is included in the receipt for the deposit, as an addendum, or as a separate document.

3] Disclosure Regarding Lead-Based Paint Hazards

Lead-based paint has harmful physical effects like causing disabilities, delayed development, or behavior disorders in children. Due to this, it was banned throughout the USA in 1978.

This disclosure applies to all homes built before 1978. Therefore, all American home sellers have to furnish this federal disclosure. Along with the form, the seller also provides a pamphlet prescribed by the Environmental Protection Agency regarding the hazardous effects of lead-based paint.

4] California’s Environmental Hazards Pamphlet

California home sellers must disclose any known environmental hazards, for instance, asbestos, carbon monoxide, formaldehyde, mold, lead, radon, etc. which affect their property. Normally, this is disclosed within the California TDS itself.

Apart from that, sellers are also required to provide a booklet prescribed by California Health & Safety Code titled, ‘Environmental Hazards: A Guide For Homeowners, Buyers, Landlords, and Tenants.’ The booklet instructs about the hazardous effects of these substances as well as what actions are to be taken if found in a home.

Likewise, providing this booklet to the buyer is considered sufficient to warn them against the common environmental hazards that are mentioned in it.

5] Delivery Of Structural Pest Control Inspection & Certification Reports

Although conducting structural pest control inspection is not mandatory for sellers, it can be made so if the sales contract or the buyer demands it.

If an inspection is carried out, a copy of the reports and certification prepared by a registered pest control company shall be provided to the buyer before the transfer of title.

6] Energy Conservation Retrofit & Thermal Insulation Disclosures

The state of California has certain set standards for minimum energy conservation in new constructions. Accordingly, several local governments have imposed certain regulations that mandate energy retrofitting, i.e. modifying or upgrading mechanisms in the home for efficient energy consumption or decreasing energy demand, when selling an existing home.

If your property is regulated by any ordinances, you must disclose its requirements to the buyer as well as whose responsibility it is to comply with them.

7] Foreign Investment in Real Property Tax Act

26 U.S. Code § 1445 requires homeowners who are ‘foreign persons’ to pay 10% of the gross sale price from a house sale. In order to exempt themselves from this tax, California home sellers are required to submit an affidavit affirming their non-foreign nationality and their U.S. taxpayer I.D. number.

Apart from that, sellers also need a qualifying statement from the Internal Revenue Service (IRS) attesting to arrangements that lead to their exemption from ‘foreign person’ tax.

    📝 Note: Tax laws in the U.S. are complicated. Likewise, the above tax is subject to the exemption in several cases, which are regulated by stringent requirements. It is advised to consult the IRS or a tax advisor for more information.

8] Notice & Disclosure To Buyer Of State Withholding On Disposition Of California Real Property

The Franchise Tax Board may require buyers to withhold 31/3 % of the total sales price as tax. Subsequently, this tax amount will be paid to the Franchise Tax Board under certain California real estate transactions.

For that reason, a seller needs to understand the cases where these taxes are applicable or may be exempted, reduced, or deferred. In that case, you can refer to IRS Publication 523, a tax guide for home sellers. If your sales transaction falls within any of those conditions, then you must provide the buyer with a written statement of the amount which is to be withheld from the selling price.

Because US Tax laws can be complex to understand, home sellers are advised to consult the Franchise Tax Board or a qualified tax advisor regarding the tax-related procedures.

9] Controlling Documents and Financial Statements Concerning Common Interest Developments (CID’s)

Any seller who is a member of any common interest development plan, for instance, a condominium project or a community apartment project, shall provide the buyer with a copy of the following documents:

  • Documents governing the association; e.g. articles of incorporation, operating rules, etc.
  • An age restriction not consistent with California Civil Code § 51.3, which deals with accessible housing for senior citizens.
  • Financial documents; e.g. financial statement, operating budget, reserve funding, and many more.
  • Fees and assessments; e.g. unpaid assessments, late charges, cost of collection, etc. in a written statement signed off by an authorized representative of the association.
  • Notice of alleged violation of governing documents sent to the owner in the past.
  • Construction defects; e.g. its details, measures taken to repair it and the state of repairs.
  • Settlement agreement; between the association and developer regarding construction defects, its details, measures taken to repair it, the state of repairs and more.
  • Changes in assessments or fees; approved, but not yet payable.

Thereupon, a seller receives a copy of all the documents within 10 days after making a written request for the same. Some transactions also require a copy of the minutes of previous meetings.

10] Notice Regarding the Advisability of Title Insurance

It is a notice a seller gives the buyer, which advises the buyer to obtain title insurance to protect themselves from liens or encumbrances which may affect their title. Additionally, the buyer acknowledges a receipt of this notice. It is made while closing on an escrow transaction.

11] Certification Regarding Water Heater’s Security Against Earthquake

Firstly, the law mandates home sellers in California to brace, anchor, or strap the water heater in their homes. This is to resist falling due to earthquake motions. Secondly, a seller must certify in writing whether their heater complies with these regulations. This certification can be included with the earthquake safety pamphlet or provided along with California TDS or the sales contract.

12] Locations of Registered Sex Offenders

California disclosure law mandates home sellers to specifically include a clause in real property sales contracts referring to the location of registered sex offenders. The clause must read:

Pursuant to Section 290.46 of the Penal Code, information about specified registered sex offenders is made available to the public via an Internet Web site maintained by the Department of Justice at www.meganslaw.ca.gov. Depending on an offender’s criminal history, this information will include either the address at which the offender resides or the community of residence and ZIP Code in which he or she resides.

» Explore: What is Megan’s Law?

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Who Are Exempted From Providing Seller Disclosures in California?

There are some sales or transfers where the sellers need not submit the California TDS to their buyers or transferees. These are as follows:

Sr. NoExemption
1.Transfers that are made before furnishing public reports under Section 11018.1 of the Business and Professions Code, or made without Section 11010.4 of the Business and Professions Code.
2.Sales that are made due to a court order, for instance, sales arising from the administration of an estate or foreclosure.
3.Transfer from the mortgagor to a mortgagee, or transfers under a foreclosure sale made after default in mortgage, deed, or trust. It can also be made by a mortgagee or beneficiary who has acquired the property in lieu of foreclosure.
4.Where the transferor is an executor of a will, or a fiduciary administering trust, guardianship, or conservatorship.
5.Transfers from one co-owner to one or more co-owners.
6.Any transfer made to a spouse or person/s in lineal line of consanguinity.
7.Where the transfer results from a decree of divorce, legal separation, or settlement agreement between spouses.
8.Transfers administered by a Controller of Unclaimed Property.
9.Any transfers carried out by a collector of a tax-defaulted vacant residential property, or where the property is deeded for taxes to the state, county or public agency under California Revenue & Taxation Code.
10.Where a government entity is a buyer.
11.Transfer of a portion of the property that is not a single-family residential property.
12.A sale for a limited duration.

Exempt Seller Disclosure California

Although some sellers are exempted from providing the real estate transfer disclosure statement California, they do not escape the liability of disclosing material defects.

To address this matter, the California Association of Realtors came up with a standard form. This form covers some of the most crucial disclosures, especially the ones which affect the value of the property adversely.

For instance, topics like methamphetamine contamination or whether the property lies in an industrial zone need to be disclosed in this form.

Penalty For Lying On Seller’s Disclosure Statement California

California real estate disclosure laws mandate home sellers to disclose all ‘material defects’ that their property has. The thorough disclosure process in California covers most of these aspects, but a seller has a duty to disclose a defect even if it’s not already covered in the process.

While defining material defects, the California Court of Appeal in the case of Pearson v. Norton (1964) found that a structure of a property that violates building codes is considered a material defect.

Here are the consequences of failure to disclose real estate California requirements:
Lawsuit for FraudIf a seller lied on a property disclosure statement in California, the buyer can file a suit for fraud by misrepresentation. Likewise, any concealment of a material defect to influence the sale attracts a lawsuit for fraud by omission.

📝 Note: The seller’s intention to defraud the buyer needs to be proven in such cases.
Recovery of DamagesA buyer can claim the costs which he had to make for the repairs on the property. These costs are called damages, which are categorized into compensatory and punitive damages.

📝 Note: Generally, punitive damages are two or three times bigger than regular compensation.
Recission of ContractIn some cases where the material defect causes the buyer huge losses, courts can order equitable relief in the form of a recission of the contract.

Under this, the contract is reversed and the property is transferred back to the seller. The aggrieved party is brought back to a position had the sale not occurred and all the expenses made by the buyer are returned as compensation.
Specific PerformanceThe courts order a seller to repair the damages by himself instead of making the buyer take the effort.
Breach of ContractA buyer can file a lawsuit for breach of contract with intentional misrepresentation. The penalty for lying on the seller’s disclosure includes the cost of repairs along with attorney fees.

» More: Why You Should Hire a Real Estate Attorney
    📝 Editor’s Note: A suit of fraud by misrepresentation or omission can be brought against a seller who intentionally misrepresents a fact that otherwise would have influenced a buyer adversely.

Most Common Mistakes By FSBO Home Sellers In Disclosures

The main object of disclosures in any area is to give clarity and perspective to a buyer. Buyers who are looking for a home usually have certain criteria in mind before searching for a home. Hence, a seller disclosure acts as a bridge to close these doubts, giving buyers a reason to have faith in you and your deal.

  • One of the biggest mistakes a seller can make is not giving disclosures at all. The lack of trust between a buyer and seller can demotivate a buyer from considering your property altogether. Hence, it is suggested that sellers complete all disclosure formalities as soon as possible, even though it may not be legally required in your state.
  • Likewise, sellers also get an option to mark a point as ‘unknown’ in disclosures. This gives you ample opportunities to be honest in your disclosures. Also, marking a certain disclosure clause as ‘unknown’ shifts the burden on a buyer to inspect that particular problem. Hence, don’t make the mistake of lying on your disclosures, as that would count as fraudulent misrepresentation and attract a lawsuit.
  • Most state laws require disclosures to be furnished before closing. As an FSBO seller, it is your duty to provide disclosures as soon as possible, since you do not have a real estate agent to do these things for you.
    ✍️ Pro Tip: Sellers who are selling their house the FSBO way are advised to keep their Disclosure Statement ready before listing on the MLS. It increases your credibility and reliability from a buyer’s perspective, as they get an idea of the property’s condition early on.

» More: How To List On MLS For Sale By Owner Without A Realtor

Tips To Minimize Issues in Disclosure Documents

Review And VerifyThere’s a time allowance (some permit 10 days) to review and verify everything about your Sale & Purchase Agreement—also the square footage, home usage, and marketing.
Ask QuestionsAsk questions when in doubt. This would help you in avoiding future troubles.
Hire A Professional InspectorA professional inspector can help you gather backup information about the property’s condition. You can also opt for a pre-inspection before listing.
Disclose EverythingTo avoid problems in your home disclosure statement disclose everything you know honestly. Even though it’s a minor issue, you must disclose it.
Get A Licensed Agent InvolvedThe best way to avoid disclosure issues is to get a licensed real estate agent. Agents can help you manage and assist you in the process along the way.

» Explore: America’s Top Real Estate Agents
    ✍️ Pro Tip: List Your Property With Houzeo

    One of the best ways to minimize problems in your seller’s disclosure is to Purchase the “Contract to Close Upgrade Package”. A Licensed broker will review your paperwork to make sure it is appropriate. In addition, you should also have the settlement agent review the paperwork so you cover all bases.

    » More: Start your FREE listing NOW!

Final Word: Complexity Of Seller Disclosures California

Level of ComplexityComplex
Is California a Caveat Emptor State? *No
Is California a Non-Disclosure State? **No

*Caveat Emptor Rule means states that it is the buyer’s responsibility to find out if there are major or minor defects with the property. And if he/she does not perform the necessary due diligence to inspect, it’s entirely not the seller’s liability if the property does not meet the expectation.

**In a non-disclosure state, the selling price of a house is not available to the masses on an open source.

While dealing with seller disclosures California comes with its own set of challenges, it also gives sellers sleepless nights if not dealt with properly. This is where Houzeo can help you.

By listing your property with Houzeo, you get access to all forms in electronic format. And that too, for FREE! Houzeo has segregated all the disclosures state-wise so that you don’t have to hunt for California disclosure statement separately.

Check out some of the Houzeo reviews and how it has helped customers around the US.

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Frequently Asked Questions

California real estate forms include which of the following?

California real estate disclosure forms include:
a) Disclosures Upon Transfer of Residential Property
- Termination Right
- Real Estate Transfer Disclosure Statement
- Local Option Real Estate Transfer Disclosure Statement
- Natural Hazards Disclosure
- Mello-Roos Bonds and Taxes
- Property Taxes
- Ordnance Locations
- Window Security Bars
- Industrial Uses
- Methamphetamine Contamination
b) Earthquake Guides
c) Smoke Detector Statement of Compliance
d) California’s Environmental Hazards Pamphlet
e) Delivery of Structural Pest Control Inspection and Certification Reports
f) Energy Conservation Retrofit and Thermal Insulation Disclosures
g) Foreign Investment in Real Property Tax Act
h) Notice and Disclosure to Buyer of State Withholding on Disposition of California Real Property
i) Furnishing Controlling Documents and Financial Statements Concerning Common Interest Developments (CID’s)
j) Notice Regarding the Advisability of Title Insurance
k) Certification Regarding Water Heater’s Security Against Earthquake
l) Database – Locations of Registered Sex Offenders

Who pays for natural hazard zone disclosure report in California?

The seller pays for natural hazard zone disclosure reports.

Why and when do we do disclosures for real estate transactions in California?

The law mandates that seller disclosures must be provided as soon as practicable, before the transfer of title.

The reasons for providing disclosures are threefold:
1] Disclosures help communicate the defects present on the property. They ensure that all the stakeholders involved in the transaction are well aware of the property's history.
2] Once you disclose all the known facts and defects present in the house accurately, you need not worry about the problems that may arise during the inspection.
3] Honesty, accuracy and transparency are of utmost importance when selling your house. Disclosures are a way of achieving all of these and thereby enhancing your credibility.

Is seller disclosure mandatory in California?

Yes. Apart from the sellers exempted by statute, all home sellers must complete necessary disclosure requirements and disclose known material defects.

The sellers exempted by statute are only exempted from providing California TDS. But they are required to disclose known material defects that affect the value of their property adversely.

Can you sell a house with mold in California?

Yes, you can sold a house with mold problem in California. But it is necessary to disclose this material defect in the transfer disclosure statement California, so that the buyer can make an informed decision. Lying about the problem will only attract unnecessary lawsuit in the future.

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