The state of California has always been at the forefront of consumer protection laws through the years. Due to this and the costs of real estate in California it is little wonder that the state was one of the first states to abandon a position of buyer beware in real estate transactions.
Any real estate agent in the country can you tell that California is one of the most complex and one that requires a fair amount of disclosure when selling a home. These requirements apply not only to home sellers but also to buyers and real estate agents in residential real estate transactions.
Primary disclosures required under law relate to disclosures by (1) the seller, (2) any real estate broker involved in a transaction, and (3) natural hazard disclosures. The below discusses key disclosures that fall into each group.
Due to the expensive and potentially damaging nature of a buyer doing a full thorough inspection of all elements that might affect a property (electrical, plumbing, HVAC, sprinkling system, foundation, architectural, etc.), the requirements have shifted to sellers having an obligation to disclose material known facts about the property. They do that using a few different forms:
- Transfer Disclosure Statement: The Transfer Disclosure Statement, or TDS, walks through different property attributes such as whether there is a gas or electric water heater (or no water heater) and whether water is from city or private utilities. It also asks a seller if they have made any changes to the property and, if they have, whether they were permitted and/or built in accordance with local building codes.
- Seller Property Questionnaire: The Seller Property Questionnaire, or SPQ, The SPQ requires disclosures for repairs and alteration details, structural changes, home systems and appliance defects, as well as disaster relief and insurance or similar settlements made against the property.
Real Estate Broker Disclosures
After several issues caused by consumers expecting, and agents/brokers failing to provide, expert insights into potential issues related to a property, the California courts have ruled that at a minimum an agent is required to provide a thorough visual inspection of the property. This disclosure, though often done by an agent, is actually the obligation of the broker who is the person whose license the real estate agent operated under. In California, this inspection is done via an Agent Visual Inspection Disclosure or AVID. The AVID does a room by room walk-through of a property to determine what potential issues might exist.
Natural Hazard Disclosure
California is known for its natural hazards such as earthquakes, fires, and floods. However, buying a home that is within a narrow proximity to a fault line, fire zone, high-wind area, or a flood zone without knowing it is in one of these zones could result in someone failing to get proper home insurance or worse, that a hazard occurs and the new property owners are entirely unprepared.
Caveat emptor, or buyer beware, is gone. Today is the era of disclosure. Real estate transactions would never happen at the frequency or the low cost that they do if not for seller disclosures.