Failure to Disclose in California Real Estate Contract

In real estate sales, there is a legal duty for sellers to disclose important information about the property. If a seller does not disclose any issues or known defects that would make the property less appealing to buyers or real estate agents, then the buyer may file a lawsuit against the seller.

When an owner sells a property “AS-IS” without disclosing known defects to the seller, it is fraud.

Disclosing real estate transaction information is essential and knowing methods to avoid any significant worries is equally as important.

Why is disclosure in real estate transactions important?

California requires a need for transparency when it comes to real estate. Until the current laws were created, a person would buy real estate without receiving disclosure from the seller about the property’s condition. Buyers were at risk of purchasing property that needed repairs or would soon require maintenance. Therefore, Californian authorities issued a law that prohibited sellers from omitting critical information to buyers before transactions are made.

Sellers also need to talk about the neighborhood or any hidden factor that will have a negative impact on the property. Sellers cannot depend on the diligence of buyers as an excuse to withhold information.

Rea Estate Transfer Disclosure Statement

The Transfer Disclosure Statement is a mandatory document that the seller needs to share with the buyer. This is a comprehensive document which needs to be provided to the buyer before the transaction is closed. The information has to be as detailed as possible and include all the downsides of the property. Agents and sellers typically complete this statement when they are handling the home warranty offers and home inspections.

Lacking a TDS allows a buyer to cancel the contract. However, when a TDS is provided, the buyer has 3 days in total to cancel the contract. If the TDS is offered via mail, then the buyer will have up to 5 days. This process encourages property buyers to take their time with transactions. Both parties will benefit when a seller sends the buyer a TDS.

Full Disclosure in Real Estate Transactions

Real estate agents and sellers need to have full disclosure statements outlining their avoidance of deceit, misrepresentation, or fraud. This disclosure benefits agents and sellers because trust draws buyers and positively influences business.

What kind of issues need to be shared in the Transfer Disclosure Statement?

The TDS will typically include a wide range of topics. For example, information about plumbing issues or foundation cracks are a couple topics that may be included in the document. Additionally, it will detail which appliances are included in the transaction and if they are functioning.

The TDS also requires that property damages, improvements or additions, are disclosed and if there are mildew or mold problems. Surrounding odors or noises in the neighborhood should also be noted. Additionally, sellers should disclose if there was a death on the property within the past 3 years. These are a few examples to show that the TDS is meant to be specific.

How can a buyer take action in case there’s a failure to disclose from the seller or their agent?

Sellers are held accountable for the failure to disclose only if the buyer inspected the property before purchase. Consequently, a buyer needs to know what the issues are and where. The buyer also is responsible for proving the seller’s failure to disclose that information.

If a warranty or home inspection exists, that still will not release the seller from liabilities. They still need to talk about all the property damages or issues, otherwise the buyer can make them liable via the failure to disclose.

When this issue appears for buyers, they should find a real estate litigation attorney. Action should be taken as soon as possible before the statute of limitations expires. The statute of limitations is a time limit following an incident in which someone is allowed to submit a claim. In other words, people lose their right to sue when the statute of limitations expires.

Sellers and real estate agents owe the buyer a duty of care. Agents are held as accountable as sellers and if agents breach their duty of care, they will receive similar penalties as those of sellers.

How are money damages handled?

If there are damages, they will usually be coming with a financial penalty. The seller will have to pay the amount the court deems necessary for the buyer to repair the issue(s). Or the seller may have to pay the difference in property value, depending on the situation. Only an excellent real estate litigation lawyer can help handle and manage this case at a professional level.

Usually damages are split into 3 main categories. First, there are the compensatory damages that outline the expense that the buyer has in order to repair the issue. It also reflects the decrease that the property value has due to the defect that was not shared.

And then there are punitive damages. In this situation, the attorney’s task is to prove to the court that the agent or seller acted with malice as they tried to conceal that defect. These are violations and violators will have to be punished according to the law. Only the court determines appropriate sanctions.

Lastly, you have the rescission damages. This usually appears in just a minimal number of cases. But the buyer has the opportunity to rescind the contract. The seller is forced to take the property back and return all the amount. Simply put, the entire transaction is canceled, which can happen when there are multiple omitted details of a property.

The California Bureau of Real Estate provides sellers with the Transfer Disclosure Statement. This is an opportunity for sellers to share all the information about their marketed property. Any failure to be specific and explicit will come with severe penalties.

What type of issues tend not to be disclosed?

Before current laws, one of the most common omitted detail in California was earthquake information. Sharing all seismic issues surrounding a property is nearly unavoidable since geologists have created seismic maps for the state. This information can be accessed online to help sellers fill out their TDS.

Consult a professional real estate attorney for the best insight

There are a multitude of seller disclosure requirements valid under the California law. A vetted professional with experience in the industry can make this process simple. This article only scrapes the surface when it comes to these laws. Legal professionals will help to eliminate any issues that sellers might have and guard sellers from legal repercussions.

Buyers should also have a legal representative, especially if they believe that the TDS was not appropriately shared or information was missing. We recommend working closely with a lawyer regardless of which side of the transaction you may have been on. Ensuring that all details are disclosed can be overwhelming, but working with an excellent real estate lawyer helps to make the process simple.