Selling a House in California? Get to Know the Rigorous Transfer Disclosure Statement

What does California’s Transfer Disclosure Statement require sellers to disclose?

Both Tipton and Launay agree that one of the more significant disclosures is whether or not anyone has died in the home. “That’s probably the one that people get the creepiest about,” Tipton said.

California’s law is unique in that any deaths — including natural ones — in the past three years must be disclosed. That’s according to California Civil Code Section 1710.2, which also states that a seller need not disclose a death that occurred on the property if it occurred outside the three-year time frame.

However, there is one exception: death disclosure due to AIDS is considered discriminatory and cannot be done even if it occurred within the three-year time frame. This is true in every state per the Department of Housing and Urban Development’s fair housing laws.

Tipton warns sellers to prepare themselves: “There’s a lot of questions,” he said. “If they answer yes, they want (you) to give a short explanation as to why.”

No extra documentation is required up front with these disclosures. However, if after a buyer looks over the disclosure the buyer wants more information, he or she can request it at that time.

“The buyers can dive as deep as they want and ask as many questions (as they need),” Tipton said. “I’m sure in the past I’ve had a sale fall through because of transfer disclosure issues. It’s pretty easy to get out if someone gets cold feet.”

Breaking down the contents of the California Transfer Disclosure Statement

Now that you’re ready to fill out the TDS, let’s break it down into manageable chunks. It consists of:

Section A of the Transfer Disclosure Statement: Property Characteristics

Here a seller must indicate whether he or she is occupying the property, along with the specific appliances being sold along with the home.

This list is fairly exhaustive and includes kitchen range, dishwasher, central heating/air conditioning, sprinklers, and hot tub.

It also comes with the proviso that the form is not a warranty, but it is a reliable source of information for the buyer to trust that the seller has disclosed any items not in operating condition. It goes on to clarify that the representations are that of the seller, not of the agent(s), if any, and is not part of the buyer-seller contract.

Section B of the Transfer Disclosure Statement: Malfunctions and Defects

Here the seller must answer whether he or she is aware of any significant malfunctions or defects in various structural components including:

• Sidewalks
• Walls/fences
• Electrical systems
• Insulation
• Windows
• Interior walls
• Roofs
• Driveways
• Ceilings
• Floors
• Doors
• Exterior walls
• Foundation
• Slab(s)
• Plumbing/sewers/septics

This is intended to cut down on a seller attempting to cover up the home’s defects.

“Many homeowners really either don’t know, or they go into denial and they figure, I can function in my house (as it is) but what the buyers want to know is … there’s a big scratch on the window, is there something you did to the deck to make it look bigger than it is?” Launay said. “(These are) cosmetic repairs as opposed to substantive repairs so that the house looks better than it really is. It’s to make the house look good for a sale and is less focused on the inherent problems.”

Section C of the Transfer Disclosure Statement: Special Questions

This is a lengthy list of 16 yes-or-no questions designed as somewhat of a catch-all to cover what may not already have been addressed in Sections A and B. The seller is requested to indicate whether he or she is aware of elements such as:

• Room additions or modifications to the property
• Major damage to the property from fire, earthquakes, floods or landslides
• A homeowner’s association that has any authority over the property
• Any notices of abatement or citations against the property
• Fill, compacted or otherwise, on the property or any portion thereof

Common mistakes sellers make in completing the TDS

Completing the Transfer Disclosure Statement (TDS) can be a straightforward process, but sellers often make mistakes that can lead to legal or financial complications. Here are some of the most common errors and how to avoid them:

1. Omitting Known Issues: Sellers sometimes fail to disclose known problems, such as roof leaks, past water damage, or foundation cracks, believing that minor or previously repaired issues don’t need to be mentioned. California law requires full transparency, and even repaired issues must be disclosed.
2. Guessing Instead of Confirming Details: In some cases, sellers guess about the condition of systems like plumbing, electrical, or HVAC rather than confirming their status. Providing incorrect information can lead to disputes if problems are discovered post-sale.
3. Ignoring Third-Party Work: Sellers may forget to disclose work done by contractors or repairs made without permits. Even if the work is complete, its history must be included in the TDS.
4. Leaving Sections Blank: Skipping questions or leaving parts of the TDS incomplete can give buyers grounds to terminate the contract or claim non-compliance. It’s crucial to answer every question fully and accurately.
5. Underestimating the Buyer’s Right to Negotiate: Sellers sometimes assume minor issues won’t matter, only to face renegotiation or requests for concessions from buyers later. A thorough and honest disclosure helps set accurate buyer expectations upfront.

By taking the time to complete the TDS meticulously and consulting with real estate professionals when needed, sellers can avoid these pitfalls and ensure a smoother transaction.

How the TDS differs for different property types

The requirements for completing a Transfer Disclosure Statement (TDS) can vary depending on the type of property being sold. Here’s how these differences play out:

1. Residential Properties: For most residential transactions, the TDS must comprehensively disclose any material defects or issues. Sellers of single-family homes and multi-unit properties up to four units are typically required to complete the full TDS.
2. Commercial Properties: Commercial properties are often exempt from the TDS requirement, as the rules generally apply only to residential transactions. However, buyers and sellers may still agree to voluntary disclosures depending on the deal’s terms.
3. Exempt Property Transfers: Certain transfers, such as those involving probate, foreclosure sales, or transfers to family members, may be exempt from providing a TDS. However, sellers in these situations are still required to disclose known material facts that could affect the property’s value.
4. Condominiums: In addition to the TDS, condominium sellers must provide details about the homeowners’ association (HOA), including fees, restrictions, and any pending assessments. The HOA’s financial health is also a key disclosure point.
5. Vacant Land: While not explicitly covered by TDS requirements, sellers of vacant land may still need to disclose information about easements, zoning issues, or potential environmental hazards.

Understanding the specific disclosure requirements for your property type ensures compliance with the law and fosters trust with potential buyers.

What other notable disclosures are required in the transfer of California real estate?

The California Transfer Disclosure Form has a section detailing “coordination with other disclosure forms.”

Specifically, it states: “This Real Estate Transfer Disclosure Statement is made pursuant to Section 1102 of the Civil Code. Other statutes require disclosures, depending upon the details of the particular real estate transaction.”

Other legally required disclosures include the Natural Hazard Disclosure Report/Statement that, according to the TDS, “may include airport annoyances, earthquake, fire, flood, or special assessment information, have or will be made in connection with this real estate transfer, and are intended to satisfy the disclosure obligations on this form, where the subject matter is the same.”

Other disclosure forms that are frequently listed here include:

• Agent’s Inspection Disclosure Form, which is based on “a reasonably competent and diligent visual inspection of the accessible areas of the property.”
• Local Option Real Estate Transfer Disclosure Statement, which provides specific information about the neighborhood or community in which the property is located.
• Notice Regarding the Advisability of Title Insurance, in which both buyer and seller acknowledge a transaction in which no title insurance is to be issued.

Be sure to check out HomeLight’s article on required disclosures when selling one’s home in any state. Addressed here are:

• The seller’s disclosure form
• Why document disclosures matter
• What must be disclosed when selling a home

Anything else sellers should know about the TDS?

While California’s TDS is particularly rigorous, “It’s a very litigious state,” says Tipton. “If someone could be sued for something, I’m sure they have a question about it on the disclosure statement.”

While your agent may not be legally allowed to fill out these forms for you, they can advise you on what must be submitted in line with your individual sale. This is one of many reasons that selling your home with agent representation is preferable.

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