Selling a Home? Be Safe Out There. Disclose Everything

When a Buyer makes an offer on a home in Los Angeles they will be filling out a contract called the “California Residential Purchase Agreement and Joint Escrow Instructions”. This contract and any counter offers or amendments associated with it will govern the transaction through escrow to its conclusion.

There are standard disclosures requested from the Seller which must be adhered to within a specific timeline, usually 7 days from contract acceptance. The Seller must disclose every known material fact which may affect the buyer’s decision to purchase the property.  There are exemptions to this if the Seller did not live in the property.

If the property is a condominium or governed by a homeowners association, the Covenant, Conditions, and Restrictions (CC&Rs) together with the budget, minutes and other documents must be delivered to the Buyer. These are notoriously difficult to get promptly from the management companies so it is good practice for the Seller to order them immediately upon contract signature. The Buyer still has 5 days after receipt of those documents to approve them and remove their contingency.

So what are these disclosures?

There are statutory disclosures required that the Seller must provide. These cover items such lead based paint (in homes built prior to 1978), mold issues, the necessity for compliance with the relevant City codes such installation of smoke detectors, low flow toilets, carbon monoxide detectors, etc.  The Buyer must also be provided with a Natural Hazard Disclosure which covers all known conditions in the area of the property, and a Preliminary Title Report.

In addition to these disclosures, and most importantly, the Seller is required to disclose any material defects known to them. The only exemption to this is a Seller who did not live in the property. These disclosures will primarily be included in two forms: the Real Estate Transfer Disclosure Statement (TDS), and the Seller Property Questionnaire (SPQ) which is standard to the contract OR if checked, the Supplemental Contractual and Statutory Disclosure (SSD). The SPQ is the more detailed of the two and encourages the Seller to go into more depth.

So what kinds of things should be disclosed?

  • The death of an occupant on the property. Within the past 3 years is all that is needed to be voluntarily disclosed. However if asked the question, and the Seller has knowledge of a previous death, they must respond truthfully.
  • Any insurance claims against the property within the past 5 years must be disclosed. And even though they will show up on the Title Report, knowledge of any liens against the property must be addressed.
  • If the seller has knowledge of neighborhood nuisances of any kind this must be disclosed. Yes, even your neighbors’ wild parties.
  • Any past defects in the property, whether they have been repaired or not should be disclosed.
  • Any work on the property which was done without the necessary permits. Unless the Seller provides those permits, this is definitely an area where the Buyer needs to conduct their own investigations. Remediating a non-permitted structure or upgrade can be expensive or even impossible.
  • Leaks and mold issues are always on the top of most buyers’ lists. Any knowledge of these should be disclosed, and even though it may have been a long time ago and fixed, it should be addressed.
  • There is one clause that gives the Seller the opportunity to disclose any and all material facts affecting the Property. If a Seller is not sure about something and it is not covered elsewhere this is the time to mention it.

It is the Seller’s duty to DISCLOSE, DISCLOSE, DISCLOSE. The truth will never come back to bite you.

But even though the Seller may disclose a myriad facts, the Buyer should not rely on them. If the Buyer has concerns about any of the disclosures, would like to know that they are accurate, or would like to be sure that nothing was missed then the onus is on them to do their due diligence.

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