Entering into a purchase-sale agreement for the purchase of a new residential property can be stressful for both buyers and sellers. Buyers are often concerned with the possibility of hidden defects or other issues that may negatively impact the property value, as well as the use and enjoyment of their new property. At the same time, sellers may worry that they will be held legally responsible by the buyer for failing to disclose even the smallest defect. Fortunately, failure to disclose laws in California were implemented to protect the buyer from making a bad purchase and the seller from unnecessary lawsuits.
What does a seller need to disclose to a prospective buyer?
In California, under California Civil Code Sec. 1102, sellers are required to disclose certain property defects to potential buyers of the property through a Real Estate Transfer Disclosure Statement (TDS) prior to closing. Sellers may be liable for failing to disclose information if:
- The seller knew about the defect.
- The defect is material (affects the home’s value and/or desirability).
- The seller intentionally made falsely misrepresentations regarding the condition of the property or failed to disclose a known material defect.
Simply stating that a property is being sold ‘as is’ does not release a seller from their obligations to disclose known defects.
If a seller failed to act in good faith or acted negligently in failing to provide the necessary disclosures to a buyer, the buyer may be entitled to monetary damages as well as specific performance, which requires the seller to fix their mistakes. An attorney specializing in real estate law can help determine whether a buyer has a valid non-disclosure claim against a seller.