Required Disclosures When Selling

There are certain statutory disclosures including local ordinances and federal laws that a realtor must comply with and provide to the buyer, subject to certain exemptions. These disclosures are required in connection with the sale, transfer or exchange, lease with option to purchase, and ground lease of residential real estate. The following is a highlight of those disclosures:

Transfer Disclosure Statement Exempt Transactions
The Seller and all real estate agents involved in the real estate sale, transfer or exchange of 1-4 units of residential real estate must complete a transfer disclosure statement, and deliver it to the buyer. The purpose of the statement is for the seller and all Realtors involved in the transaction to disclose any material facts or defects known about the property that might influence the buyer's decision to purchase the property. It is always best to over disclose. It will help keep everyone out of court.

However, there are certain exempt transactions when a transfer disclosure statement is not required. The following is a list of those exempt transaction under California Civil Code Section 1102:

o The sale of new homes as part of a subdivision project where a public report must be delivered to the purchaser or a public report is not required. If the new homes are sold through a real estate broker and not a developer, then the real estate broker has a duty to disclose material facts which might affect the value, desirability and use of the property.
o Foreclosures
o Court ordered transfers or sales.
o Transfers by a fiduciary of a decedent's estate, a guardianship, conservator-ship, or trust, except in the case where the trustee is a former owner of the property.
o Transfers to a spouse or to children.
o Transfers resulting from a judgment of dissolution of marriage, a legal separation, or from a property settlement agreement in connection with dissolution of marriage.
o Transfers from one co-owner to another.
o Transfers by the State Controller for unclaimed property.
o Transfers resulting from failure to pay taxes.
o Transfers to or from any governmental entity.

There are two thoughts on when you should deliver the transfer disclosure statement. In order to avoid your buyer cancelling the contract after execution, you may want to give the buyer a copy of the transfer disclosure statement at the time you are negotiating the purchase and sale agreement. Other realtors suggest that the seller deliver the transfer disclosure statement at the physical inspection.