Question: Can I list a property “as is” in California?
Answer: No, properties may not be listed “as is.” Rather, properties as listed as disclosed, a difference more significant than just semantics.
For many agents, “as is” has become synonymous with “no disclosure required.” In fact, the transfer disclosure statement (TDS) is statutorily required in California and cannot be waived by the buyer. Any attempted waiver, such as the use of an “as-is” clause in the purchase agreement, is unenforceable by public policy. [See RPI Form 304]
“As is” implies a failure to disclose something adverse known to the seller or their agent, a prohibited activity. In contrast, “as disclosed” is the condition of the property as known by the buyer when the seller accepts their purchase agreement offer. [Calif. Civil Code §1102.1(a)]
The seller is never excused or excluded from disclosing known material facts, nor are any of the agents involved in the transaction excused from performing their due diligence and visual inspections.
However, transactions which exempt the seller from delivering the statutory TDS form to a buyer include those occurring:
- by court order, such as probate, eminent domain or bankruptcy;
- by judicial foreclosure or trustee’s sale;
- on the resale of real estate owned (REO) property acquired by a lender on a deed-in-lieu of foreclosure, or by foreclosure;
- from co-owner to co-owner;
- from parent to child;
- from spouse to spouse, including property settlements resulting from a dissolution of marriage;
- by tax sale;
- by reversion of unclaimed property to the state; and
- from or to any government agency. [CC §1102.2]
But whether or not the seller is exempt from using the TDS, the seller’s broker and their agents are never exempt from:
- conducting a visual inspection of a one-to-four unit residential property, sold or acquired on behalf of any seller or buyer; and
- disclosing their observations and knowledge about the property on a TDS form or other separate document. [CC §2079; CC §1102.1]
Timely delivery of the TDS
When preparing the TDS, the seller sets forth any known or suspected property defects.
Defects to be disclosed in the TDS include any conditions known to the seller which might negatively affect the value and desirability of the property for a prospective buyer, even though they may not be an item listed on the TDS. Thus, disclosures to the buyer are not limited to the conditions preprinted for comment on the form. [CC §1102.8]
It’s best to deliver the TDS to potential buyers as soon as possible — before the buyer and seller enter into negotiations. This is for two reasons. Delivering the TDS as soon as possible:
- helps narrow the field of potential buyers to those who are truly serious about buying, even knowing all disclosed facts; and
- decreases the likelihood that the buyer will later negotiate based on adverse facts that are new to them.
Disclosure of defects and other known conditions do not obligate the seller to repair the items mentioned in the TDS. The buyer may choose to negotiate based on the disclosed facts, or they may simply acknowledge them and move forward with the transaction. However, when material facts are discovered, say, during the home inspection, the buyer is more likely to negotiate with the seller for repairs, seller concessions or a lower price.
Delivering a thoroughly completed TDS to the homebuyer isn’t only beneficial to the seller’s bottom line. It also helps protect their brokers from potential liabilities.
The failure of the seller or any of the agents involved to deliver the seller’s TDS to the buyer does not invalidate a sales transaction once it has closed. However, the seller and the seller’s broker are both liable for the actual monetary losses incurred by the buyer due to an undisclosed defect known to them — or unknown to them due to their negligence — at the time the offer was accepted by the seller. [CC §1102.13]
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