When in doubt, disclose – always!
By law, seller’s agents need to conduct their due diligence investigations and promptly disclose all known material facts to buyers. A transfer disclosure statement (TDS), among other disclosures, is required to be made on the sale of any one-to-four unit residential dwelling. Any conditions known to the seller – and their agent – which might negatively affect the value and desirability of the property for a prospective buyer are to be disclosed in the TDS. [See RPI Form 304]
The buyer cannot waive the seller’s delivery of the statutorily-mandated TDS, even when it is handed to the buyer before entering into a purchase agreement for the property. Any attempted waiver, such as an “as is” condition, is unenforceable and void as against public policy.
A property is always sold “as disclosed” in the TDS, never “as is.” “As is” implies a failure to disclose something adverse known to the seller or their agent. In contrast, “as disclosed” is the condition of the property known to the buyer when the seller accepts their purchase agreement offer.
Timely delivery of the TDS
The TDS needs to be delivered to potential buyers as soon as possible – before the buyer and seller enter negotiations. 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 the buyer will later negotiate based on adverse facts that are new to them.
Disclosure of defects and other known conditions in the TDS does not obligate the seller to repair the items mentioned. The buyer may choose to negotiate based on the disclosed facts or simply acknowledge them and move forward with the transactions.
Exceptions to the Transfer Disclosure Statement
The seller is never excused or excluded from disclosing known material facts. All agents involved in the transaction need to and are not 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 a probate, eminent domain or bankruptcy;
- by judicial foreclosure or trustee’s sale;
- on the resale of a 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. [Calif. Civil Code 1102.2]
While the seller may be exempt from using the TDS, the seller’s broker and their agents are never exempt from:
- conducting a competent visual inspection of a one-to-four unit residential property, sold or acquired on behalf of any seller of buyer; and
- disclosing their observations and knowledge about the property on a TDS form or other separate document. [CC §2079; CC §1102.1]
Related Articles:
Transfer Disclosure Statement – The seller’s mandated disclosure of property conditions
Related Videos:
Property is Sold “As Disclosed,” Never “As Is”
As all agents know, every property (thus, every property’s set of defects) is unique. However, keeping track of a myriad of contingencies can be impracticable. Always remember: if you have to ask whether or not something should be disclosed, then it should be disclosed.
This article has been updated and was first published July 2012.
My rule of thumb – as a licensed Broker and an Office Manager of a major Real Estate Company overseeing agent’s transactions – was “when in question about a disclosure, just envision yourself in court, testifying about your expertise and actions during the transaction to the other side’s lawyer, and then decide on what is the right disclosure to make. This generally results in the conclusion, when in doubt, disclose!