If only selling a home was as simple as selling a car. However, most homes far surpass the investment of a new car, which is why legal agreements bind both parties. In California, the Transfer Disclosure Statement can become the bane of a seller’s existence. Still, it exists to protect both buyer and seller.
Let’s take a look at why it’s essential to complete a Transfer Disclosure Statement before selling your home.
What is a Transfer Disclosure Statement?
The California Transfer Disclosure Statement (TDS) is a legal document completed by home sellers that discloses any issues with the property being sold. Disclosures include any problems that could decrease the home value or pose a health or safety risk.
Most states have similar requirements for disclosure or reporting issues. Still, in California, this document is a legal requirement for every home sale. California Civil Code Section 1102 requires a seller to complete a TDS and provide a copy to the buyer during the contract contingency period.
Buyers have either three days (TDS delivered in-person) or five days (TDS delivered by mail) to cancel their contract based upon items in the disclosures report.
Most importantly, a TDS provides documentation should a buyer decide to sue a seller for non-disclosure. The seller is protected if the document lists the item of buyer concern, as is the seller if the specific issue is not disclosed.
Required by law
While there is not a specific due date for completing a TDS — just that it must be provided during the contract contingency period — sellers must provide one to buyers in a “timely fashion.” Read into that what you will, but the last thing you want to be worrying about is answering hundreds of questions when you should be focusing on buying your new home and packing.
It’s wise to complete your TDS before listing, to eliminate any surprises while your home is under contract. While hiccups may still happen, disclosing any issues with your property at the outset means that buyers can consider all of the information, and ask any questions before entering into a contract. The likelihood of surprises decreases exponentially when all of the information is available from the outset.
What sellers must disclose
The details of a Transfer Disclosure Statement are thorough and all-encompassing. It requires sellers to fill out the forms on their own in handwriting. While real estate agents can explain what the TDS forms ask of sellers, they are not able to complete the legal documents for sellers, nor are they in a position to advise them. If you are unsure whether or not to disclose an issue, always consult with a real estate attorney who can assist you with the legalities involved with your disclosures.
Now to the fun part: what exactly do sellers need to disclose about their home? Any deaths, even natural deaths, must be disclosed if they occurred in the home within three years. Deaths that occurred in the house more than three years before selling do not require disclosure. Still, it’s recommended that they are shared (especially if the death was crime-related). It’s important to remember that buyers may ask for further information regarding any disclosures, and will likely ask how the death occurred if you do disclose, so be prepared to get honest. The only exception to this pertains to AIDS-related deaths, as it is discriminatory in nature.
If chemicals or illegal drugs were grown, processed, or manufactured in your home, you must disclose this. So, if marijuana was grown or a chemical-based drug such as methamphetamine was produced on the premises, you must disclose this as they can pose a severe health hazard.
While you may not wish to, you need to disclose any neighborhood disturbances, such as high-volume traffic or airport traffic overhead. While you likely have legal documentation to include with the deed, you also need to disclose any property encroachments or easements to buyers. If you experience any flooding, drainage, or grading issues, note these and explain in detail within your TDS. Lastly, if there are any co-owned or common areas, such as a driveaway, walkway, or pool, notate this within the paperwork.
What makes up the TDS?
So that you’re familiar with the TDS once it’s in your hands, here’s a line-by-line document breakdown:
Section A: Property Characteristics
In the first section of the TDS, you notate each appliance sold with the home (refrigerator, sprinklers, hot tub, etc.), as well as whether you occupy the residence (versus it being a rental property, etc.). Along with the appliances included, you will note if any of the devices are not working for buyer reference. It’s important to note that this section makes it clear that it is not a warranty for any of the included appliances, just a listing them, and noting if any are not in working condition.
Section B: Malfunctions and Defects
In this section, you will disclose any problems with structural elements in and around your property. Details to include are walkways in need of repair, roof damage, plumbing or electrical concerns, and foundation issues. This part of the document protects buyers from sellers attempting to hide any significant problems with the home that negatively impact its safety and value.
Section C: Special Questions
This final section will catch any items you may have missed in the previous two parts. A list of sixteen questions covers everything from major renovations and additions to specifics about the homeowners association (if applicable). Many details that are important to a buyer may go unnoticed by the sheer fact that you live and function just fine in your home. A natural disaster such as an earthquake or flooding may be a thing of the past, but a potential buyer wants to know if the house has undergone severe damage.
While it will take some time to complete the California Transfer Disclosure Statement, remember that it provides pertinent information up-front so that there are no surprises after your home is under contract. The TDS functions as legal protection for both you and the buyer. When in doubt, disclose. And always seek advice from a real estate attorney if you have questions about the TDS.