There are a number of things which are related to the purchase and sale of real estate which require the professional guidance of those other than your Realtor, namely a legal or tax professional.  This sometimes surprises consumers.  Once I was discussing one of these areas with a prospective client and she felt quite frustrated and exclaimed, “you know the answer, you just won’t tell me!”  That was many years ago, but I’ve never forgotten it.  Many Silicon Valley home buyers and home sellers assume that they’ll never need to talk to a tax or legal professional, and if advised to do so, may balk.

So let’s talk about it.

In other states, such as New York, attorneys are very involved in real estate transactions. Here in California, though, that’s not the case most of the time.  We call on CPAs and lawyers when there’s a problem or a question which is beyond the real estate licensee’s scope.  I’ll provide a few examples.

Holding Title: Probably the most frequent question I get that I’m not allowed (or qualified) to answer is about how people should hold title when buying a home.  The purchase agreements we use (both CAR and PRDS) lay it out best and puts it in bold so that consumers don’t miss it:

“THE MANNER OF TAKING TITLE MAY HAVE SIGNIFICANT LEGAL AND TAX CONSEQUENCES. CONSULT AN APPROPRIATE PROFESSIONAL.” (newest revision of the CAR contract, April 2010)

Most title companies have a nifty little chart that summarizes the pros and cons of the various ways in which people can hold title.  But neither the escrow officer nor the real estate agent can tell you what’s best for you.  We know what’s most common, but that doesn’t mean it is best for you and your particular set of circumstances.  So talk to a CPA or talk to a lawyer (or both) if you do your research and are at all unsure of what to choose! (Old Republic Title has a summary of the most common ways to hold title in a downloadable pdf file, which you can access via this link.)
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A colleague of mine sometimes asks me to help teach a course he offers on Real Estate Practice (one of the requirements for getting a real estate license) at West Valley College in Saratoga.   He’s been giving this weekly class for a few years now,  and several times I’ve come in to instruct on the broad topic of disclosure (or “disclosures”) for the 2-3 hour session.  It’s very interesting and a fun topic to for me cover because it reaches into some uncommon, yet critically important, areas of discussion in real estate.

What is “disclosure”?

Disclosure is affirmatively offering information that a the other party in a real estate transaction (and the other party’s agent) would want or need to know to make an informed decision on the realty purchase or sale. Often, this information is not easily apparent.  Most of the time, disclosure refers to the seller’s obligation to disclose in particular.  That will be our focus in this post: the seller’s disclosures.

The sellers obligation to disclose is not the same everywhere.

Disclosure laws and practices vary from state to state, both in terms of what must be disclosed and, sometimes, what must not be disclosed. Sometimes it’s a “don’t ask, don’t tell” situation. My comments here refer to the practice in California, which may be different from other states. 

Silicon Valley has varied issues which must be disclosed. Some of them are regional (rather than particular to one home in particular). Some of what must be disclosed is a “natural hazard” and some is an “environmental hazard”.  Other issues might not be hazardous, but instead a nuisance.

Next, find some examples of regional things in the Santa Clara Valley that might be disclosed. In the south county areas of Morgan Hill and Gilroy, disclosure issues will include the farming and crop dusting. In some of the newer, downtown San Jose loft communities, there will be disclosure about the proximity of trains and their late-night runs nearby (horns blaring).  In Cupertino, Los Gatos, Monte Sereno, Saratoga, Almaden Valley, and may areas near hills, there may be disclosures about high water tables, water runoff, and damp crawl spaces.  Remote areas all around Santa Clara County may report a requirement to clear brush within so many feet of structures for fire safety.

Throughout Silicon Valley, we have some constants that should be disclosed. Issues here that the seller needs to tell the buyer include the fact that sometimes we have drought years and cannot water our lawns when we want.  Also, we have expansive clay soils and that is important to know regarding proper grading – do it wrong and your foundation may suffer.  Earthquake fault zones and other natural hazard zones also must be disclosed to buyers. (You would want to know if you were buying a home on the San Andreas or Hayward Fault, wouldn’t you?) Forms and ordered reports do address most of these issues, luckily!

Forms are a big help, but they have limits. 

There are forms – lots and lots of forms, particularly when buying or selling a home in Santa Clara County or Silicon Valley – that can help with the obliation to disclose. But what has to be disclosed isn’t necessarily written on the form. The form is just an aid to making that full disclosure.

How does a seller know when something must be disclosed?
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