“When in doubt, disclose” is the advice that real estate and legal professionals use as a guiding principal in home sales. And yet many sellers forget or miss things that should be told to the buyer, and some listing agents are a bit sloppy in reviewing their clients’ disclosure paperwork. It is not uncommon to see questions unanswered or only partially answered. The home owner may presume that if the disclosure paperwork was done wrong, the Realtor hired to help market and sell the home will catch it. Would that it were so, but too often, that is not the case.
To avoid problems later, whether small or big, it is best to be thorough and careful while making your disclosure.
Small problems are created by seller (and listing broker) omissions when the paperwork gets kicked back for clarification or to complete the needed response. Bigger problems are forged when a sale is nearly closed and a new disclosure is made – introducing a brand new 3 day “right of rescission” for the home buyer. Worse yet is something substantial which is only brought to light after the close of escrow. At that point, it’s not an inconvenience, it risks being costly and time consuming to resolve it.
The State of California requires that the Transfer Disclosure Statement or TDS be filled out in most realty transactions. The intention of the form is to help you, the property owner, to disclose anything materially impacting value or desirability. That’s a tall order to fill, so other forms have been created to supplement the TDS, which has pretty much become Step #1 for disclosing defects and other issues to buyers.
What kind of things are often skipped in the real estate disclosure paperwork?
On the TDS, a very common error involves the question as to whether the property has any shared features with other properties. Almost always, this answer is “yes” because there’s a fence sitting on a property line (or in the case of a condo, a common wall or at least common HOA facilities). Some sellers think that if they respond yes to anything, it’s a problem, so just check no, no, no. And many of the agents working with them don’t catch it.
Another common mistake is to answer “yes” but not explain further. Often a question will broach a broad subject. In the question about shared features, the question specifies walls, fences, and driveways – so if the owner marks yes, it needs to be clear which of these applies, or if it’s something else.
There are two other disclosures that sellers complete, the Seller Property Questionnaire (SPQ on the CAR forms, used in most of the San Jose area) and the Supplemental Seller’s Checklist (SSC on the PRDS set of forms, which is commonly used in Silicon Valley between Los Gatos and San Bruno). Both ask about modifications to the property (PRDS is far more thorough on that subject). Recently I showed a home that was almost completely remodeled in recent years, but when asked if the home had been modified in any way, the seller answered “no”. And the listing agent did not catch it.
Why an incomplete TDS is bad for seller
If a Transfer Disclosure Dtatement or TDS isn’t completed, the buyer gets an automated 3 day right of rescission when it is completed and delivered. Miss a box or an explanation? You’re at risk, Mr. or Ms. Seller, of giving the buyer(s) a new 3 day contingency.
Beware of under-disclosing. If you have had 6 repairs on a leaking deck over 6 years and it seems to leak after each repair, you don’t want to say simply that “the deck was leaking but repaired”. The new owners will find out, eventually, that you had what appeared to be an unfixable problem. It will not go down well.
It’s important for the home owner to really take time in thoroughly filling out this paperwork. Non-disclosure, or under-disclosure, by sellers to buyers is the #1 reason for real estate lawsuits.
It is also extremely important for home buyers to thoroughly review the disclosure paperwork and to look for any hints of further issues or red flags. Often the seller makes mistakes quite unintentionally due to rushing or sloppiness. But you do want to catch it if that happens. Ask questions. Look at the property carefully – you may see something that the listing agent and home seller missed completely. Investigate.
For more information, please also read:
What Do You Need to Know About Disclosures when Buying or Selling a Home in California?