Property selling

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Did you know that home sellers in San Francisco have a legal duty to disclose certain issues to prospective home buyers? Under California real estate law, sellers must inform buyers of serious issues that impact a home’s valuation. However, that’s not always what happens — especially in highly competitive real estate markets like California’s Bay Area.

The reality is that too many homeowners move into their new dwellings only to find serious, sometimes devastating, issues with their new purchase. Luckily, they do have legal recourse. If a homeowner discovers substantial, undisclosed issues with their home purchase, they may be eligible to pursue legal action against the seller.

This article will explore the buyer’s responsibilities prior to the home sale, the seller’s disclosure requirements, important disclosure exemptions, and how an experienced California real estate attorney can provide invaluable assistance in your pursuit of compensation.

Property Inspection Responsibilities of the Buyer

Under California Civil Code 2079.5, buyers have “a duty to exercise reasonable care” when assessing issues in a home. However, Civil Code 2079.5 only applies to “facts which are known to or within the diligent attention and observation of the buyer.”

In other words, buyers are only responsible for searching out obvious issues. If you failed to notice an issue that the seller intentionally hid (painting over a moldy wall, for example), you may be eligible to pursue legal action. Although California law does not require buyers to hire a home inspector before purchasing a home, buying a property without conducting a home inspection may make it more difficult to sue a seller for non-disclosure.

It’s important to note that home inspectors do not need licenses in California, and anyone can call themself a home inspector — even if they lack formal training. That’s why you need to choose a certified home inspector that has passed the National Home Inspector’s Exam (NHIE).

Although buyers carry the largest burden when it comes to recognizing obvious home issues before completing the purchase, real estate agents also have responsibilities. California Civil Codes 2079-2079.6 requires realtors to visually inspect homes and to inform you of issues they uncover.

What Do Sellers Need to Disclose?

According to California Civil Code 1102.4, sellers are required to disclose various home issues and known defects to prospective buyers through a Real Estate Transfer Disclosure Statement (TDS). When filling out the TDS, the seller must report the conditions of certain items and appliances, as well as any known home defects and structural issues, including the following:

  • Defective items and appliances. Sellers have an obligation to inform a buyer about issues related to the dishwasher, alarms, septic tank, water heater, gas supply, oven, air conditioning, sump pump, pool, well, gutters, and more.
  • Structural issues. The TDS also requires sellers to reveal structural issues and material defects in the interior walls, ceilings, floors, exterior walls, insulation, roof, windows, doors, foundation, slab, driveway, sidewalk, fences, electrical systems, plumbing, and more. This also includes issues such as water damage and termite infestation.

In Section C of the TDS, sellers are asked to reveal the presence of any known toxins, including asbestos, lead-based paint, contaminated soil, radon gas, and others. Under California Health and Safety Code 25400.10, sellers must also disclose any known methamphetamine contamination or if past occupants used the property as a methamphetamine laboratory. 

California sellers must also inform buyers if a property exists in an area that is especially prone to certain types of natural disasters. Here are a few examples:

  • California Government Code 8589.3 requires a seller to disclose whether their property is in a “special flood hazard area.”
  • Under California Government Code 8589.4, sellers must inform buyers if their property lies in a potential flood area or if it would be affected by the failure of a nearby dam.
  • According to California Government Code 51183.5, Californians must also inform buyers if the property is in a “high fire severity zone” or on a “designated wildland area” with a high risk of forest fires.
  • California Public Resources Code 2621.9 requires sellers to inform the buyer if the property lies in an “earthquake fault zone,” which are especially vulnerable to earthquake damage, or in a seismic hazard zone that frequently experiences tremors and landslides.

If a seller neglects to reveal any of the above-mentioned issues or hides them intentionally, the buyer may be eligible to sue the seller for non-disclosure.

Suing the Seller for Non-Disclosure

Under California’s disclosure laws, buyers can pursue compensation for damages related to a seller’s non-disclosure. According to California Civil Code 1102.13, a seller who “willfully or negligently violates or fails to perform any duty prescribed by any provision of this article,” is considered “liable in the amount of actual damages” the buyer suffers.

In other words, a seller is responsible for the buyer’s losses, the extent of which depends on whether or not they decide to keep the home. If the buyer does choose to keep the home, the seller must pay for the necessary repairs. Sellers may also be forced to pay back some of the buyer’s money if the property’s value was significantly less than the price. Or, in some cases, sellers are ordered to take back the property and pay back the buyer’s money.

Ultimately, the compensation available to a buyer will depend on their specific circumstances and losses. It’s important to know that not all property purchases are subject to disclosure requirements, meaning that buyers cannot sue for non-disclosure. According to California Civil Code 1102, the following real estate transactions may be exempt from disclosure requirements:

  • Certain subdivisions
  • Foreclosures
  • Court-ordered transfers
  • Transfers in guardianships
  • Transfers in conservatorships
  • Transfers through a decedent’s estate
  • Transfers to a spouse
  • Transfers during divorce
  • Transfers between co-owners
  • Transfers by the State Controller
  • Transfers after failure to pay taxes
  • Transfers involving government entities

Even if your transaction isn’t listed here, you may lose your ability to pursue legal action if you exceed the statute of limitations. In California, buyers have three years after discovering the issue to pursue legal action, after which they are typically ineligible to sue.

Estavillo Law Group: Trusted Real Estate Attorneys in San Francisco

Buying a home is the largest purchase most people will ever make. In a highly competitive real estate market like the Bay Area, it’s critical that buyers who are misled by sellers have access to legal recourse. If you purchased a home only to discover serious issues you weren’t informed about, our law firm may be able to help you sue the seller for non-disclosure.

Ready to explore your legal options? Contact the Estavillo Law Group to schedule a consultation with a top-quality real estate attorney today.