The legalities required when selling a home in California

When putting your home for sale in San Diego, be mindful of your legal responsibilities as a seller. Taking care of these documents and processes ensures a quick and stress-free sale. It also protects you from any liabilities.

Learn more about your legal responsibilities as a home seller below:

1. Seller disclosure obligations

The following standard disclosure forms provide buyers with important information that may affect their decision to purchase the property or change the amount they’re willing to offer:

Transfer Disclosure Statement (TDS)

Use this form to disclose any known defects that your property has to help buyers make informed decisions.

The TDS covers the following parts of the home:

• Roof
• Ceiling
• Walls
• Floors
• Windows
• Doors
• Insulation
• Driveways
• Sidewalks
• Fences
• Plumbing
• Electric systems
• Appliances
• Foundation

You must also state if any deaths occurred on the property within the last three years. California law stipulates that if a buyer directly asks the seller about any deaths that occurred on the property, the owner cannot lie or hide the information, even if the deaths in question occurred far back in the past.

HIV/AIDS-related deaths are an exception to this rule. These are classified as disabilities under federal law, making disclosure considered discriminatory.

California Natural Hazard Disclosure (NHD) Statement

You must also declare if the property is situated in a hazardous area. This includes properties that are in:

• Designated flood hazard areas

• Areas vulnerable to potential flooding

• High fire hazard severity zones

• Wildland areas with substantial forest fire risks and hazards

• Earthquake fault zones

• Seismic hazard zones

Other important disclosures

Additional disclosure statements that may also be required include those that are relevant to purchase money liens and special study zones. This depends on the location of your transaction and the details defined in the purchase agreement.

As a seller, it is also your responsibility to assure buyers about community safety, particularly involving registered sex offenders. Advise buyers that information about the location of registered sex offenders is accessible via local law enforcement agencies, as well as online.

Submission of disclosure forms

You can get the required forms from your realtor, but you must accomplish them in your own handwriting. The disclosure forms must be supplied to potential buyers as soon as possible, ideally made accessible prior to listing. Failure to comply with these disclosure obligations subjects you to penalties and gives buyers the right to cancel a purchase agreement.

Your realtor will help you determine which information to include in these forms. The general rule is that if you are unsure about something, you’re better off stating it.

2. Title company and title buyer’s insurance

Before you can close the sale, the title company will perform a title search and complete a Preliminary Title Report (PTR) on your property. This report will be used by the title insurance company to prepare the title insurance that will be given to the buyer.

Lenders often include title insurance among the conditions for loan approval.

In many cases, the seller and buyer agree on the title and title insurance companies they will use for the transaction. It’s common practice for buyers to recommend a company when making their initial offer. Under the Real Estate Settlement Procedures Act (RESPA), sellers are prohibited from requiring buyers to use a specific title insurance company as a condition of the sale.

In California, sellers and buyers can negotiate who pays for title insurance, but customs vary depending on the location. In southern California, for instance, it is usually the seller who pays. In some cases, the buyer and seller split the cost.

3. Escrow services

During the escrow stage, the buyer deposits earnest money, while the seller does the same with the deed. These items are put on hold until both parties fulfill all contingencies detailed in the purchase agreement.

In southern California, escrow services are typically rendered by a separate escrow company, but sellers and buyers can negotiate whether to use the title company for escrow purposes as in the northern parts of the state. Responsibility over the escrow fees may also be negotiated. However, like title insurance, RESPA forbids sellers from requiring the buyer to use of a specific escrow company.

4. Transfer tax

When you transfer the property to the buyer, you must file documents at the county recorder’s office to indicate that the property has changed hands. The county will then impose a transfer tax, a special tax levied on real estate sales.

You can negotiate with the buyer as to who pays this tax, although it is customary for the seller to absorb the cost in southern California.