What Is a California Transfer Disclosure Statement?
A transfer disclosure statement (TDS) is required by California law in section 1102 of the California Civil Code. This law requires that every residential seller complete a TDS for the buyer. This document is one of the seller disclosures that buyers receive during their contract contingency period. The purpose of the TDS is to let a buyer know of major defects in a property as required by California law.
If you need help preparing a transfer disclosure statement or have further questions, please consult a real estate lawyer. Real estate agents cannot provide legal advice.
Importance of the Transfer Disclosure Statement
This multi-page document is often used as supporting evidence in court when a buyer decides to sue a seller for non-disclosure. That is why it's very important that sellers fill it out correctly and disclose pertinent information. The information contained in the document could affect the buyer's decision to move forward with the purchase.
Part I of the California Disclosures in Real Estate form is for the transfer and financing of California property and contains four sections.
- Disclosures from a seller
- Requirements for the real estate agent
- Required with financing
- Relates to new residential subdivisions.
Part II of the California form is the disclosures for a business property transfer. Each section of the form contains several items that must be completed.
Most of the form is self-explanatory, but there are a few tricky areas that some real estate agents do not fully understand. First, this form must be completed in the seller's handwriting. An agent cannot complete this form for a seller under any circumstance. If you are unable to fill it out, ask a close relative to do it for you, but do not ask your agent.
The buyer has three days after a new or amended disclosure statement is delivered to them to back out of any deal or offer. If you mail the statement, the buyer has five days in which they can terminate the agreement.
Date of the Disclosure
This is the date on which sellers complete the disclosure. If something changes between the date the TDS is completed, and the property sells, prudent sellers will update the transfer disclosure statement.
Additional Disclosures and Occupancy
Sellers may want to make the buyer's future home inspection part of this disclosure by checking the appropriate box. In addition, they may include other inspections such as pest reports part of the form.
Sellers should indicate whether they are presently living in the property.
This part of the form will deal with the systems, appliances, and other items contained in the home and meant to convey with the structure. It is broken into several subsections with alphabetical designations.
The main thing you need to know about the transfer disclosure statement is that sellers are not warranting the condition of the home. The seller is simply disclosing its condition. Seller's subsection A is read across, not down, because some items to the right are associated with item to the left. This section asks whether the home has a range, dishwasher, smoke detectors, rain gutters, pool, among other items.
You will be asked to designate where certain items are located such as exhaust fans, 220-volt wiring, and fireplaces. As an example, you may have exhaust fans in the bathroom, as well as the kitchen, or you may only have 220-volt wiring in the garage.
Subsection A also asks whether water is supplied by the city or is on a well and if gas is supplied by a utility company or is bottled. Check each box that applies.
Sellers should check only the items that pertain to the home. For example, if your home does not have a sump pump or a gazebo, you would not check those boxes. If you disclose that the home has window screens, for example, and there are no screens, the buyer might demand that you buy all new screens.
Moreover, if you do not know the age of your roof, do not make up a number. Also, do not say the home has 220-volt wiring if you are uncertain. If a buyer cannot connect a dryer because there is no 220 wiring, the buyer may demand you to remedy the situation.
At the end of the page, you will be asked if the items you checked are in working order. If any are not you should make note of that in this section. Also, remember to initial the first page.
Seller's Subsection B – Defects or Malfunctions
Subsection B covers the structural integrity of the home. Before answering yes or no review all of the structural items contained in this section. If you check "yes" to the question that asks if you are aware of significant defects or malfunctions in Section B, you will need to describe them.
Even if you do not think the defect is significant, you should disclose it anyway, especially if you have knowledge about it. Such disclosures may include the crack in the driveway or the wobbly section of the fence in the back yard.
Section B provides both seller and buyer with the information that the garage door opener and child-pool barriers may not comply with the current California laws or government-mandated requirements. It also covers anchoring or bracing for water heaters and quick-release window security bars and the section of the law that pertain to these items.
Subsection C – Material Facts and Special Questions
Section C consists of 16 questions that you should read carefully before answering. The section covers hazardous building materials such as asbestos and lead-based paints, the condition of the underlying soil, additions to the property, shared property features like walls or fences, and many other circumstances.
For example, question 2 asks if there are features of the property that are shared in common. For instance, a fence is most likely a shared feature between you and your neighbor but it could be an item like a driveway or irrigation well. If the fence was the subject of prior boundary disputes with your neighbors, you may also want to consider checking question 3 as "yes."
Question 8 asks about flooding or drainage. If rainwater puddles near your home, you should disclose that fact. If you live on a busy street or your neighbor's dog barks, consider answering "yes" to question 11 about the neighborhood noise.
Buyers aren't likely to walk away from purchasing your home if they read that a dog barks or early morning trash collection cause an occasional disturbance. They will get upset if those nuisances have not been disclosed.
Remember to initial and sign page 2 of the transfer disclosure statement.
Agent's Inspection Disclosure
If you are represented by a real estate agent, your listing agent will complete the agent's inspection disclosure. A buyer's agent will complete a separate section. Under no circumstance should an agent ever check the box that says there are no items for disclosure. There are always items to disclose.
Agents are often advised not to diagnose the problem or deficiency but should state it in simple terms. For example, if there are black spots in a shower, the agent does not know for certain if it is mold, therefore, it should be disclosed as black spots.
Note that real estate agents should only disclose what they observe. Agents are required by law to walk the property and note everything they see, even if it's a crack in the sidewalk.
Sellers sign page 3. Listing and buyer agents sign page 3. Buyers initial and sign the receipt.
Additional Disclosure Forms
The California Disclosure form contains several parts that are specific to particular areas of the state and may not need to be completed by all sellers. Such items include the local option transfer statement, the natural hazard disclosure for flood, fire, earthquake fault, and wildland zones, and the notice of the levying of special taxes.
In the later pages of the form, a seller can also find additional information about California law on many of the disclosure items listed at the beginning of the document. Such information includes descriptions of requirements for smoke detectors, earthquake anchors, lead-based paints, pest inspections, and environmental hazards.
Agents often try to submit additional disclosures near closing that are not required. The most common are the Water Heater and Smoke Detector Statement of Compliance and the Carbon Monoxide Detector Notice, which are included in the TDS on page 2 and are, therefore, redundant.