What Is a California Transfer Disclosure Statement?

Home sellers preparing transfer disclosure statement with realtor
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A transfer disclosure statement (TDS) is required by California law in Section 1102 of the California Civil Code. This document is one of the seller disclosures that buyers receive during their contract contingency period. Its purpose 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.

Key Takeaways

  • California law requires that potential buyers must be informed of any major defects in a property that they’re considering purchasing.
  • Sellers should update their statements if anything occurs to change the property’s condition between the time of submitting the TDS and closing.
  • The statement should include the condition of any appliances or other items in the home that are included in the sale.

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 all 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:

  1. Disclosures from a seller
  2. Requirements for the real estate agent
  3. Required with financing
  4. Relates to new residential subdivisions

Part II of the California form is for the disclosures for a business property transfer. Each of its sections 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 may not complete this form for a seller under any circumstances. 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 mailing the statement, the buyer has five days to terminate the agreement.

Date of Disclosure

This is the date on which sellers complete the disclosure. If something changes between the dates when the TDS is completed and the property sells, prudent sellers will update the transfer disclosure statement as well as the date.

Additional Disclosures and Occupancy

Sellers may want to make the buyer's future home inspection part of this disclosure by checking the appropriate box, and they may include details of other inspections, such as pest reports. They should indicate whether they are currently living in the property.

Seller's Information

This part of the form pertains to the systems, appliances, and other items contained in the home that are meant to convey with the structure. It is broken into several subsections with alphabetical designations.

It is important to realize that a seller is not warranting the condition of the home with the transfer disclosure statement, they are simply disclosing its condition. This section asks whether the home has a range, a dishwasher, smoke detectors, rain gutters, a pool, and other items.

Sellers will be asked to designate where certain items are located, such as exhaust fans, 220-volt wiring, and fireplaces. For 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 whether 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, but there are none, the buyer might demand that you buy all new screens.

If you do not know the age of your roof, do not make up a number, and do not say that the home has 220-volt wiring if you are uncertain. If a buyer cannot connect a dryer because there is no 220 wiring, they may demand that you remedy the situation.

At the end of the page, you will be asked whether the items you checked are in working order. If any are not, you should say so in this section. Remember to initial the first page.

Seller's Subsection B – Defects or Malfunctions

Subsection B covers the structural integrity of the home. Before answering the questions, review all of the structural items contained in this section. If you indicate that you are aware of significant defects or malfunctions, you will need to describe them.

Even if you do not think that any defect is significant, you should disclose it anyway. Such disclosures may include a crack in the driveway or a wobbly section of the fence in the back yard.

Section B provides information that the garage door opener and any child-pool barriers might not comply with the current California laws. It also covers anchoring or bracing for water heaters and quick-release window-security bars as well as the sections of the law that pertain to those 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.

Question 2 asks whether 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 neighbor, you may also want to consider checking question 3 as "Yes," as it asks about "any encroachments, easements or similar matters that may affect your interest in the subject property."

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 simply because they read that a dog barks, or early-morning trash collection cause an occasional disturbance, but 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 they should state it in simple terms. For example, if there are black spots in a shower, the agent does not know for certain whether it is mold, and 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 through the property and note everything they see, even if it's just a crack in the sidewalk.

Sellers sign page 9. Listing and buyer agents sign page 9. 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 might 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 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 4 and are, therefore, redundant.

 

Article Sources

  1. The State of California Department of Real Estate. "Disclosures in Real Property Transactions," Page 2.

  2. The State of California Department of Real Estate. "Disclosures in Real Property Transactions," Pages 3-4.

  3. The State of California Department of Real Estate. "Disclosures in Real Property Transactions," Page 5.

  4. The State of California Department of Real Estate. "Disclosures in Real Property Transactions," Pages 6-9.