The vast majority of real estate lawsuits in California involve homebuyers suing sellers regarding issues related to the condition of the property. Lack of proper disclosure is usually the basis of these lawsuits, which can be brought many years after a home sale closes. Before selling your home, you have the opportunity to build an effective “firewall of protection” from lawsuits by properly using professional inspections and the state-mandated seller’s disclosure documents. We will walk you through these forms and assist you in completing them.
Your home should be inspected by the right professionals (termite, roof, chimney, and general whole house) prior to going on the market. By “right” inspectors, we mean those who will do a thorough inspection, yet will not be inflammatory about what they find (trying to protect themselves from liability). Good inspectors carry adequate “errors and omissions” liability insurance and are financially strong enough to remain in business well into the future.
Tip: The cost of these inspections (typically ranging from $800 to $1000) can be paid out of your proceeds at closing.
Complete the necessary seller’s disclosures (required by the state) to continue to build your “firewall of protection.” A home seller is required to disclose all “significant defects” in the home or neighborhood.
Tip: Since there is no rule as to what is “significant” in every situation, disclosing small problems with your home that you feel are “insignificant” protects you and actually makes a prospective purchaser feel confident that you took the disclosure process seriously. Rarely does the disclosure of small items negatively affect the marketability or sale price of a home.
Fill out the disclosure forms correctly. Here are a few suggestions we tell our clients:
- If you are not completely certain of the answer to a disclosure question, “unknown” is a perfectly acceptable answer.
- There is no requirement that a seller investigate any issues or conditions of which they are uncertain.
- Avoid using descriptive adjectives to explain defects. If your description is inaccurate you could be liable to correct the condition. An example would be stating there are “small, normal, seasonal” cracks in the walls of the property. Simply state that there are cracks in the walls and let the inspectors and/or purchaser decide whether the cracks are a problem.
- We make certain that professional inspectors are referenced in the disclosures and copies of the reports are given to the buyer to read and approve (in writing). This eliminates the need to list in your disclosure what the inspectors found. It is too easy to inadvertently omit a finding if you attempt to list them.