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Brokers are responsible for disclosing information material to a home sale

California has experienced a recent surge in the value of residential real estate. Especially along the coast, home prices are up, due to a variety of factors. Prop 13 has kept property taxes low, meaning homeowners have less incentive to sell. Investors took advantage of the crash to buy property relatively cheaply and convert homes into rentals. Foreign investment has driven up prices, as has lack of available land. All of this means that homes are worth more than they have ever been, even relative to pre-crash levels, according to Forbes. And fewer homeowners are underwater on their homes.

So real estate investment is looking up. That means opportunity, but also the need for caution.

Californians looking to buy a home must be sure of what they are getting into. "Flipping" houses provides a valuable service to the real estate industry. But with old or neglected property, defects are a real possibility. Under California law, a broker must disclose certain material defects in the home. Under state law, that means any fact of "sufficient materiality to affect the value or desirability of the property." If a broker fails to disclose such information, that broker may be subject to a lawsuit. Each state and municipality has its own disclosure requirements. But generally, a broker must disclose:

  • A death in the home, if the death did not occur from natural causes, AIDS or occurred longer than three years before the sale.
  • Nearby nuisances.
  • Environmental hazards.
  • Repairs done to the home.
  • Water damage.
  • Missing items.
  • Relevant zoning information.
  • If the home is part of a homeowner's association.

The broker must disclose relevant information regardless of how the information was obtained. Even if the broker had no actual knowledge of a defect, a broker is still liable if the information should have been known to the broker.

Under California law, a plaintiff who successfully sues a brokerage for fraudulent nondisclosure can recover "the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction." Other damages may include moving costs, escrow fees, building permit fees, and the cost of repairs.

A real estate attorney can help

Purchasing a home is one of the largest investments a person can make. Homebuyers in California who are concerned about disclosure requirements should contact an experienced real estate attorney to discuss their legal options.

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