Due diligence is part of buying and selling real estate in any state. California has several disclosures you must make, including additional disclosures for certain cities and counties for fire, flood and earthquake zones. However, some property transfers are exempt from disclosure requirements. If you are looking at a home that is exempt from disclosures, you might want to complete inspections on your own to determine if the property has problems that would typically be disclosed.
If the subdivision is being newly built and the builder delivers a public report to the buyer, the seller does not have to provide a disclosure statement. The same is true in a subdivision where regulations do not require a public report. If the builder sells the homes through a real estate agent, the agent is obligated to disclose any material facts that affect the intended property use, the value of the property and / or the desirability of the property, such as train tracks or highways close to the property, flooding issues and graveyards abutting the subdivision. While some of these might not be a required disclosure, they do affect the desirability of the properties in the community.
Certain transfers are also exempt from disclosure laws. However, the buyer should complete due diligence before putting down a deposit. These transfers include:
Transfers by a fiduciary for a decedent’s estate;
Transfers through a conservatorship, guardianship or trust, unless the trustee is one of the previous owners of the property;
Transfers between spouses or from parents to children and other lineal lines as defined in California statutes;
Transfers that are a result of a legal separation or divorce;
Transfers from a property settlement when the settlement is a result of legal separation or divorce;
Transfers between co-owners;
Transfers of unclaimed property by the State Controller;
Tax deed transfers; and
Any transfers from or to a governmental entity.
Before buying any property, even if the seller completes the disclosure form, you should do your own due diligence. Visit the property during a rainstorm to check for flooding, hire a building inspector to check for structural and other problems with the house. Hire a termite inspector to check for termites and other pests. If the property has a basement or crawlspace, check those areas for moisture and mold.
While newly built homes may not have obvious problems, they could have structural or flooding issues. Foreclosures and other transfers that do not require disclosure could have many points of concern. Depending on the age of the home and how the previous owners cared for the property, hiring your own inspectors could save you thousands or more in the long run.