How California’s disclosure laws leave buyers in the dark

A couple of years ago I went to an open house that overlooked an empty one-story commercial property, and asked the listing agent's representative if she knew what was planned for the site. She didn't - but she assumed someone would be taking over the existing business.

She was wrong. The building was due to be demolished, and the city council had already approved a large multi-story residential development in its place. That potentially meant years of construction dust and noise; traffic and parking problems during and after construction; and blocked light for neighbors. The sort of information a buyer ought to know.

This wasn't unusual. With some important exceptions, property owners and their agents are under no obligation in California to research things they don’t already know or can’t see, whether it's what’s beneath the carpet or on the other side of the fence*. Even information that's publicly available - including planning applications for nearby residential and commercial developments - doesn't necessarily have to be disclosed if they’re not things a seller or agent should reasonably be aware of.

Put simply, if you're legally obliged to disclose every material fact you know about your property, it may be best not to know it in the first place. Why would you test whether your popcorn ceiling contains asbestos if a positive response lands you with an expensive remediation project or an obligation to tell future buyers they'll be living with a known carcinogen? Why would you keep an eye on local city planning decisions if you run the risk of having to disclose that a nearby traffic calming project might reroute more cars down your street?

"Put  simply, if you're legally obliged to disclose every material fact you know when selling your property, it may be best not to know it in the first place"

That's not to say California buyers are short of information, of course. The Natural Hazards report buyers routinely receive is packed full of information about the risks of earthquakes, wildfires, flood zones, environmental hazards and other negatives that might - quite literally - keep you awake at night. Home and pest inspections expose real defects, large and small. And there are a growing number of sites dedicated to analyzing threats from climate change. For some people, the giant disclosure packages that accompany every sale can be overwhelming. But they still don’t cover everything.

Campaigning for change

Does it have to be this way? Well, it can certainly be better. That’s why I’ve created tools to help buyers better research local issues that don’t necessarily make it into disclosure packages - and to help them carry out key parts of their disclosure preparation upfront, reducing the time crunch when they're ready to make an offer. 

There's never a guarantee that you can unearth every negative before you buy a house - but that’s not the point, Like everything in real estate, it's about reducing risk.

*Sellers beware - failure to make adequate disclosures can have serious, costly legal consequences. Seek advice from your real estate agent and attorney.

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