California Brokers Disclosure Requirements on Property Defects to Home Buyers

Real estate brokers in California have similar disclosure obligations to property sellers.

If you live in California and decide to sell your home, you might decide to enlist the help of a competent real estate broker. The broker can help you set a sale price, assist you in interacting with buyers and their agents, and provide other helpful tips and support throughout your sale.

As a seller, you perhaps already know that California law obligates you to disclose to potential buyers any material defects concerning the property that are within your knowledge (California Civil Code Sec. 1102). These requirements separately extend to your broker, therefore you should be prepared to have an open conversation with your broker about your property. As part of the home sale process in California, you authorize your broker to provide a copy of the broker disclosures along with your seller disclosures.

Your Real Estate Broker’s Inspection Obligations

Your real estate broker is required, by California Civil Code Section 2079.3, to visually inspect all physically or visually accessible areas of the property you have for sale in a “reasonable, competent and diligent” manner. This does not mean that your broker has to comb through every grain of sand on your property or perform the same level of inspection that a home inspector might, as that is the inspector’s area of expertise and not necessarily the broker’s. The inspection does, however, need to be thorough. Performing this inspection will allow your broker or agent to complete and sign the required Agent’s Inspection Disclosure that will be provided to any potential buyer of your property.

The purpose of the broker’s inspection is so that your broker can inform a potential buyer about issues affecting the property that might affect the value of the property, or the buyer’s use or enjoyment of it. It’s entirely possible that the broker will notice issues with your property that you hadn’t.

There are areas of the property that your broker is not obligated to inspect, including areas that are not reasonably physically or visually accessible, perhaps because they are fully closed off between the walls of a home, as is typically the case with electrical wiring. Your broker is also not required to inspect public records or permits regarding the title to or use of the property, since those are public, and are therefore equally available to the buyer to research.

Your Real Estate Broker’s Disclosure Obligations

After performing a thorough visual inspection, your broker must use the Agent Inspection Disclosure form to tell potential sellers about any problems with the property that the broker discovered that would affect the value, desirability, or buyer’s intended use of the property.

Your broker’s disclosure obligations include disclosing defects that he or she has learned from any source, even if this includes things that were not learned from you. In particular, if the broker knows of defects that are not otherwise observable to or known to the potential buyer, the broker should disclose these.

If your broker does not fully and honestly disclose known problems to the potential buyer at these early stages, both you and your broker risk being held legally liable for the nondisclosure if the sale goes through and the related information is then discovered.

When Your Broker Must Provide Disclosure Information

Although there is no specific number of days during which your broker must provide these disclosures to a prospective buyer of your property, the buyer will need them early on in the process in order to make an informed purchase decision, including offering an appropriate purchase amount. It is a good idea to provide your seller disclosures and the broker’s disclosures at the same time, so the prospective buyer has all of this information available in considering your property. A potential buyer can back out of a purchase deal if he or she does not receive these disclosures prior to signing a purchase agreement.

How Detailed Your Broker’s Disclosures Should Be

Though California’s disclosure obligations are no laughing matter, there’s also no need to take them to the extreme. A home is an intricate structure, with a lot of surface area to cover. Nevertheless, there are parameters that allow both you and your broker to maintain your sanity while complying with your California disclosure obligations.

Items that need to be disclosed are those of “sufficient materiality to affect the value or desirability of the property.” Basically, things that would be important to the buyer in making a purchase decision are things that your broker must disclose. For instance, the fact that a leaf blew inside your home when the door was open and is now resting comfortably in the corner of the kitchen would not need to be specifically brought to the buyer’s attention; while a leaf doesn’t necessarily belong in the kitchen, it’s not a defect. If, however, there is a hole in the roof over the kitchen that is allowing leaves to blow in, or if a pile of leaves has been resting against your foundation for so long that the termites that were dining on them and are now working their way into your walls, these are definitely things that you, your broker, or both would need to disclose.

Material issues further include things about the quality of the property being sold, such as that the property was constructed on filled land, that the home is in violation of building codes or other ordinances, or that the home is infested with termites. (See, Sweat v. Hollister (1995) 37 Cal.App.4th 603.) Ordinances regulating improvements to homes located in a flood plain area, however, are considered to be information readily available to a potential buyer and therefore do not require disclosure. (See, Sweat v. Hollister.)

Details that do not need disclosed by your broker (or you) are whether or not a prior occupant was ill with Acquired Immune Deficiency Syndrome (AIDS), or whether someone died on the property, including how they died, so long as the death occurred more than three years prior to the current potential buyer’s offer to purchase. If, however, a potential buyer asks a question about any deaths occurring on your property, your broker (and you) must truthfully answer even if the answer involves an occurrence more than three years prior. See, California Civil Code Sect. 1710.2.

It is important to note that a potential buyer still has a duty to pay attention to the details of your property and to the available records and other accessible related information, as well as to his/her own observations. If there is a detail about the property that a reasonably attentive buyer would have noticed, California law will assume that any other reasonably attentive buyer should have also noticed it on his or her own, thus precluding a potential buyer from later bringing a lawsuit against you or your broker based on that particular detail.

For further information, a local California real estate broker is qualified to advise you on real estate matters. For legal advice, consult your attorney.

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