Before Buying a Home in California, Here's What to Know

From taxes to dual-agency relationships to disclosure requirements, California has some unique practices when it comes to purchasing real estate.

If you've never owned a home before, or owned one outside California, realize that practices and procedures in this state are likely different than you've encountered in the past. The good news is, it’s a state whose laws are friendly to home buyers! Here’s a primer of what’s ahead.

You May Never Meet the California Home Seller in Person

California law doesn't require the buyer and seller to physically come together at the closing table, or ever deal with each other face to face. Buyers and sellers in California are often represented by their own real estate brokers and agents, who communicate with each other on their clients’ behalf. Therefore, it's entirely possible that you might visit, ask questions about, and negotiate a purchase agreement for a home without ever meeting the actual seller.

Some states require that the buyer and seller both physically attend the closing or settlement. There, the buyer (or lender) will provide funds for the purchase price, the seller will sign the deed over to the buyer, the deed will be registered so that the buyer appears as the record owner, and proceeds of the sale will be distributed to the seller.

However, in California, all of these acts may take place at the title or escrow company in your absence. The keys are delivered to you once all the paperwork has been handled. This is efficient, as it lets the closing take place once the terms of the sale and escrow instructions are satisfied, and not be delayed by scheduling conflicts or bad traffic!

You Need Not Hire an Attorney, Although You May Want To

While some states require that an each party to a real estate transaction retain a lawyer to represent their interests at the closing; California does not.

You (and your broker or agent) will most likely use a standard form called the Residential Purchase Agreement and Joint Escrow Instructions to make your offer. Your real estate agent will help you complete this form, and you need not have an attorney review it. If the seller accepts your offer, he or she can simply sign this form and it will serve as the final contract. (The seller will likely counteroffer, but this too can be done using the standard form.)

If, however, you have questions about the offer and contracting process that your agent is unable to answer, or if your transaction is particularly complex, it may make sense to seek legal advice from a reputable local attorney.

Sellers and Buyers Can Be Represented By a Dual Agent

California law permits sellers and buyers to be represented by the same real estate broker in a real estate transaction. When the seller and buyer are both represented by the same real estate broker, or are represented by two separate agents working for the same broker, this is called a dual agency relationship.

Many states do not permit dual agency, recognizing the possible conflict of interest that arises when an agent is charged with the task of obtaining the highest price on behalf of the seller, while also bargaining for the lowest price on behalf of the buyer, without sharing confidential information with either party.

In California, however, dual agency is permitted as long as both the buyer and the seller consent to it in writing. This consent is ordinarily provided on a form titled, “Disclosure Regarding Real Estate Agency Relationships,” which identifies the broker and agents involved in the transaction and the parties they represent.

You May Need to Pay Mello-Roos Taxes

Mello-Roos taxes are imposed on owners of property to fund improvements to local infrastructure, under the Community Facilities Act (Government Code §53311-53368.3.) The funds from the taxes finance bonds used to build or enhance streets, sewer and sanitation systems, police and fire protection, schools, parks, and other local cultural facilities.

Only properties located in a Mello-Roos Community Facilities District (“CFD”) can be subject to this tax. Before buying a home in California, ask whether the property is subject to Mello-Roos taxes and what the expected special tax payment is each year.

You Can Expect a Lengthy Set of Written Disclosures From the Home Seller

California law places an unusually high level of responsibility on home sellers to tell prospective buyers about the property’s physical condition, features, pest problems, environmental concerns, and any other material defects. See California Home Buyers: What You Can Learn From the Seller's Disclosure Report for details.

Buying a home in California can be a new experience and much different than buying a home in another state. However, if you know what to expect and ask the right questions, you can have a smooth and successful real estate purchase experience.

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