Q: Marsha, I am going to put my home of 30 years on the market. Besides the usual disclosures, what else am I required to disclose? How far back do I need to go? I actually still have the disclosures from when I purchased the home. Do I need to share these with a buyer? What are your thoughts?
A: Litigious California is leaning more and more to all-inclusive disclosures. In fact, it is now required that all historical documents — repairs done, previous inspections, and the estimate of costs — be given to the buyer. All receipts, reports, and inspections will be asked for, even if the seller simply got a quote but the repairs were never done. What’s more, these disclosures can go back for any time period in which the seller was associated with the property. This pertains only to disclosures and reports the current seller is aware of. The seller is not required to contact previous owners for all reports.
I recently heard Kathy Mehringer, the superstar of California real estate risk management, deliver a talk. I first met Ms. Mehringer in 2007 when the entire country’s real estate market was in a devastating freefall and collapse. She was the voice of reason for risk, rules, and responsibility when the only sales we had were either short sales or foreclosures. This was an atmosphere rife with fraud and criminal behavior. She told us what was ethical and compliant and what behavior was not going to be tolerated.
At this recent program, Ms. Mehringer shared a real estate war story that made me realize California is now in a new environment as far as disclosures. To maintain anonymity, she did not share the exact location of the property she discussed.
There was an expensive property for sale somewhere along the coastal cliffs of California. This estate has a beautiful view overlooking the Pacific Ocean. Yet, instead of the gorgeous infinity pool one would expect to find with a property of this caliber, there was an above-ground swimming pool overlooking the ocean. It was an expensive and elaborate above-ground pool with a diving board, waterslide, and the works, but it was still an above-ground swimming pool. For whatever reason, no one on the buyers’ side of this transaction seemed to question why they had an above-ground pool.
After the new buyers took possession of the home, they decided they wanted the infinity pool. They called the pool contractor in that area known for putting in magnificent infinity pools. They asked about the costs and time to put in the pool. The contractor said that was not a problem; in fact, he already had the estimate for that particular property. He had visited the site and knew it well. The cost he had quoted the previous owner was around two million dollars. An estimated 15 to 20 deep caissons (or pier foundations) had to be put in the ground to stabilize the cliff and the new swimming pool.
The new owners sued the seller for not disclosing this swimming-pool estimate to them. The work had never been done, yet the new owners felt the sellers had an obligation to disclose this information. The lawsuit was settled, coincidentally for around two million dollars.
This tells us that it is more important now than ever to disclose and document. When in an escrow, slow down, confirm all conversations in writing, and believe what people tell you, but be sure to verify and get receipts.
Marsha Gray has worked in Santa Barbara real estate for more than 25 years. She has expanded her knowledge into all aspects of the real estate market. At Allyn & Associates, she serves her clients’ real estate and finance needs. To read more of Marsha’s Q&A articles, visit marshagraysbhomes.com. Contact Marsha at (805) 252-7093 or marshagraysb@gmail.com. DRE# 012102130; NMLS #1982164.
