Buying or Selling a Home? Consider this.

Buying or Selling a HomeGuest Blogger: Mark Breunig

When it comes to California real estate, there are plenty of laws and rules related to the buying or selling a house.  However, anyone who has ever purchased real estate knows that reading, understanding, and quickly signing a bunch of pre-printed forms is often an unsettling process.  Before you sign, here are a few basics to consider when buying or selling a home.

Used Homes –Buyers Beware

Unless you purchase a home warranty insurance plan, you should be much more careful when purchasing a home from someone other than the original builder.  Hire a licensed contractor or home inspector to do a thorough inspection to discover and resolve problems during the contract negotiation stage.

California law does provide home buyers with some protections by requiring sellers to enter into detailed written contracts for sale of real property, and by requiring the seller to disclose to buyers facts which materially affect the value or desirability of the property. This disclosure should include things such as failing appliances, leaking roofs, plumbing or electrical problems, noisy and disruptive neighbors, using the property in a way that violates the applicable zoning ordinance, unpermitted additions or modifications, or even the state’s interest in buying and redeveloping the property.  If sellers fail to disclose material facts, buyers have the right to sue for damages or even seek to cancel the contract altogether.

I recommend you request an additional “substitute disclosures” in addition to the minimum disclosures required in the standard Real Estate Transfer Disclosure Statement.  Read these disclosures very carefully and ask for clarification in writing from the seller and seller’s agent if needed. Despite these protections, I always urge clients to personally test all lights, electrical outlets, plumbing fixtures, hot water systems, doors, and pool equipment to get a good feeling for the houses condition.

If you find something you believe should have been disclosed after you purchase the property, you may wish to consult an attorney to evaluate your options.

The “As Is” Clause – Buyer Really Beware

An “as is” clause in a purchase agreement relieves the seller of liability for defects in the property unless the seller, through fraud or misrepresentation, conceals or fails to disclose material defects not otherwise known or observable to the buyer.  Buyers should always view as is clause as a red flag that the property is likely to be in poor condition. These clauses are common in short sales or fixer properties with some obvious problems, so buyers should know that they are likely getting what they pay for. If you don’t have experience in inspecting such homes, hire a licensed contractor or home inspector to be sure of what you’re getting into.

New Homes and Warranties

California requires builders of new homes to offer a standard “one year expressed limited warranty” also known as the “Fit and Finish warranty”, and most new builders will offer more than the minimum required, so always review it carefully to see what it covers. Report problems in writing early and often until you get resolution.

The 10 Year Rule

California also provides protection against defects which are not readily apparent to the consumer.  These “latent” defects, as they are called, are covered for 10 years.  Common forms of these types of “latent” defects include cracking or shifting foundations, buckling walls, roofing leaks, framing problems not easily seen by the naked eye, and failing pipes or electrical wires.

If you suspect any problems, it’s best to hire a licensed contractor or home inspector to document potential problems and assert any claims against the original builder before the clock runs out. So long as you submit a written warranty claim before the end of the new home warranty period, the builder is obligated to fix the claim(s).

Mark Breunig is a business and estate planning attorney based in Loomis, CA.  He has been helping people and businesses with legal services since 1995. For more information from Mark, visit Breunig Law or mark@breuniglaw.com.

Many of these same principles and documents are also required in other US states. Be sure to check what your state requirements are when buying or selling a home.