Disclosure Is Not Evidence

California requires the seller to fill out disclosure forms for the benefit of the buyer. These include the Transfer Disclosure Statement (TDS) and Seller Property Questionnaire (SPQ). The seller certifies that what is on these forms is true and correct to the best of their knowledge, as of the day they sign it. The form itself says, in capital letters, that it is not a warranty of any kind and not a substitute for any inspection the buyer may want.

So the paperwork can be complete, honest, and still wrong about the house. What follows is one recent transaction, first from the buyer's side and then from the seller's. I was the buyer's agent on it.

From the buyer's side

A property on the Sonoma coast came on the market with solar and battery backup, advertised as paid off. The other side kept pointing to what the seller had put into the place, and the solar was part of that. We priced the offer considering everything we understood about the property, including fully owned solar. The offer was accepted.

Five days into escrow the preliminary title report came through. The title prelim is a crucial document. And one to read early, whether you are buying or selling a home. Among other things it shows whether any liens have been recorded on the property. This one showed a solar lease. The system that was advertised as paid off was in fact a lease, with a $48,000 obligation that transfers to the buyer.

Nobody lied here. The seller was under the impression that the solar was owned. Someone else handled the details of managing the house and paying the bills. So she answered honestly, and her agent passed on what she told him. The form was filled out correctly… and what it said was still wrong.

Timing mattered. We were still inside the period after an offer is accepted when a buyer can ask for a price change, a repair, or walk away with their deposit. In the purchase contract it is called the investigation contingency.

My buyer wanted the house. What he didn't want was to pay off a lease that he didn't negotiate and, in his analysis, was overpriced. We reviewed the lease terms, determined the likely value of taking over the lease and negotiated a $25,000 seller concession. This satisfied the buyer and the transaction moved forward.

The same potential information gap shows up in other aspects of the property… each one affecting the value of the house. How many bedrooms the septic is approved for. Whether the in-law unit was ever permitted. Is the owner aware of any deficiencies to the roof, including leaks. Every one of those has an answer. And quite often they are not answered by the seller's disclosures.

From the seller's side

Now the same transaction from the other chair.

She had a real asset. Solar and battery backup, and she believed it was hers. She priced the house that way. Her agent marketed it that way. The offer she accepted considered it.

Then five days into escrow the title report revealed that the solar wasn't owned. This was avoidable. At any point prior to listing, the title report could have been pulled. Had that happened, and I do this on every property I am going to list, she would have discovered this before listing and marketing the property.

Finding it in escrow instead put her in a position of weakness. She could reject the buyer's request for a seller credit and let the transaction cancel. But then she has to start all over again, with a new buyer. Who knows how long that process will take, and the risk remains that the new buyer won't finalize the transaction either. This was an expensive and easily avoidable oversight.

This is why I order the preliminary title report before I activate a listing, as part of the fact finding. Not because it is required. The title company produces one in every escrow anyway, which is exactly the problem… by then the property is listed, an offer is in, and whatever it says is a surprise to somebody. Pulling it early costs nothing and it can be the difference between a seller being in control or reacting to a surprise. Giving up the leverage of choice and acting under duress is not ideal for a seller.

Where these facts come from

The transaction is my own, on the Sonoma coast, and the figures are the ones from that purchase. The disclosure language is quoted from the California Real Estate Transfer Disclosure Statement itself.