Real Estate Transfer Disclosure Statement (TDS)

Real Estate Transfer Disclosure Statement

By: California Association of Realtors Legal and Board Services Department



Question:
What is the Real Estate Transfer Disclosure Statement?

Answer:
A Real Estate Transfer Disclosure Statement ("TDS") is a form prescribed in Civil Code ss 1102.6. Sellers of residential property with 1-4 units have been required to furnish this completed form to prospective purchasers. Sellers and licensees may comply with this law by utilizing C.A.R. Form TDS-11.

The Real Estate Transfer Disclosure Statement describes the condition of a property and, in the case of a sale, must be given to a prospective buyer as soon as practicable and before transfer of title. In the case of a transfer by a real property sales contract (as defined in Civil Code Section 2985) by a lease coupled with an option to purchase, or by a ground lease coupled with improvements, the TDS is to be delivered before the execution of any of the foregoing.

The seller and any broker(s)/agent(s) involved are to participate in the disclosures. If more than one broker/agent is involved, the broker/agent obtaining the offer is to deliver the disclosures to the prospective buyer unless the seller instructs otherwise.

Delivery to the prospective buyer of a report or opinion prepared by a licensed engineer, land surveyor, geologist, structural pest control operator, contractor, or other expert (dealing with matters within the scope of the professional’s license or expertise) may limit the liability of the seller and the real estate broker(s)/agent(s) when making required disclosures. The overall intention is to provide meaningful disclosures about the condition of the property being sold or transferred. (Cal. Civ. § 1102.4)

Question:
What types of real estate transactions are covered by this disclosure law?

Answer:
These disclosure requirements apply to transfers by sale, exchange, installment land contract, lease with an option to purchase, option to purchase, or ground lease coupled with improvements, of real property (or a residential stock cooperative) improved with 1-4 dwelling units.


Question:
Are there any transactions involving one to four units property for which the seller is exempt from the necessity of providing a Real Estate Transfer Disclosure Statement?

Answer:
Yes. Certain types of transfers are specifically exempted in Civil Code ss 1102.1. They are as follows:

Transfers requiring a public report pursuant to ss 11018.1 of the Business and Professions Code and transfers pursuant to ss 11010.8 of the Business and Professions Code where no public report is required.

Transfers pursuant to court order (such as probate sales, sales by a bankruptcy trustee, etc.).

Transfers by foreclosure (including a deed in lieu of foreclosure and a transfer by beneficiary who has acquired the property by foreclosure or deed in lieu of foreclosure).

Transfers by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust.

Transfers from one co-owner to one or more other co-owners.

Transfer made to a spouse or to a child, grandchild, parent, grandparent, or other direct ancestor or descendant.

Transfers between spouses in connection with a dissolution of marriage or similar proceeding.

Transfers by the State Controller pursuant to the Unclaimed Property Law.

Transfers or exchanges to or from any government entity.

It should be noted, however, that a real estate licensee still has a duty to conduct a reasonably competent and diligent visual inspection of accessible areas in almost all of the above situations. In other words, although the seller is exempted from having to provide a disclosure statement in certain situations, a licensee must conduct this inspection, and disclose the results of the inspection, in almost all residential transactions involving one to four units.


Question:
Must a Transfer Disclosure Statement be provided to a purchaser of a new residential property that is not part of a subdivision, such as a new home being built on a lot?

Answer:
Yes. The disclosure statement must be provided to purchasers of these types of new homes.



Question:
Does the Real Estate Transfer Disclosure Statement requirement apply to "For Sale by Owner" transactions?

Answer:
Yes. The law applies even if there is no real estate licensee involved in the transaction.



Question:
Who must fill out this Real Estate Transfer Disclosure Statement?

Answer:
The seller must fill out sections I and II of the form. If any real estate licensees are involved in the transaction, the listing and selling agents usually fill out sections III and IV, respectively, based on the results of the careful visual inspections they have conducted.


Question:
On 1-4 unit transactions where the seller is exempt from providing the Transfer Disclosure Statements, but where the real estate licensees involved are required to conduct an inspection, should the licensees provide the buyer with a completed TDS form?

Answer:
No. The real estate licensees should never fill out the seller's portion of the Transfer Disclosure Statement. If they wish to, any agent involved in the transaction may disclose the results of his/her inspection on page 2 of the TDS form, or he/she can make the disclosure on a separate piece of paper.


Question:
Are the real estate agents responsible for checking and commenting on the accuracy of the seller's portion of the TDS form?

Answer:
No. The agents do their own inspection and disclose their findings, on the TDS or elsewhere, whether or not their findings agree with the seller's portion.


Question:
What about landlords or relocation companies who have never lived in, or even seen the inside of their residential property (1-4 units)? Are they exempted from having to fill out the disclosure statement?

Answer:
No. A seller in this situation must fill out the disclosure statement to the best of his/her ability.


Question:
Who is responsible for delivering the disclosure statement to the buyer?

Answer:
If two or more real estate licensees are acting as agents in the transaction, the selling agent must deliver the statement to the buyer, unless the seller has given other written instructions for delivery. If only one licensee is involved, that licensee must deliver the statement to the buyer. If no real estate licensees are involved in the transaction, the seller is responsible.



Question:
When does the disclosure statement have to be delivered to the buyer?

Answer:
If possible, it would be preferable to provide the completed disclosure statement to the buyer prior to his/her signing the offer to purchase. If the buyer receives the disclosure statement after execution of his/her offer to purchase, the buyer will have a three or five day period to cancel the transaction.


Question:
When should the prospective buyer of a new home, that is not exempt from the TDS requirement, receive the completed form?

Answer:
The buyer should get the TDS before he/she enters into the contract to purchase the home, even if it has not yet been built. In other words, no special rule applies.



Question:
Does a buyer have a right to cancel the transaction when the Transfer Disclosure Statement is furnished after the buyer has signed the offer to purchase?

Answer:
Yes. "If any disclosure, or any material amendment of any disclosure . . . is delivered after the execution of an offer to purchase, the transferee (buyer) shall have three days after delivery in person or five days after delivery by deposit in the mail, to terminate his or her offer by delivery of a written notice of termination to the transferor (seller) or the transferor's (seller's) agent." (Civil Code ss 1102.2.)



Question:
What if after the disclosure statement is furnished to the buyer but before the close of escrow, an error or omission in the disclosure form is discovered?

Answer:
The Real Estate Transfer Disclosure Statement may be amended, at any time, in writing, by the seller or his/her agent. However, if any material amendment to the disclosure statement is delivered to the buyer after he/she is already obligated under the contract, he/she has three days, if delivered in person, or five days, if deposited in the mail, to rescind the contract. In other words, if the statement is materially amended at any time after the execution of the contract, the buyer has a right to back out of the transaction.



Question:
Is it mandatory that a Real Estate Transfer Disclosure Statement be provided to a buyer in applicable real estate transactions, or can a buyer waive his/her right to receive the form?

Answer:
The law states that the seller must provide the disclosure statement to the buyer. This requirement can not be waived.



Question:
What happens if the seller refuses to fill out a Real Estate Transfer Disclosure Statement?

Answer:
The statute provides that if the seller willfully or negligently violates any of its provisions, the seller will be liable to the buyer for any actual damages which result from such a violation. If the licensee responsible for delivering the disclosure statement cannot obtain it, that licensee must advise the buyer in writing of the buyer's right to receive the statement.



Question:
If a seller gives this form to the buyer, does that mean that he/she does not have to provide other disclosure statements?

Answer:
No. All other disclosures mandated by local, state, or federal law must still be provided to the buyer, in addition to the Real Estate Transfer Disclosure Statement.



Question:
What is the liability under this law of a real estate licensee or seller who fails to comply with the disclosure requirements, either by making intentionally inaccurate statements or omissions, or by failing to deliver it promptly.

Answer:
The Real Estate Transfer Disclosure law provides that anyone "who willfully or negligently violates or fails to perform any duty prescribed by . . . (this law) . . . shall be liable in the amount of actual damages suffered by a transferee (buyer)."



Question:
Under this disclosure law, can a closed transaction be invalidated for failure to comply?

Answer:
No. The Real Estate Transfer Disclosure law specifically states that a completed transaction will not be invalidated by non-compliance. However, failure to comply can result in liability.



Question:
Does the seller have to provide a TDS if he/she sells the property "as-is"?

Answer:
Yes. There is no exemption to providing the disclosure statement for an "as is" transaction.


Question:
What is the seller's responsibility when the TDS states that an item is "not working," while the purchase contract warrants that it is operable? For example, let's say the seller states in the Transfer Disclosure Statement that the dishwasher is not functioning. On the other hand, in the deposit receipt the seller warrants that "all built-in appliances are in working order." Is the seller responsible for fixing the dishwasher?

Answer:
Yes. The seller is responsible for living up to his or her contractual obligations. The Transfer Disclosure Statement is not part of the contract; its only function is to provide information to the buyer to enable the buyer to decide whether or not to go through with the transaction. Even if the buyer decides not to cancel based on the TDS with some negative disclosures, the buyer does not waive any of his/her rights under the purchase contract.





1Listing.com is a California fixed fee Multiple Listing Service (MLS) listing and marketing website for California For Sale By Owner (FSBO) sellers. 1Listing charges only $299 for a listing on the MLS. Visit us at www.1Listing.com or call (707) 693-0100.