The Transfer Disclosure Statement (TDS)
The Transfer Disclosure Statement is the heavyweight of California disclosures. It's a three-page form where the seller lists known material defects in the property—damage, malfunctions, significant repairs, or other conditions that could affect the property's value or desirability.
Here's what matters: California law requires the seller to disclose any known material defects. The operative word is "known." If the seller doesn't know about something, they can't be faulted for not disclosing it. But if they know and don't disclose, that's a problem, and it can open them to lawsuits after closing.
The TDS covers issues like:
- Roof leaks or damage
- Foundation problems or settling
- Water damage or mold
- Electrical system problems
- Plumbing issues
- Garage door malfunctions
- Pest infestations (past or present)
- Structural damage or repairs
- HOA disputes or violations
- Any lawsuits involving the property
You're entitled to the TDS before you make an offer, and California law typically requires the seller to provide it within one business day of receiving an offer. However, it's common practice to see it either before or very quickly after offer acceptance.
Timing matter: The TDS must be provided before the buyer is bound to the purchase agreement, or your offer should allow you to terminate if you don't like what you see. Don't waive your right to review the TDS or accept it without reading it carefully.
The Natural Hazard Disclosure (NHD)
The Natural Hazard Disclosure tells you about environmental and geological risks specific to the property's location: flood zones, fire hazard areas, earthquake fault lines, landslide zones, and other natural disasters the property may be exposed to.
This is generated by a third-party service, not the seller themselves. It identifies whether the property is in a high-fire zone, a flood zone, a seismic hazard zone, and other critical safety areas. In California, especially in wildfire and flood-prone regions, this is crucial information.
You'll also see references to specific California hazard maps. If the property is in a high-fire zone, for example, you'll see a detailed fire hazard assessment. This matters for insurance costs, long-term risk, and resale value.
The NHD is required for all residential sales, and you're entitled to it before you're bound to the purchase agreement. If a property is in a significant hazard zone and that's news to you, it should factor heavily into your decision to proceed or renegotiate terms.
Megan's Law Disclosure
Megan's Law requires sellers and agents to disclose whether the property is in a neighborhood where registered sex offenders live. This is a straightforward factual disclosure pulled from state databases.
California law requires this disclosure to be provided before the buyer is bound to the purchase agreement. However, it's important to understand the limitation: this tells you only about registered sex offenders. It does not tell you about any other safety factors in the neighborhood or the crime rate generally.
If the presence of a registered offender in the area affects your decision to buy, that's valid. But don't assume that the absence of a disclosure means the neighborhood is entirely safe—that's not what this disclosure is for.
Lead-Based Paint Disclosure
Federal law requires sellers of homes built before 1978 to disclose known or suspected lead-based paint in the home. This is especially important for homes with young children, as lead exposure can cause serious developmental issues.
The lead disclosure is straightforward: the seller and agent must disclose known lead paint, lead-contaminated dust, or lead-contaminated soil. The buyer typically has a 10-day inspection period during which they can hire a lead inspection and terminate the contract if they're unhappy with the results.
In older California homes, lead paint is common. If you're buying a pre-1978 property with children in the home, I'd strongly recommend getting a professional lead inspection, even if the seller says there's no lead. An inspection costs a few hundred dollars and can identify risks that visual inspection misses.
HOA Disclosures
If the property is in a homeowners association, the seller must provide extensive HOA documentation, including:
- Governing documents: CC&Rs (Covenants, Conditions, and Restrictions), bylaws, rules and regulations
- Financial documents: Reserve study, budget, financial statements (usually 3 years)
- HOA status: Current assessment amount, any special assessments, pending litigation or disputes
- Meeting minutes: Recent board meeting minutes (if available)
- Contracts: Service contracts with vendors (pool, landscaping, management)
This is where many buyers get surprised. You might discover that the HOA is planning a $20,000 special assessment, or that there's pending litigation against the HOA, or that the reserve fund is dangerously depleted. These facts can drastically affect your willingness to buy or your offer price.
California law gives you between 3 and 21 days (depending on how the contract is written) to review HOA documents and terminate if you're unhappy. Read these carefully. The HOA budget is often more revealing than the property itself.
Watch out: A low HOA fee doesn't mean good value—it might mean the reserve fund is inadequate and a big special assessment is coming. Ask the HOA directly about upcoming planned improvements or capital expenditures. The documents sometimes lag behind reality.
Other Required Disclosures
Earthquake/Seismic Hazards: If the property is in a fault zone or liquefaction zone, this must be disclosed. It's often part of the NHD, but worth confirming separately.
Flood Zone: FEMA flood zone information is required. If the property is in a flood zone, you'll need flood insurance, which adds significant ongoing cost.
Fire Zone: High-fire hazard area disclosure is critical in California. Properties in Fire Hazard Severity Zones (FHSZ) face insurance availability and affordability issues, and insurers are increasingly non-renewing policies in high-fire areas.
Airport Proximity: If the property is near an airport, this must be disclosed.
Previous Inspection Reports: If the property was previously inspected for defects, those reports must be made available to you.
Death on the Property: If someone died on the property within the past three years (and the death was not from natural causes, or was natural but suspicious), this must be disclosed. Suicides and murders must be disclosed; natural deaths don't have to be.
What You Should Ask For Beyond the Legal Minimums
Legally required disclosures cover the basics, but smart buyers ask for more:
- Pest inspection report: Particularly important if you're in an area prone to termites or other structural pests. Get a professional WDI (Wood-Destroying Insect) report.
- Maintenance records: Ask the seller for records of major repairs, roof replacement, HVAC service, plumbing work, electrical upgrades. This gives you a sense of the home's maintenance history.
- Utility usage history: Ask for a year or two of utility bills. This gives you a realistic sense of heating and cooling costs, which vary dramatically by home efficiency.
- Previous inspection reports: If the property was inspected for a previous sale that fell through, ask to see that report. It often reveals issues the current seller already knows about.
- Insurance history: Ask if the property has filed homeowners insurance claims in the past 5 years and what they were for. Claims history affects insurability and cost.
- Permits and approvals: If the property has been renovated, ask for permits for those renovations. Unpermitted work can become your problem.
Sellers don't have to provide these, but many will. If they refuse, that itself is information—it might mean they're hiding something, or it might just mean they're being protective. Either way, it gives you data for your decision.
What to Do When a Disclosure Concerns You
You received the TDS and it says the roof was replaced 8 years ago, but there's already evidence of leaking. Or the NHD shows the property is in a high-fire-hazard zone and your insurance agent later tells you the home is uninsurable. What now?
Option 1: Terminate. If the disclosure concerns you enough and you're still in your contingency period (typically 17 days for inspections), you can terminate the contract and get your earnest money back. This is the clearest path.
Option 2: Request repairs or credits. You can ask the seller to fix the issue (roof repair, foundation work) or give you a credit toward closing costs to cover the repair yourself. Sellers often resist repairs but will sometimes give a credit.
Option 3: Renegotiate price. You can ask for a price reduction to account for the disclosed issue. This is negotiable and depends on the market and how badly you want the home.
Option 4: Proceed as-is. You can accept the disclosure and proceed with the purchase. This is your choice if you decide the issue is manageable or the price is right despite the problem.
Don't ignore a disclosure because you don't want to deal with it. Use your inspection period to verify what the seller disclosed, hire professionals to assess the severity, and make an informed decision about how to proceed.
Bottom line: California's disclosure laws are comprehensive, but they're only as good as what the seller knows and is willing to tell. Read every disclosure carefully, ask for additional information beyond the legal minimums, and use your inspection period to verify claims. A disclosure problem early is fixable; one you discover after closing is yours forever.