Disclosure:  I am not an attorney nor do I play one on T.V.  Readers who require specific advice about their individual situation should consult an attorney.  Nufff said.

California Civil Code Section (CCCS) 1710.2 basically states that a death on a property must be disclosed if it occurred within three years of an offer on the property.  According to CCCS 1710.2, a 10 year old suicide need not be disclosed to a potential buyer.   However, strictly adhering to this 3 year rule may be short sighted.

Real estate disclosure law also stipulates that a seller and his/her agent must disclose any fact of which they have knowledge that could be material to a buyer’s decision to purchase the property.  Facts about the property are considered material if their disclosure would affect the value or desirability of the property.  Is a death by suicide a material fact that affects the value or desirability of a property?   I would argue, yes.

For some buyers, a death by suicide (no matter how long ago) is a material fact and they would want to know about it before proceeding.   For other buyers, it doesn’t matter.  But how does the seller and/or agent determine who has issues with death by suicide versus those who don’t?  Can you rely on the buyer’s agent to ask a direct question about the subject?  Maybe, maybe not.

What I have found in almost 18 years in selling homes locally is that most sellers don’t want to talk about it much less disclose it.  They cling to the fact that CCCS 1710.2 places a 3 year cap on such disclosure.  They know if they disclose a death by suicide, their home will sell for less. 

This just goes prove my point.  Sellers don’t want to disclose a death by suicide because they know it will result in a lower sales price.  What sellers don’t understand is that by acknowledging that their home will sell for less (if they disclose the death by suicide) they are confirming that the disclosure is a material fact that must be disclosed. 

Anyone have any other thoughts on the topic?

Owners Title Policy

In Santa Clara County it is customary for the seller to pay a one time premium for the new buyer’s title policy.  The amount of the title policy is based on the sales price of the property.  The owner’s policy indemnifies the buyer against loss and provides a defense in the event of claims against the buyer.  Coverage last as long as the buyer remains on title.

The Owner’s Title Policy protects the new homeowner (buyer) from:

1. Fraud associated with the title ownership
2. Liens existing against the property at the time the policy was issued
3. Mistakes in the public record that are not caught before the sale
4. Inaccurate or conflicting wills and trusts related to the title
5. Missing heirs who suddenly appear and claim to own the property
6. Forged or misfiled deeds and other documents
7. Errors or flaws in the title that are not discovered in the initial title examination

Lender’s Title Policy

In Santa Clara county it is customary for the buyer to the pay for title insurance premium for the Lender’s policy on the home loan.  The amount of the policy is based on the amount of the loan, not the purchase price of the property and covers the lenders interest in the property if any of the above (1-7) occur.

Click here to find out who pays for title costs (it’s based on the county where the subject property is located).

Comparison Shopping for Title and Escrow Services

Los altos no longer has several title companies in town.  Most offices have either consolidated or closed business altogether.  Consumers can ask their real estate professional for a reputable title and escrow company and/or go to Title Wizard to compare title and escrow fees and services. 

Lastly, below are tips that the Title Wizard web site recommends when comparing title and escrow fees, policies, coverages etc.

Some records of older homes (homes built prior to around 1940) have been lost or destroyed.  In addition, when many of the city/county records systems were transferred to computerized record systems, the data was entered incorrectly (entered manually).  Lastly, many homeowners have completed some non-permitted additions to their properties that wouldn’t be included in the official records because the addition isn’t legally there.

Example Of Building and Planning Record Errors

Several years ago, I represented a homeowner of a property that was adjacent to Stevens Creek near Fremont Avenue in Los Altos.  The county records indicated an 18K square foot lot.  This property was on a large lot, but it looked nowhere near 18k square feet.  After intensive research, we found out that there was an interior lot owned by the water district that had been incorporated into the county records description of this property.  Fortunately, we waited until we had the correct information prior to marketing the home.

Example Of Seller Recollection Errors

I can’t tell you how many times I’ve been out on a listing appointment and the homeowner’s recollection of the property’s size and the information from the county records differ.  Most of the time, the seller is innocently hoping the home is bigger (so they will get more when it sells).  But once they see a property description from a reliable source, they realize it isn’t.  No harm, no foul.  However, there are instances where the seller might not be so innocent.

Last month I was on a listing appointment with a homeowner of a Los Altos property that had an unusual floorplan.  It looked as if a garage had been converted into a living/bedroom with bath.   I showed the homeowner records that indicated that the home was 3 bedroom, 2 bath home.  However, the seller believed it to be a 4 bedroom, 2.5 bath home with approximately 450 more square feet than my records indicated.  (note: I am using fictitious numbers because the home is currently on the market).

How To Determine Market Value For an Addition that May Not Exist

When we got to the point of determining the home’s market value, I told them that I would recommend that it be priced at $1,500,000 until I could verify that the home was in fact larger as they had claimed.  They wanted it priced at $1,750,000, a $250,000 premium for something that may not legally exist.  Its odd footprint also reduced its market value.

The home was listed by another agent at the higher price.  I hope the agent did his due diligence and verified that the home was in fact a 4 bedroom 2.5 bath home with the additional 450 square feet.  Otherwise, the agent and seller may find themselves in legal trouble as soon as the new buyer recognizes the discrepancy. 

Recommendations For Sellers

1. Price the home according to its verifiable size.
2. If there is a discrepancy, hire a licensed appraiser to measure the home and provide the appraiser’s  information to any prospective buyers.
3. Disclose any alterations done to the property (whether you did them or not).
4. Direct any buyers to the appropriate building/planning office so they can do their own due diligence. 
5. Clarify everything about the property before putting the home on the market for sale. 

Remember, buyers will buy almost anything as long as the problems are disclosed up front.  However, buyers get squeamish when they are hit with a surprises. 

On Monday I sat through a 2+ hour legal forum put on by out local real estate board that featured Stan Smith, attorney for Alain Pinel Realtors, Bill Jansen attorney for Cashin Company, Ron Rossi, attorney for Intero Real Estate and Victoria Naidorf, Attorney for Coldwell Banker.  The topic was Risk Management and how to protect one’s client and oneself from lawsuits. 

One issue that seller’s rarely think about when they are selling their home is Risk Management.  Usually a seller’s focus is on the money and/or how soon they will get it.   Disclosure law rarely factors into the equation.  Unfortunately, incomplete or inaccurate real estate disclosure increases a seller’s liability which can lead to costly and unnecessary lawsuits.

For those of you who are attempting to sell your property yourself (for sale by owner) and not employing the services of an experienced real estate professional, be aware!  Given that I have found that many real estate professionals don’t understand the disclosure process, it is less likely that you will.  The liability for full disclosure falls solely on your shoulders.  Do it incorrectly and it might be a very expensive lesson.

Many uninformed sellers (and short sighted real estate agents) look at disclosure documents as marketing pieces used to make the property more saleable.  Adjectives like “minor ponding,” “hairline cracks,” and “slight traffic noise,” are used to describe a garage that floods annually, a shifting foundation, and a house backs up to a major freeway.  In good times, these adjectives are sometimes overlooked.  Today, they are the foundation (pun intended) of an expensive lawsuit.

Now, I am not a real estate attorney, nor do I play one on T.V.  However, I do have 15+ years experience in selling homes and making sure that I don’t put my clients in a situation that might cost them down the line.  These are some of the steps that I use to make sure that my client is protected:  Note: you should check with your own real estate agent for their recommendations.  For those going it alone, I would strongly recommend talking with a real estate attorney (not your brother’s room mate who is a Trust and Wills attorney).

• Disclose everything.  As a seller, if you are questioning whether or not an issue should be disclosed, the fact that you’re questioning it, probably means that you should disclose it.
• If you have any reports, inspections (regardless of age) on the property, included them as part of your disclosure.
• Don’t leave any questions on the disclosure documents blank.  It makes a buyer wonder what you are hiding.
• Complete the documents legibly and with the same pen (same ink color).  Illegible writing makes a buyer wonder what you are hiding.  Different colored inks could indicate that the disclosure information was changed or added after the fact.
• If there is a change or update to a disclosure, make sure it is put in writing.  Have it dated and acknowledged by the other side (e-mail works great for this).
• Complete all of the disclosure documents at the same time and give them to any potential buyer prior to a buyer writing an offer.

Your real estate professional should review the disclosure documents with you in order to get clarification on the issues contained in the disclosure documents.  If he/she doesn’t, ask him/her why.  If he/she hasn’t read your disclosures, how can he/she intelligently answer questions about your property.  Remember your agent has a fiduciary responsibility to maximize your sales price.  Your agent must do the things necessary to allow you to keep all proceeds from the sale of your home.  In addition to having a good marketing plan, web presence, experience, etc, a good real estate agent must do all the things necessary to keep you out of any future legal problems.