Selling a home in California puts the legal risk on the seller. Buyers inherit a property; sellers inherit liability for what they failed to disclose about it, and that exposure survives the closing. California imposes some of the broadest residential disclosure duties in the country, plus a withholding obligation at closing and a specific set of remedies if the buyer walks. Bay Legal, P.C. represents California sellers on disclosure compliance, contract terms, buyer default, and closing.
Definition: A residential sale transfers title to a one-to-four-unit dwelling, subject to California’s statutory seller disclosure, withholding, and contract rules.
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This review reflects one client’s experience. Results depend on the facts and law of each individual case and do not guarantee or predict a similar outcome in your matter.
What must you disclose when selling a home in California?
More than most sellers expect, and the duty is personal to you rather than delegable to your agent. The centerpiece is the Real Estate Transfer Disclosure Statement required by Civil Code section 1102 and following. On most one-to-four-unit sales you must complete it yourself, disclosing known defects in the structure, systems, appliances, and land, along with nuisances, litigation, and conditions affecting the property.
Riding alongside it:
- Natural hazards. Under Civil Code section 1103, whether the property sits in a flood zone, a very high fire hazard severity zone, an earthquake fault zone, or a seismic hazard zone.
- Deaths on the property. Under Civil Code section 1710.2, a death on the property within the prior three years is generally material and must be disclosed.
- HOA documents. If the property is in a common interest development, Civil Code section 4525 requires the seller to provide the governing documents, budget, reserve study, and assessment information. Ordering these takes time, so start early.
- Lead paint on pre-1978 homes under federal law, plus city and county ordinances that vary — point-of-sale inspection and retrofit requirements are common and local.
Two points sellers routinely get wrong. First, disclosure is about what you know, not what you are certain of. A repaired leak is still a disclosable history. Second, “as-is” does not switch the duty off — an as-is clause allocates repair responsibility, it does not excuse a failure to disclose a known material defect. Under-disclosing to protect a sale is the single most reliable way to convert a completed transaction into litigation eighteen months later.
Are you exempt from the disclosure statement?
Some sellers are. Trustees and executors who never occupied the property are generally excused from the transfer disclosure statement, as are certain transfers by operation of law and some foreclosure-related sales. Exemption from the form is narrower than it sounds: it does not excuse fraud, and it does not excuse the separate natural hazard disclosure in every case. If you are selling inherited property or property held in a trust, confirm which exemptions actually apply to you before relying on any of them.
What are your remedies if the buyer breaches?
Deals fall apart for ordinary reasons: financing collapses, the appraisal comes in low, the inspection turns something up, or the buyer changes their mind. What you can do about it depends on the contract and on whether contingencies were still in place.
Keep the deposit. Where the buyer defaults after removing contingencies, the deposit is generally forfeit as liquidated damages. On residential property of four units or fewer that the buyer intended to occupy, Civil Code section 1675 presumes a liquidated damages clause valid up to 3% of the purchase price, and presumes amounts above that invalid unless the seller proves otherwise.
Sue for specific performance. Under Civil Code section 3387, breach of an agreement to transfer real property is presumed not adequately remedied by money, which is why courts will order a buyer to complete a purchase. The presumption is conclusive for a single-family dwelling the buyer intended to occupy. In practice, sellers pursue this less often than buyers do, because reselling is usually faster than litigating.
Sue for damages. A conventional breach claim covers losses beyond the deposit — carrying costs, a lower resale price, and the expense of relisting. This is the route when the deposit does not cover the harm.
Which remedy is right depends on the market and on how quickly you need to be out. A seller in a rising market usually relists. A seller in a falling market has a stronger reason to hold the buyer to the contract. Disputes are filed in the Superior Court of the county where the property sits.
What is withheld from your proceeds at closing?
California requires withholding on the sale of real property under Revenue and Taxation Code section 18662, generally 3⅓% of the total sale price, remitted to the Franchise Tax Board through escrow. Exemptions exist — the most common is the sale of a principal residence — but they must be claimed on the certification form at closing, not afterward. Sellers who are not California residents should expect the withholding to apply. Foreign sellers face a separate federal withholding obligation under FIRPTA on top of the state one.
This surprises sellers who budgeted from the sale price rather than from net proceeds. Confirm your exemption status before you sign escrow instructions.
How does a California home sale work, step by step?
- Assemble the disclosure package. Before listing, not after an offer. HOA documents in particular take time to obtain.
- List and receive offers. The highest offer is not always the best one. Contingencies, financing strength, and closing timeline often matter more than price.
- Accept and open escrow. The signed agreement fixes every deadline that follows; the buyer’s deposit goes to the neutral escrow holder.
- Deliver disclosures and respond to inspections. Buyer requests for repairs or credits get negotiated here.
- Clear title objections. Old liens, an unreleased deed of trust, or a recorded easement may need resolving before closing.
- Buyer removes contingencies. The point at which the deposit becomes meaningfully at risk for the buyer, and the deal becomes meaningfully real for you.
- Close, record, and receive proceeds. The grant deed records with the county recorder, withholding is remitted, and the balance disburses. Recording practice is the same in Santa Clara, San Mateo, Alameda, and Los Angeles Counties, though local transfer taxes differ significantly.
Who handles residential sales at Bay Legal?
Clarence Olson handles real estate and landlord-tenant matters. Robert Brian Ponziano, a senior attorney and licensed California realtor, leads real estate transactions and brings the brokerage perspective to disclosure and contract questions. Where a sale produces a claim — a buyer who refuses to close, a deposit dispute, or a post-closing disclosure allegation against you — the matter moves to the litigation group, where Stephen Moses and Jason Rose handle real estate litigation under managing attorney Jayson R. Elliott.
Bay Legal, P.C. represents sellers statewide from offices in Palo Alto and Los Angeles, with flat-fee pricing on many transactional matters.
Clarence and the paralegal team are so professional, warm, kind and astute. Such a pleasure working with them through a relatively difficult situation.
This review reflects one client’s experience. Results depend on the facts and law of each individual case and do not guarantee or predict a similar outcome in your matter.
Frequently Asked Questions
What do I legally have to disclose when selling a house in California?
Known material facts affecting the property’s value or desirability. The transfer disclosure statement under Civil Code section 1102 covers defects in the structure, systems, and land, plus nuisances and litigation. Separate disclosures cover natural hazards, deaths on the property within three years, HOA documents, and lead paint on pre-1978 homes.
Does selling a home ‘as-is’ remove my disclosure obligation?
No. An as-is clause allocates who pays for repairs. It does not excuse failing to disclose a known material defect. Sellers who rely on as-is language to stay quiet about a known problem are the ones most likely to face a claim after closing.
Do I need a lawyer to sell my house in California?
No, and most California sales close through escrow without one. Counsel is worth it when you are selling from a trust or estate, the property has a title defect or unpermitted work, the buyer is asking you to carry financing, a prior claim exists, or the buyer has already defaulted.
Can I keep the buyer’s deposit if they back out?
Only if they defaulted rather than cancelling under an active contingency. On residential property of four units or fewer intended for the buyer’s occupancy, Civil Code section 1675 presumes a liquidated damages clause valid up to 3% of the purchase price. Amounts above that are presumed invalid unless you can prove otherwise.
How much is withheld from my sale proceeds?
California generally withholds 3⅓% of the total sale price under Revenue and Taxation Code section 18662, remitted through escrow to the Franchise Tax Board. Exemptions apply, most commonly for the sale of a principal residence, but they must be claimed on the certification at closing rather than afterward.
Related Questions
Do I have to disclose a death that happened in the house?
Generally yes, if it occurred within the prior three years. Civil Code section 1710.2 sets that window. Deaths older than three years need not be volunteered, but a direct question from a buyer cannot be answered falsely.
What HOA documents do I have to provide?
Civil Code section 4525 requires the governing documents, the current budget, the reserve study, assessment and delinquency information, and any pending litigation disclosures. Request them from the association early — turnaround is often slower than the escrow timeline allows.
Can the buyer sue me after closing?
Yes, most commonly for failing to disclose a known material defect. A claim generally requires that you knew, that it was material, that you did not disclose, and that the buyer could not reasonably have discovered it. Thorough disclosure before closing is the only reliable defense.
Should I get an inspection before I list?
Often, yes. A pre-listing inspection tells you what you would otherwise learn during the buyer’s contingency period, when you have less leverage. Note that what it finds becomes knowledge you then have to disclose.
Talk to a California real estate attorney before you list
Disclosure problems are cheap to fix before listing and expensive to fix after closing. To review a disclosure package, a listing agreement, or a buyer default with a Bay Legal attorney, call the office nearest you or email intake.
I appreciated Clarence Olsen’s attention and responsiveness. I felt heard and supported.
This review reflects one client’s experience. Results depend on the facts and law of each individual case and do not guarantee or predict a similar outcome in your matter.
Bay Legal, P.C. — serving California statewide
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667 Lytton Ave Ste 3, Palo Alto, CA 94301
Southern California office
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Intake: intake@baylegal.com
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Website: https://baylegal.com
This page is general information about California law and does not constitute legal advice or create an attorney-client relationship. For advice on your specific situation, contact a licensed California attorney.