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When selling your home, YOU are obligated to disclose problems that could affect the property's value or desirability. In most states, it is illegal to fraudulently conceal major physical defects in your property such as a basement that floods in heavy rains or a leaking roof. Many states now require sellers to take a proactive role by making written disclosures about the condition of the property. Generally, you are responsible for disclosing only information within your personal knowledge.
California sellers must fill out and give the buyers a disclosure form listing a broad range of defects -- such as a leaky roof, deaths that occurred within three years on the property, neighborhood nuisances such as a dog that barks every night, and more. In addition,
The State of California has requirements in which potential hazards from floods, earthquakes, fires, environmental hazards, and other problems, must be disclosed in a Natural Hazard Disclosure Statement. Also, the knowledge of hidden problems ranging from sex offenders in the neighborhood, using lead-based paint or an understanding that a golf ball may shatter a window has to be disclosed to potential buyers. The idea is that buyers should know what potential problems may occur from purchasing property in a given location.
Although not a requirement, sellers should think about getting a physical inspection of the property as well as a sewer inspection. This way, you’ll have a heads-up on any potential problems and can disclose them to future buyers. Problems laid out in the beginning are less likely to cause problems after escrow is opened.
If you have even the slightest question about whether or not to disclose something to potential buyers, avoid the potential for liability and tell all. Full disclosure of any property defects will help increase the buyer's confidence that you're dealing fairly. And it will protect you from legal problems later, such as buyers who want out of the deal or who claim damages suffered because YOU, the seller carelessly or intentionally withheld information about your property.