Last summer, Assembly Bill 968 went into effect requiring California homeowners who want to sell their property to disclose whether any room additions, structural modifications, or other alterations or repairs were performed by a contractor during the prior 18 months worth more than $1,000. This is aimed at those hoping to buy a property, renovate it, and quickly sell it for a profit (calling flipping)—and at those who would buy the flipped property.
Legally, sellers are required to disclosure anything about their property they know(or should reasonably be expected to know) that may influence whether a buyer would want to purchase the property. Anytime one of my REALTORs asks me whether to disclose something, my answer is yes. It’s always better for buyers to walk away before an escrow closes than come back with their lawyers after the escrow closes, seeking damages.
To prevent a souring of relations between buyers and sellers (and to protect sellers against buyers who get buyer’s remorse), the California Association of Realtors has created the Seller Property Questionnaire. It helps to determine the information a seller might forget to mention.
A trap many sellers fall into is that once a problem is fixed, it’s out of sight, out of mind. If the seller hired a contractor to address a leaky toilet and a little dry rot ten years ago and they haven’t had a lick of trouble since, why mention it on a disclosure form? The answer is that these kinds of repairs can alert potential buyers to faulty plumbing or additional dry rot.
It's important to know that homeowners are allowed to take on whatever do-it yourself projects they choose and are not required to hire a contractor. However, as of the beginning of 2025, as soon as labor and materials add up to more than $1,000 (up from $500), a contractor’s license is legally required for anyone you hire. Even if the homeowner doesn’t hire a licensed contractor when they should, they still need to disclose the work when it comes time to sell.
AB 968, also called the flipper rule, requires disclosure of modifications if performed by a “contractor,” which in this case means someone under contract to do home repairs or renovations (not necessarily a licensed building contractor). As soon as you hire someone, he’s a contractor (because you have a verbal or written contract)— could be the guy next door or it could be a licensed contractor.
So what happens if a seller doesn’t disclose legally required information? It depends.
When buyers don’t have any trouble with their homes and nothing pops up requiring them to sell quickly (like a divorce or out-of-state job opportunity), a lack of disclosures may not cause any hassle. But we don’t disclose information in anticipation of everything going well. We disclose information for when things go sideways.
Damages for non-disclosure are based on the difference between purchase price and market value at closing, and not necessarily on the cost of repairing a specific defect. But the cost of repairs is typically taken into consideration.
Buyers come looking for damages in two cases: 1. Defective or botched repairs cause problems, or 2. They no longer want the property, either because the housing market makes the property less valuable or because they want to unload it quickly.
A few years ago, one of my agents sold a property and disclosed everything they could think of, including alerting the buyer to a repair intended to keep water out of a basement that wasn’t 100% guaranteed to prevent future trouble. After the escrow closed, the buyer took an out-of-area job and needed to sell fast in a tough housing market. Because there had, in fact, been some water intrusion, the buyer tried to get the seller to pay for damages (even though the original seller no longer owned the home). Because the REALTOR had required the buyer to sign a disclosure confirming he knew about the potential water intrusion, the seller’s liability was limited.
So, a word to the wise: disclose, disclose, disclose. And, here’s my shameless plug: hire a REALTOR who knows the legal, ethical, and financial ways to help you complete a real estate transaction, so everything is above board (and you’re protected against unscrupulous actors).
If you have questions about property management or real estate, please contact me at [email protected] or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.
The opinions expressed here are his and do not necessarily represent his affiliated organizations.
