Home Purchase Disputes FAQ

California has the most comprehensive disclosure requirements in the nation under Civil Code Sections 1102-1102.17. Sellers of residential property with one to four units must provide buyers with a Transfer Disclosure Statement (TDS) detailing known material facts about the property's condition. The TDS requires sellers to disclose defects in the roof, plumbing, electrical, heating, foundation, and other structural components. Sellers must disclose environmental hazards including lead-based paint (for pre-1978 homes), asbestos, mold, and proximity to earthquake faults or flood zones.

Additional required disclosures include Natural Hazard Disclosure (NHD) statements regarding fire, flood, and seismic zones, Mello-Roos and special tax assessments, HOA information if applicable, and any deaths on the property within the past three years. The Real Estate Transfer Disclosure Statement must be provided as soon as practicable before transfer of title. Buyers have the right to cancel the transaction within three days of receiving disclosures delivered in person, or five days if mailed.

When sellers fail to disclose known defects in California, buyers have several legal remedies under Civil Code Section 1102.13 and common law. Buyers can pursue fraud claims if the seller intentionally concealed or misrepresented material facts about the property, which can result in compensatory damages for repair costs and diminution in value, plus potential punitive damages. Negligent misrepresentation claims apply when sellers carelessly made false statements. Breach of contract claims may be available if disclosure obligations were included in the purchase agreement.

Rescission allows buyers to undo the transaction entirely and recover the purchase price, though this remedy is typically available only when defects are severe and discovered relatively soon after purchase. To succeed, buyers must prove the seller knew or should have known about the defect, the defect was not disclosed, the buyer was unaware of the defect, and the buyer suffered damages. The statute of limitations is generally three years for fraud and four years for written contract claims, with discovery tolling potentially extending these periods.

The inspection contingency period, typically 17 days in the California Association of Realtors purchase agreement, provides crucial protections for buyers. During this period, buyers have the right to conduct physical inspections of the property including general home inspection, roof inspection, pest inspection, pool and spa inspection, chimney inspection, and specialized inspections for mold, radon, or other concerns. Buyers can review all seller disclosures and request additional information about disclosed issues.

If inspections reveal problems, buyers can request repairs, request credits toward closing costs, renegotiate the purchase price, or cancel the transaction entirely and receive their deposit refund. To cancel based on inspections, buyers must provide written notice before the contingency deadline. If buyers fail to actively remove contingencies or cancel before the deadline, the standard CAR contract may allow sellers to issue a Notice to Buyer to Perform, giving buyers additional time to act. Buyers should never waive the inspection contingency without fully understanding the risks.

California law and standard purchase agreements allow buyers to cancel and recover their deposit under specific circumstances. Buyers can cancel within contingency periods, including the inspection contingency, loan contingency, and appraisal contingency, by providing written notice before deadlines expire. Cancellation rights also exist within three to five days of receiving certain disclosures. Seller breach, such as failure to deliver clear title or meet contractual obligations, allows buyers to cancel and recover deposits. If the loan contingency was not removed and financing falls through, buyers typically can cancel.

When buyers properly exercise cancellation rights, the deposit must be returned. If sellers dispute the cancellation, the standard CAR purchase agreement includes a dispute resolution process. Deposits are typically held in escrow, and both parties must authorize release. If parties cannot agree, mediation followed by arbitration or litigation may be necessary. Buyers who cancel improperly or without contractual basis may lose their deposit as liquidated damages, typically limited to 3% of the purchase price for residential properties under Civil Code Section 1675.

California imposes various limitation periods for claims arising from home purchases. Written contract claims, including breach of the purchase agreement, have a four-year statute of limitations under Code of Civil Procedure Section 337. Fraud claims have a three-year limitations period under Section 338(d), but the period does not begin until the buyer discovers or should have discovered the fraud through reasonable diligence. For construction defects in new homes, California Civil Code Section 896 establishes specific limitation periods: one year for fit and finish issues, two years for plumbing, electrical, and appliances, four years for fire protection systems, and ten years for structural and foundation defects.

Negligence claims generally have a two-year limitation under Section 335.1. Claims against real estate agents for breach of fiduciary duty have a two-year limitation period. The discovery rule can toll limitations periods when defects were hidden or could not reasonably have been discovered. Buyers should act promptly upon discovering problems, as delay can result in loss of rights.

California provides specific protections for new home buyers under the Right to Repair Act, Civil Code Sections 895-945.5. This comprehensive statutory scheme establishes building standards and a mandatory pre-litigation process before homeowners can sue builders. The Act covers defects in foundation, framing, roof, plumbing, electrical, exterior walls, windows, doors, and other building components. Before filing a lawsuit, homeowners must provide the builder with written notice of claimed defects. The builder has the right to inspect the property, offer repairs, and attempt to resolve claims without litigation.

If the builder's offer is inadequate, homeowners can proceed with litigation. Available remedies include cost of repair, diminution in property value, relocation costs during repairs, and attorney fees if the builder's offer was unreasonable. Builders often provide express warranties in addition to statutory protections. Common law claims including negligence and breach of contract may also be available. The statute of limitations varies by defect type as discussed above, so prompt action is essential.

An as-is clause in a California purchase agreement affects but does not eliminate buyer rights. The as-is provision means the seller is not obligated to make repairs discovered during inspections, and the buyer agrees to accept the property in its current condition. However, an as-is clause does not excuse seller disclosure obligations. Under Civil Code Section 1102.4, sellers must still provide required disclosures regardless of any as-is language, and sellers cannot use an as-is clause to shield intentional fraud or concealment of known defects.

If the seller knew about a material defect and failed to disclose it, the buyer can still pursue fraud claims even with an as-is clause. The as-is clause also does not waive the buyer's right to conduct inspections or to cancel during the inspection contingency period if unacceptable conditions are discovered. Courts have consistently held that as-is clauses do not protect sellers from liability for active concealment or fraud. Buyers should still conduct thorough inspections before removing contingencies, as the as-is clause shifts risk of unknown defects to the buyer.

When a California home appraises below the agreed purchase price, buyers have several options depending on their purchase agreement terms. If the standard CAR contract was used and the appraisal contingency was not waived, buyers can cancel the transaction and receive their deposit back if the property does not appraise at the purchase price. Alternatively, buyers can attempt to renegotiate with the seller for a price reduction to match the appraised value. Buyers may also proceed by paying the difference between the appraised value and purchase price in cash, since lenders will only loan based on the appraised value.

Some buyers request a reconsideration of value, providing the appraiser with additional comparable sales or property features that may have been overlooked. In competitive markets, many buyers waive the appraisal contingency, which means they must make up the difference in cash or risk losing their deposit. Before waiving this protection, buyers should understand the financial risk. The appraisal protects the lender's interest, but also serves as an independent assessment of market value for the buyer.

Discovering undisclosed defects after closing requires prompt action to preserve your legal rights. First, document everything thoroughly, including photographs, videos, and written descriptions of the defects. Obtain professional inspections and repair estimates from licensed contractors to establish the nature and extent of problems. Review all disclosures you received before purchase to determine what should have been disclosed. Gather evidence that the seller knew or should have known about the defects, such as prior inspection reports, repair records, or neighbor testimony.

Consider sending a demand letter to the seller detailing the undisclosed defects, your damages, and requesting compensation. Under California law, you may have claims for fraud, negligent misrepresentation, or breach of disclosure obligations under Civil Code Section 1102.13. The statute of limitations varies by claim type, but the discovery rule may toll the period until you knew or should have known of the problem. Consult with a real estate attorney to evaluate your claims and determine the best approach, whether negotiated settlement, mediation, or litigation.

California home inspectors can be held liable for negligence if they fail to meet the standard of care required by their profession. Under Business and Professions Code Sections 7195-7199, home inspectors must conduct inspections in accordance with established standards and report observable defects. To sue an inspector, you must prove the inspector owed you a duty of care (established by the inspection contract), the inspector breached that duty by failing to discover or report defects that a reasonably competent inspector would have found, the breach caused your damages, and you suffered actual damages.

However, recovery against inspectors is often limited. Inspection contracts typically contain limitation of liability clauses capping damages at the inspection fee, and California courts have generally enforced these provisions when not unconscionable. Inspectors are not responsible for latent defects hidden from view, conditions requiring specialist evaluation beyond general inspection, or areas that were inaccessible during inspection. The statute of limitations for professional negligence is generally two years. Review your inspection contract carefully and consult an attorney to evaluate the strength of potential claims.