BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Broker Risk Management (“BRM”) held its fall risk management webinar on October 6, 2025. The webinar will be reshown on October 13, 2025. The following are questions and answers from that webinar.
QUESTION NO. 1: During the webinar, it was stated that buyers are declining to close their escrows based on sellers failing to complete repairs set forth in the contract. I understood that a verification of condition was not a contingency. Therefore, how are buyers declining to close the escrow?
ANSWER: You are correct that a verification of condition is not a contingency. However, a seller’s agreement in writing, which is made part of the contract, is a condition of that contract. Therefore, if the seller does not fulfill the seller’s promises (for example, in the CAR Request for Repairs), a buyer has a right to delay the close of escrow until the seller performs. If this situation arises, do not advise the buyer to stop the close of escrow. Instead, refer the buyer a qualified California real estate attorney as the buyer’s rights to stop the escrow involves a legal analysis based on the facts in each case.
QUESTION NO. 2: I was taught that a contract is not formed until the buyer puts their deposit into escrow. Is this accurate?
ANSWER: No. A contract is formed when both parties sign the contract. The required “consideration” for the enforceability of the contract is the mutual promises of the parties (i.e. buyer agrees to pay seller the purchase price and seller agrees to deliver the title to buyer.) The buyer’s initial deposit is a condition of the contract.
QUESTION NO. 3: You discussed the disclosure of a creek. Shouldn’t the creek issues be disclosed in the Natural Hazard Disclosure Statement?
ANSWER: Not necessarily. Any disclosures in the Natural Hazard Disclosure Statement do not replace an agent’s obligation to advise their clients with regard to the risks affiliated with the existence of a creek.
QUESTION NO. 4: What are the risks to a buyer who purchases property where at least one of the structures is built partially or totally without permits?
ANSWER: The local building department could require that the owner of a property with unpermitted construction either modify the structure to comply with local Building Codes or remove the structure altogether. If the structure is significant (e.g., an accessory dwelling unit), the loss could be significant. In addition, an unpermitted structure, such as ADUs, cannot legally be rented without permits and compliance with the local Building Code.
QUESTION NO. 5: With regard to seeking clarity in the Transfer Disclosure Statement and Seller Property Questionnaire, what if the seller’s agent replies to our request for clarification and the answer is incomplete or unclear. How do we respond or handle the situation?
ANSWER: Answers to disclosure questions should not come from the listing agent; answers should come from the seller. You should continue to ask the questions until your client, the buyer, is satisfied with the response. At the point where the buyer says, “I no longer have a concern” or “My concerns have been addressed,” you can stop asking for clarity and document buyer’s response in the transaction file.
QUESTION NO. 6: Are disclosures required by a for sale by owner (“FSBO”)?
ANSWER: The law is the same for a FSBO seller as it is for a seller represented by an agent. A seller is still required to provide a Transfer Disclosure Statement under the law, a Seller Property Questionnaire under the Residential Purchase Agreement, and any other statutorily required disclosures (i.e., Natural Hazard Disclosure Statement, Fire-Hardening Disclosure, if applicable).
QUESTION NO. 7: Does a property owner who has not lived in the home for over 40 years still have to fill out the Transfer Disclosure Statement and Seller Property Questionnaire?
ANSWER: Yes, unless an exemption applies, a seller is required to provide full disclosures to a buyer. The ONLY TDS exemption for a seller who has not occupied the property is for the narrow situation where seller is a trustee of a trust and all the following conditions are met: (1) the trust is revocable; (2) the trustee is a living natural person; and (3) either the trustee has not occupied the property in the past year or was previously on title in their own name. Otherwise, the fact that a seller has not occupied the property for any length of time is not relevant to seller’s disclosure obligations. See the BRM Trustee TDS Exemption Chart accompanying this tip.
QUESTION NO. 8: What if a seller does not want you to disclose a material defect?
ANSWER: A seller objecting to the disclosure of a fact is not an excuse for failing to disclose that fact. If you are taking the listing and are not in escrow, you need to consider whether you wish to continue with this listing. If you have knowledge of a material fact and fail to disclose it, even at the instruction of a seller, you could be liable to the buyer for fraud, and be subject to sanction of your license by the DRE up to and including revocation. If you are in escrow and learn of a material fact and the seller does not want you to disclose that fact, you should immediately discuss the issue with your manager. Your manager can discuss the issue with BRM. We may decide to disclose that fact over the objections of the seller given that the law requires that agents disclose all material facts of which they are aware.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is an attorney-client privileged communication for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management PC. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry but rather are intended to suggest good risk management practice.