Legal Documents Required To Sell a House in California


Whether you have hired a listing agent or you are selling your house by yourself
(FSBO — for sale by owner), the process is the same, except you will be saving the
realtor commission by 2.3% to 2.7% (an average commission based on 2020
survey report of 500+ real estate agents). Few details can vary depending on the
state you are living in.

When you are selling a house in California, it is essential to make a list of
numerous legal document requirements before/while putting the house on the
market list to help the process go smoothly and to avoid any problems with the
legal obligations to the buyer past the sale.

Disclosing each detail about the residential property

As per the California Civil Code 1102 disclosure, all the property sellers in
California must disclose their residential property in writing details, whether the
house is a mobile home, high-rise condo unit, or standalone home. What upgrade
needs to get it done, any possible repairs, etc. The potential buyer needs to know
all the details to evaluate the house and make a decision.

The main reason for the disclosure is to remind the Californian house seller that
they need to be transparent for their house selling; otherwise, they could sue for
hiding the problems.

PTR — Preliminary Title Report

Preliminary Title Report (PTR) is an important document that authenticates legal
ownership of the residential property. When you put your house for sale, the title
company conducts a little research to verify the title is clear. Then they put
together the reports and issue title insurance to the house buyer.

For instance, some house owners might restrict adding something extra from an
additional unit like maximum height of the outer fences, constructing other lodge
units, etc. These restrictions have to be mentioned in the report, so the buyer
should be aware before buying the house.

All the house seller need to do the transaction via Escrow

All the house sellers and buyers in California need to do all their monetary
transactions via Escrow. Escrow reduced the fraud risk by working as a trusted
third-party agent that collects the funds, holds the amount safely, and releases the
funds only when both parties  come to terms. When the buyer transfers the
funds to an escrow account, the seller will notify the seller that the funds are
secured in an escrow account once the payment is verified.

In Northern California, the title company majorly acts as an escrow agent to ensure
the transactions are secure. While in Southern California, an independent escrow
company is performing all the escrow functions.

The house seller needs to take care of certain things. In contrast, both the
parties — seller and the buyer may negotiate and choose an escrow holder; the
the seller needs to be aware that the Real estate Settlement Procedure Act (RESPA)
prohibits the seller from forcing the buyer to use a particular escrow service for the

Transfer Tax

House sellers in California may need to pay specific tax such as transfer tax. When
the house is transferred from the old owner (the seller) to the new owner’s (the
buyer) name, a document must be filled and signed at the country recorder’s office
to show its change in ownership. The county recorder’s office imposed a transfer
the tax which is either 0.11% or $1.10 for every $1000 of the property sales price.

In Northern California, the buyer pays the transfer tax, while in Southern
California, the transfer tax is paid by the seller.

Final Thoughts

When you are selling your house, it is necessary to prepare all the above legal
documents and provide the buyer with all the disclosures. The disclosure
the agreement serves as a trust bond between the buyers and the seller that can
serve as a legal document in the future in case the seller failed to mention
anything in the house, which caused the new owner trouble.

Image by aymane jdidi from Pixabay