You Moved In and Found Problems Nobody Disclosed. Now What?

Almost every residential resale in California closes using a California Association of REALTORS Residential Purchase Agreement and Joint Escrow Instructions, with a licensed agent on each side and a stack of disclosures that runs well past a hundred pages. The buyer signs a Real Estate Transfer Disclosure Statement, a Seller Property Questionnaire, a Natural Hazard Disclosure, an agent visual inspection disclosure, and a series of advisories telling the buyer to investigate everything independently. Then escrow closes, the buyer takes possession, and within weeks the first rain reveals a roof that leaks in three places, a bathroom remodel that was never permitted, or a slab crack running the length of the family room that, it turns out, was sitting under new carpet.

The question that follows is always the same. Who is responsible, and what can I do about it? The answer in California is more favorable to buyers than in most states, but it is also more procedurally unforgiving. Different defendants owe different duties, deadlines are short and vary, and the purchase agreement itself contains a provision that can eliminate a buyer's right to recover attorney fees before the case ever gets to the merits. What follows is a practical map.

1. Start by Separating the Defect from the Disclosure

A defect by itself is not a claim. California does not give a buyer of an existing home a warranty that the house is in good condition. What California gives the buyer is a right to accurate information. In almost every case, the claim is not that the roof leaks. The claim is that somebody knew the roof leaked, or should have discovered that it did, and failed to disclose it.

That distinction drives everything. Before evaluating remedies, a buyer should be able to answer three questions about each problem discovered. First, is this condition something the seller knew about, and what is the evidence of that knowledge? Second, was this condition visible or reasonably discoverable during the inspection period, and if it was, what did the buyer's inspection reports actually say? Third, was this condition disclosed somewhere in the transaction file, perhaps in a report the buyer received but did not read closely? Claims fail far more often on the second and third questions than on the first.

2. The Seller's Disclosure Duties Are Statutory and They Cannot Be Waived

For residential property with one to four units, Civil Code sections 1102 and following require the seller to deliver a Real Estate Transfer Disclosure Statement on the statutory form set forth in section 1102.6. The statute is mandatory and not negotiable. Any waiver of the article is void as against public policy, and the Legislature expressly codified the holding of Loughrin v. Superior Court (1993) 15 Cal.App.4th 1188 that delivery of a Transfer Disclosure Statement may not be waived in an as-is sale. A seller who sells as-is still has to tell the truth on the form.

The remedy provision is section 1102.13. A transfer is not invalidated solely because someone failed to comply with the article, but any person who willfully or negligently violates or fails to perform a duty under the article is liable to the buyer for actual damages. Note the negligence standard. A seller does not have to lie deliberately to be liable under the statute. Answering no to a Transfer Disclosure Statement question that a reasonable seller in the same position would have answered yes is enough. There is a corresponding safe harbor at section 1102.4 for errors or omissions in information that the seller was not personally aware of, and that was based on information timely provided by public agencies or by licensed experts, but it is narrower than sellers usually assume.

The disclosure package has also grown considerably in recent years, and each new item is a potential claim. Civil Code section 1102.6h, effective July 1, 2024, requires a seller who resells a single-family residence within eighteen months of acquisition to disclose all room additions, structural modifications, other alterations, and contractor-performed repairs; identify each contractor with contact information; and provide copies of permits or explain how the buyer can obtain them. That statute exists precisely because of the cosmetic flip that hides a structural problem. Three additional disclosure obligations took effect January 1, 2026: section 1102.6k requires the seller to disclose actual knowledge of tobacco or nicotine residue or a history of smoking or vaping on the property, including vaping; section 1102.6i requires delivery of an advisory recommending a professional inspection of the electrical system, including the main panel, subpanels, and wiring, for buildings more than three years past the certificate of occupancy; and section 1102.6j requires disclosure of known state or local restrictions on the future replacement of gas-powered appliances transferring with the property. The statutory Transfer Disclosure Statement form itself was not amended to add these items, so, in practice, they appear on the Seller Property Questionnaire or a supplemental checklist. A buyer reviewing the file after closing should confirm that they were made at all.

Independent of the statutes, the common law duty survives. Since Lingsch v. Savage (1963) 213 Cal.App.2d 729, a seller of residential property has been required to disclose material facts known to the seller but not known to, or reasonably discoverable by, the buyer. An as-is clause does not defeat that duty when the seller actively concealed the condition, as Calemine v. Samuelson (2009) 171 Cal.App.4th 153 confirms in the water intrusion context. The mirror image is also true, and buyers should hear it early: RSB Vineyards, LLC v. Orsi (2017) 15 Cal.App.5th 1089 holds that a seller has no duty to disclose what the seller does not know and no affirmative duty to investigate the property to find things to disclose. And where a defect was disclosed, even generally, a buyer who elects to close anyway will have difficulty, as Peake v. Underwood (2014) 227 Cal.App.4th 428 illustrates.

3. The Agents Owe Duties, but Not the Same Duties as the Seller

Both agents in the transaction are potential defendants, and the analysis differs for each. Civil Code section 2079, which codified Easton v. Strassburger (1984) 152 Cal.App.3d 90, imposes on a listing broker and any cooperating broker a duty to the prospective buyer to conduct a reasonably competent and diligent visual inspection of a one-to-four-unit residential property and to disclose all facts materially affecting value or desirability that such an investigation would reveal. The agent is chargeable with what a competent inspection should have revealed, not merely with what the agent actually noticed. In C.A.R. practice, this duty is documented on the Agent Visual Inspection Disclosure, and a thin or boilerplate AVID on a property with visible distress is often the most productive document in the file.

The duty has real limits, and buyers should understand them before spending money. Section 2079.3 confines the inspection to areas that are reasonably and normally accessible. It does not extend to areas off the site, to common areas in a planned development where a statement is already provided, or to public records and permits. Section 2079.5 preserves the buyer's duty to exercise reasonable care to protect himself, including with respect to facts that are known to or within the buyer's diligent attention and observation. And the Section 2079 duty is a limited statutory duty rather than a fiduciary one. See Michel v. Moore & Associates, Inc. (2007) 156 Cal.App.4th 756.

The buyer's own agent is a different matter. That agent is a fiduciary, and the fiduciary duty is broader than the statutory inspection duty. It reaches advice, the framing of contingency decisions, the handling of red flags in inspection reports, the recommendation of vendors, and the agent's own conflicts. Where the same brokerage represented both sides, the dual agency disclosure and confirmation requirements of Civil Code sections 2079.13 through 2079.24 become a focus, and so does the question of what the brokerage knew from the listing side. It is also worth remembering that the disclosure duty does not stop when the contract is signed. Ryan v. Real Estate of the Pacific, Inc. (2019) 32 Cal.App.5th 637 held that a listing agent's duty to disclose material facts extends to information the agent learns during escrow, before close.

One caution specific to the 2026 disclosure statutes. Section 1102.6k makes third-hand smoke disclosure the sole responsibility of the seller, but a licensee who has actual knowledge of a material fact, including a noticeable odor, still has an independent duty to disclose it. The same logic applies broadly. Assigning a disclosure obligation to the seller by statute does not extinguish an agent's separate obligation as to facts the agent actually knows.

4. The Home Inspector and the Other Vendors

Buyers are often surprised to learn that their own inspector may be the most exposed party in the case. Business and Professions Code sections 7195 through 7199 govern home inspectors. Section 7196 imposes a duty to conduct a reasonably competent and diligent inspection and to prepare a written report. Section 7198 is the most important provision: contractual provisions purporting to waive that duty or to limit the inspector's liability to the cost of the inspection report are contrary to public policy and invalid. The one-page limitation-of-liability clause in the inspection agreement, which almost every inspector uses, does not do what it says.

Section 7199 sets an outside limit of four years from the inspection date for an action for breach of duty arising from a home inspection report. In Moreno v. Sanchez (2003) 106 Cal.App.4th 1415, the court applied the discovery rule to accrual and refused to enforce a contractual shortening that measured accrual from the inspection date rather than from discovery. Pest control operators, roofers, and contractors retained by the seller before the sale, as well as sewer scope and geotechnical vendors, are potential parties, and the seller's own pre-sale repair contractor is often the one who knows exactly what was covered up.

5. If the House Is Newer, the Builder May Be the Real Defendant

For homes originally sold new after January 1, 2003, the Right to Repair Act, codified in Civil Code sections 895 through 945.5 and commonly called SB 800, sets functionality standards in section 896 covering water intrusion, structural, soil, plumbing, electrical, and other components, and establishes a mandatory prelitigation notice and opportunity to repair procedure in sections 910 through 938. McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241 held that the Act provides the exclusive remedy for construction defect claims in new residential construction and that the prelitigation procedure must be followed. Filing suit without complying invites a stay.

Two timing rules interact, and both are easy to miss. The Act's component-specific limitations periods run from the close of escrow to the original purchaser, not from the resale to your client, so the clock does not restart when the home changes hands. Code of Civil Procedure section 337.15 then imposes a ten-year statute of repose from substantial completion for latent deficiencies, and section 337.1 imposes a four-year statute for patent deficiencies. A buyer who purchases a nine-year-old home and discovers a soils problem may have a builder claim, but not for long.

6. What to Do in the First Thirty Days

The single most common way a strong case is weakened is by repairing the defect before documenting it. A buyer living with an active leak understandably wants it fixed, and there is a duty to mitigate, but the sequence matters. Photograph and video everything before anyone touches it. Retain a qualified expert, not merely a contractor with a bid, and have the expert document the condition, its probable age, and any evidence of prior repair, concealment, or cosmetic covering. Evidence that a stain was painted over or a crack was patched and re-textured often converts a disputed negligence claim into a concealment claim with punitive exposure.

At the same time, assemble the record. Request the complete transaction file from both brokerages, including the agent's notes, emails, and text messages. Pull the MLS history for the property, including prior listing periods, listing photographs, and agent remarks, which often describe the very condition the seller later denied knowing about. Pull permit and code enforcement records from the city or county building department. Obtain prior escrow files if the property was in escrow and fell out, because inspection reports from a prior failed transaction are often in the seller's possession and were required to be disclosed. Consider a CLUE report on prior insurance claims. Promptly notify the buyer's title insurer, homeowner's insurer, and home warranty administrator, because delayed notice is itself a coverage defense.

7. The Purchase Agreement Controls How the Dispute Must Begin

This is where cases are lost before they even start. The C.A.R. Residential Purchase Agreement contains a dispute resolution provision with two parts. Mediation is mandatory and applies whether or not the arbitration provision was initialed. Arbitration is optional and binds the parties only if both initialed it separately. Paragraph numbering has changed across form editions, appearing at paragraphs 30 and 31 in the December 2022 edition and at other numbers in earlier and later versions, so counsel should read the executed form rather than rely on a remembered paragraph number.

The consequence of ignoring the mediation clause is severe. A party who commences an action without first attempting mediation, or who refuses mediation after a request has been made, is not entitled to recover attorney fees, even if that party prevails. The prevailing party fee provision is what makes many of these cases economically viable, and it is forfeited by a procedural misstep that is easy to avoid. Recent revisions also require a party who files a court action within a recognized exclusion to request a stay pending mediation or arbitration, either concurrently with or immediately after filing.

Two further points. The brokers are not automatically bound to arbitration; under the form they are bound only if they agree in writing, before or within a reasonable time after the claim is presented to them. That means a buyer can end up in arbitration against the seller and in superior court against the agents at the same time, which is an argument for coordinating the mediation demand across all parties at the outset. And certain matters are excluded from the mediation and arbitration provisions, including judicial or nonjudicial foreclosure, unlawful detainer, and the filing of a mechanic's lien or a lis pendens, so the exclusions should be checked before assuming any filing waives anything.

8. The Deadlines Are Short and They Are Not the Same for Every Defendant

A buyer who spends a year negotiating with a seller can walk into a limitations bar against the agents without ever realizing it. The periods that most often apply are these. Against a broker or salesperson for breach of the section 2079 duties, Civil Code section 2079.4 provides two years, running from the earliest of possession, close of escrow, recordation, or occupancy, whichever occurs first. Against anyone for fraud or intentional concealment, Code of Civil Procedure section 338, subdivision (d), provides three years from discovery of the facts constituting the fraud. Under the written purchase agreement, Code of Civil Procedure section 337 provides four years. For negligence causing property damage, section 338, subdivision (b), provides three years; for other negligence claims, section 339 provides two. Against a home inspector, Business and Professions Code section 7199 caps the period at four years from the inspection. For latent construction deficiencies, Code of Civil Procedure section 337.15 imposes an absolute ten-year repose from substantial completion.

Section 2079.4's two-year period is the one that catches people. It can expire while the parties are still exchanging repair estimates, and it runs from possession rather than from discovery of the defect. When a claim against an agent is realistically in play, the mediation demand should be sent early, and a tolling agreement should be requested in writing.

9. What Recovery Actually Looks Like

The two principal remedies are rescission and damages. Rescission under Civil Code sections 1689 and following unwinds the sale and restores the parties, but it requires prompt notice under section 1691 upon discovering the grounds and becomes practically unavailable once the buyer has lived in the home, made improvements, or waited. Rescission is a first-few-weeks remedy, not a first-few-months remedy.

Damages are the usual route. For fraud or deceit in the purchase of property, Civil Code section 3343 applies the out-of-pocket rule, measuring the difference between what the buyer paid and the actual value received, plus additional damages proximately caused. Where the claim is breach of fiduciary duty by the buyer's own agent, the broader measure of Civil Code section 3333 can apply, and Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555 permits benefit-of-the-bargain recovery in that setting. In practice, courts and mediators gravitate to cost of repair where repair is feasible, with diminution in value and stigma damages argued where it is not. Intentional concealment supported by clear and convincing evidence opens the door to punitive damages under Civil Code section 3294, which is frequently the difference between a nuisance-value settlement and a real one.

Two practical realities deserve mention. First, collectability. A seller who has moved out of state, spent the proceeds, and has no applicable insurance is a poor defendant regardless of how strong the liability case looks; agents and brokerages carry errors and omissions coverage and inspectors carry professional liability coverage, which is why those defendants often drive settlement value. Second, proportionality. A twenty-thousand-dollar repair does not justify a hundred-thousand-dollar litigation. Where the number is modest, mediation with a demand letter that lays out the evidence of knowledge is frequently the entire case, and small claims court, with a jurisdictional limit of $12,500 for individuals, is a legitimate option worth considering before anyone files a superior court complaint.

A Post-Closing Checklist

• • Photograph and video every condition before any repair, and preserve removed materials.
  • Retain a qualified expert to document the condition, its likely age, and any evidence of prior repair or concealment.