Selling a home in California carries more legal exposure for the seller than for the buyer. California imposes extensive statutory disclosure duties, layers a common law duty on top of them, and gives a buyer who discovers an undisclosed material defect a claim that can survive long after closing. Sellers who assume that “as is” ends the conversation are the ones who get sued.
There is also more money moving sideways than most sellers expect: state withholding on the sale price, transfer taxes that in some California cities are substantial, retrofit requirements, prorations, and — for anyone selling a long-held property — a capital gains calculation that California taxes at ordinary income rates. And selling from a trust or a probate estate follows an entirely different set of rules.
The Holmes Law advises California sellers on disclosure, contract and cancellation issues, withholding and tax questions, tenant-occupied sales, and sales by trustees and personal representatives.
The Disclosure Duty Is the Main Risk
California sellers of residential property of one to four units must generally provide a Real Estate Transfer Disclosure Statement under Civil Code section 1102 and following, plus a Natural Hazard Disclosure Statement under section 1103, Mello-Roos and assessment district disclosures, lead-based paint disclosure for pre-1978 housing, fire hardening and defensible space documentation in designated fire zones, water-conserving fixture and detector compliance, the Megan’s Law notice, and disclosure of a death on the property within the prior three years under Civil Code section 1710.2.
Beyond the forms, California recognizes a broader duty: a seller must disclose facts materially affecting the value or desirability of the property that are known to the seller and not known to or reasonably discoverable by the buyer. That duty is not satisfied by checking boxes. It reaches things a form never asks about — a neighbor dispute, recurring flooding in a particular storm, a repair that was done without permits, litigation over an easement.
The listing agent has an independent statutory duty as well: under Civil Code section 2079 the agent must conduct a reasonably competent and diligent visual inspection of accessible areas and disclose what it reveals. A seller cannot rely on the agent’s silence, and an agent’s inspection does not narrow the seller’s own obligation.
“As Is” Does Not Mean What Sellers Think
An as-is sale means the seller is not agreeing to make repairs. It does not waive the statutory disclosures and it does not excuse concealment of a known material defect. A seller who sells as-is and stays silent about a known foundation problem has not protected themselves; they have created a fraud claim.
The genuinely protective strategy is the opposite of silence. Disclose everything known, in writing, in detail — including problems already repaired and problems the seller chose not to repair. Provide old inspection reports, permits, and invoices. A buyer who proceeds with full information has no claim. A buyer who discovers something afterward has an easy one.
Note the timing rule that runs against a late-disclosing seller: if the Transfer Disclosure Statement is delivered after the buyer’s offer, the buyer may terminate within three days of personal delivery or five days of delivery by mail under Civil Code section 1102.3, and an amended disclosure can revive that right. Getting disclosures out early protects the transaction as well as the seller.
The Exemption for Trustees and Personal Representatives
Certain transfers are exempt from the Transfer Disclosure Statement requirement under Civil Code section 1102.2, including transfers by a personal representative in the administration of a decedent’s estate and, in defined circumstances, transfers by a trustee — the rationale being that a fiduciary who never lived in the property knows nothing about it.
Two cautions. The exemption does not extend to every disclosure — the Natural Hazard Disclosure and other requirements may still apply. And the exemption never licenses concealment: a trustee who does know of a material defect must disclose it. Successor trustees selling a parent’s house frequently know a great deal about that house. Claiming the exemption while sitting on knowledge of a leaking roof is how a fiduciary becomes a defendant.
What the Sale Actually Costs
A California seller’s closing statement typically includes brokerage compensation — now negotiated and documented differently following the changes that took effect in 2024 — escrow fees, title insurance premiums, county documentary transfer tax and, in a number of California cities, an additional municipal transfer tax that can be very substantial on higher-value sales. Add prorated property taxes, HOA document and transfer fees, any required retrofit work, natural hazard report costs, and negotiated credits.
Retrofit obligations vary by jurisdiction. Statewide requirements cover smoke alarms, carbon monoxide detectors, and water-conserving plumbing fixtures. Many California cities add point-of-sale requirements — sewer lateral inspection and repair, seismic gas shutoff valves, energy or water conservation certificates, or a city inspection report. These are local, and they should be identified at listing rather than discovered in the final week.
Withholding: Money Held Back at Closing
Two withholding regimes catch California sellers.
California Franchise Tax Board withholding. Escrow must withhold a percentage of the total sale price — 3⅓% by default, with an optional alternative calculation based on the actual gain — and remit it to the FTB, unless an exemption applies and is properly certified on Form 593. Common exemptions include a sale of the seller’s principal residence qualifying under Internal Revenue Code section 121, a total sale price of $100,000 or less, and a sale at a loss. The certification has to be completed correctly and delivered to escrow before closing; sellers who miss it can wait until they file a return to recover the money.
FIRPTA. Where the seller is a foreign person, federal law generally requires the buyer to withhold a percentage of the amount realized — commonly 15% — and remit it to the IRS. Reduced rates and exemptions exist for certain lower-priced residences the buyer will occupy, and a withholding certificate can reduce the amount, but the application takes time. A foreign seller should raise this at listing, not at closing.
Capital Gains on a California Sale
Under Internal Revenue Code section 121, a seller may exclude up to $250,000 of gain — $500,000 for a married couple filing jointly — on the sale of a principal residence owned and used as such for at least two of the five years before the sale. The exclusion may generally be used once every two years, and partial exclusions are available for a sale prompted by a change in employment, health, or certain unforeseen circumstances. California conforms to the federal exclusion.
Gain above the exclusion is taxed federally at capital gains rates, potentially with the net investment income tax, and by California as ordinary income — California does not give capital gains a preferential rate. For a long-held California home, the state tax on the excess can be the largest single line in the calculation.
Two points follow for older sellers. Adding the cost of capital improvements to basis reduces gain, which is why receipts going back decades are worth finding. And where the exclusion will not cover the gain, the alternative of holding the property until death — so heirs receive a stepped-up basis, and for a married couple holding it as community property, a step-up on both halves under Internal Revenue Code section 1014(b)(6) — is sometimes worth more than the sale. For an investment property, a section 1031 exchange defers the gain, and California requires ongoing reporting where a California property is exchanged for property out of state.
Depreciation taken on a rental is recaptured on sale and is not covered by the section 121 exclusion.
Selling From a Trust or a Probate Estate
This is where a California sale most often needs counsel.
Sale by a successor trustee. A trustee of a funded revocable trust may generally sell without any court involvement, providing escrow and title with a certification of trust under Probate Code section 18100.5 rather than the entire instrument. If the property was never actually deeded into the trust, the sale stalls — the fix is a petition under Probate Code section 850 and Estate of Heggstad (1993) 16 Cal.App.4th 943 confirming that the property belongs to the trust, and that takes time. Verify title early.
Sale by a personal representative. Where the estate is in probate, the route depends on the authority granted. With full authority under the Independent Administration of Estates Act, the representative can sell after giving a Notice of Proposed Action to interested persons, who have a period to object. Without that authority, the sale requires court confirmation — a hearing at which the accepted offer can be overbid by another buyer in open court, on a statutory formula. Buyers and agents unfamiliar with probate sales are routinely surprised by this, and the possibility of an overbid needs to be disclosed to the buyer at the outset.
Fiduciary duties apply throughout. A trustee or representative must obtain a reasonable price, deal impartially among beneficiaries, and avoid self-dealing — selling to oneself, a family member, or an entity one controls invites a surcharge action even at a fair price. Where a beneficiary wants to buy, get consent in writing or court approval.
Obtain a date-of-death appraisal. Inherited property receives a stepped-up basis as of the date of death, so a sale shortly afterward often produces little or no gain — but only if the date-of-death value is documented. Without an appraisal the family may be unable to prove basis years later.
Tenant-Occupied Property
Selling a property with tenants does not terminate the tenancy. The buyer takes subject to existing leases, and a month-to-month tenant retains the protections California law provides.
California’s Tenant Protection Act imposes just cause eviction requirements and relocation assistance obligations on covered properties, and many California cities impose stricter local rent stabilization and eviction ordinances on top. An owner-move-in or a withdrawal of the property from the rental market under the Ellis Act has its own procedural requirements and notice periods.
Sellers also must observe entry notice rules for showings, and security deposits and prepaid rent must be properly transferred or credited at closing. A seller who promises a buyer vacant possession without confirming how — and whether — that can lawfully be achieved is creating a problem for both sides.
Cancellations and Disputes
Because California contingencies must be removed in writing, a seller frustrated by a buyer’s delay generally cannot simply cancel. The seller must serve a Notice to Buyer to Perform, giving a short additional period, before cancelling.
When a deal collapses, the deposit is the fight. Escrow will not release funds without mutual written instructions or a court order, so a disputed deposit can sit for months. The standard purchase agreement makes mediation a condition of recovering attorney’s fees, and contains an arbitration provision the parties may or may not have initialed — which is worth reading before a dispute rather than during one.
Frequently Asked Questions
Does selling “as is” protect me from disclosure claims?
No. As-is means you will not make repairs. It does not waive California’s statutory disclosures or the duty to disclose known material facts. Full written disclosure is what actually protects a seller.
Why is escrow withholding money from my proceeds?
California requires withholding of a percentage of the sale price for the Franchise Tax Board unless an exemption is certified on Form 593 — the principal residence exclusion being the most common. Foreign sellers also face FIRPTA withholding.
I inherited my mother’s house. Will I owe tax if I sell?
Often very little. Inherited property receives a stepped-up basis at the date of death, so a prompt sale usually produces minimal gain — provided you have a date-of-death appraisal to establish the value.
Do I need court approval to sell my late father’s house?
Not if it is in a funded living trust — the successor trustee sells with a certification of trust. In probate, it depends on whether full authority under the Independent Administration of Estates Act was granted; without it, the sale requires court confirmation and can be overbid at the hearing.
Can I sell a house with tenants in it?
Yes, but the buyer takes subject to the tenancy. California’s just cause and relocation rules, plus any local ordinance, govern whether and how possession can be delivered. Do not promise vacant possession before confirming it is lawful.
Speak With a California Real Estate Attorney
The Holmes Law advises California sellers on disclosure strategy and liability, contract and cancellation disputes, withholding and tax questions, tenant-occupied sales, seller financing, and sales by successor trustees and personal representatives — including trust funding problems discovered mid-escrow.
To discuss a sale, contact the office. You may also want to review our pages on California real estate law, CA residential purchase, CA commercial sales, and California trusts.