Understanding California’s AB-968: New Rules for Home Sellers

Assembly Bill 968 (AB-968), effective July 1, 2024, introduces significant changes to how home sales, particularly those involving flipped homes, are handled in California. This law aims to increase transparency and protect buyers by requiring sellers to provide detailed disclosures about recent renovations and repairs.

Key Requirements Under AB-968

1. Sellers Must Disclose Repairs and Improvements:
   • If you’ve owned a home for less than 18 months and made repairs or improvements, you are required to provide a detailed report to the buyer. This report must include:
     • A list of all repairs and improvements made during your ownership.
     • The names and contact information of all contractors involved in the work.
     • Copies of permits obtained for the work, if applicable.
2. $500 Repair Threshold:
   • Repairs under $500 are exempt from disclosure. This provision ensures that minor fixes, which are less likely to impact the property’s integrity or buyer’s decision, do not need to be included in the report.
3. Protecting Buyers from Shoddy Work:
   • The primary goal of AB-968 is to safeguard buyers from purchasing homes with subpar renovations that could lead to costly problems down the line. By enforcing these disclosures, the law helps ensure that buyers have all the necessary information to make informed decisions.
4. Contractor Accountability:
   • Sellers must disclose the names and contact details of the contractors who performed any renovations or improvements. This transparency allows buyers to verify the quality of the work and hold contractors accountable if issues arise.
5. Permit Verification:
   • Sellers are required to provide copies of permits obtained for renovations. If permits were not obtained, sellers must disclose this, allowing buyers to investigate further. This step is crucial for preventing the sale of homes with unpermitted or unsafe work.
6. Potential Impact on Home Flipping:
   • While AB-968 primarily targets home flippers, who often purchase homes off-market and make quick, cosmetic fixes, it could also add a layer of complexity to traditional home sales. Flippers will need to be more diligent about the quality of work and the transparency of their disclosures, which could potentially slow down the flipping process or increase costs.

Impact on Buyers and Sellers

• Buyers: AB-968 provides greater protection by ensuring buyers have comprehensive information about the property’s condition, reducing the risk of unexpected repairs or hidden defects after purchase.
• Sellers: Compliance with AB-968 helps sellers avoid legal complications and fosters trust in the transaction process, ultimately contributing to a more transparent and fair real estate market.

Conclusion

California’s AB-968 represents a significant step forward in protecting buyers and promoting transparency in the real estate market. For sellers, particularly those involved in flipping homes, it introduces new responsibilities and potential challenges. Understanding and adhering to these requirements is crucial for a smooth and successful transaction.

If you’re navigating the complexities of selling or buying a home under the new AB-968 regulations, consider seeking professional legal guidance to ensure compliance and protect your interests.