Understanding Residential Real Estate Transactions in California: What Homebuyers and Sellers Should Know
Residential real estate transactions can be complex, particularly in California, where unique state laws and regulations significantly impact the buying and selling process. Whether you are a first-time homebuyer, a seasoned investor, or a homeowner looking to sell, it’s crucial to be well-informed about the steps involved, the legal requirements, and potential pitfalls. In this blog post, we’ll cover the basics of residential real estate transactions in California and provide some key tips to ensure a smooth and successful transaction.

The Basics of Residential Real Estate Transactions
A residential real estate transaction typically involves a variety of steps, each of which is critical to ensuring that both the buyer’s and seller’s interests are protected. These steps include:
Listing the Property for Sale
- Sellers typically begin the process by listing their property on the market. This step often involves working with a real estate agent who helps set the right price, markets the property, and negotiates offers.
Finding a Property to Buy
- Buyers, on the other hand, start by searching for properties that meet their needs. Once they find a suitable property, they typically make an offer through a purchase agreement.
Negotiating the Purchase Agreement
- The purchase agreement is a legally binding document that outlines the terms and conditions of the sale. It should cover the purchase price, contingencies (such as financing and inspections), and other relevant terms. This is where legal guidance is crucial, as the terms in the purchase agreement can significantly impact the buyer or seller.
Conducting Property Inspections and Due Diligence
- Before finalizing the sale, the buyer usually has the property inspected for any structural, electrical, or other issues. This step also includes verifying the property’s title and ensuring there are no legal encumbrances that could affect ownership.
Securing Financing
- Buyers typically need to secure a mortgage loan to purchase the property. During this phase, the lender will appraise the property and conduct its own due diligence to ensure the buyer’s ability to repay the loan.
Escrow and Closing
- In California, real estate transactions often go through an escrow process. Escrow is a neutral third party that holds funds, documents, and instructions until all the terms of the transaction are met. Once the buyer and seller have satisfied all conditions, the escrow officer facilitates the closing, where funds and ownership are transferred.
Unique Aspects of California Real Estate Transactions
California real estate transactions have some unique characteristics that differentiate them from those in other states:
Dual Agency
- California allows for dual agency, where one real estate agent or broker represents both the buyer and seller in the transaction. While this is legal, it can sometimes lead to conflicts of interest. If you’re considering a dual agency scenario, it’s wise to consult a real estate attorney to ensure your interests are fully represented.
Disclosure Requirements
- California has strict disclosure requirements for sellers. Sellers must provide potential buyers with a comprehensive disclosure statement, covering everything from known defects in the property to any neighborhood hazards. The Transfer Disclosure Statement (TDS) and the Natural Hazard Disclosure (NHD) are standard documents in most California real estate transactions.
Contingency Periods
- In California, purchase agreements often include contingency periods for inspections, appraisals, and loan approval. During these periods, buyers have the right to back out of the transaction without losing their deposit if certain conditions are not met.
Title and Escrow Companies
- Title and escrow companies play an essential role in California real estate transactions. The title company ensures that the title to the property is clear of any liens or claims, while the escrow company manages the transfer of funds and documents.
Common Challenges in Residential Real Estate Transactions
Even with the best planning, residential real estate transactions can encounter hurdles. Some common challenges include:
- Financing Issues: Buyers may face difficulties securing a loan, or a lender’s appraisal might come in lower than the purchase price.
- Inspection-Related Disputes: Property inspections can reveal problems that buyers want fixed or that sellers are unwilling to address.
- Title Complications: Unresolved liens or unclear ownership can delay or derail a sale.
- Misunderstandings in Contract Terms: Without a thorough understanding of the purchase agreement, buyers or sellers might find themselves in legally precarious positions.
The Role of a Real Estate Attorney
Given the complexities of California real estate law, working with an experienced real estate attorney is highly recommended for both buyers and sellers. An attorney can:
- Review and negotiate the terms of the purchase agreement.
- Advise on disclosure obligations and compliance.
- Address title issues or disputes.
- Assist with the closing process to ensure that all legal and financial matters are properly handled.
Residential real estate transactions in California are governed by stringent regulations and require careful attention to detail. Understanding the process and potential issues is key to achieving a successful transaction. Whether you’re buying or selling, having knowledgeable professionals on your side—including a skilled real estate attorney—can make all the difference.
If you have any questions or need assistance with a residential real estate transaction, Martin APC is here to help. Our team has extensive experience navigating California’s real estate landscape, and we are dedicated to protecting your interests every step of the way.
Contact us today to learn more about how we can support your real estate needs!



