California has strong consumer protection laws in place, and that protection extends to homebuyers.
Home seller and buyer laws
Sellers in California are required by law to provide buyers with a real estate transfer disclosure statement that documents any defects, potential hazards and modifications that may affect the value of the home or are subject to pending lawsuits or not in compliance with building codes. A local real estate broker can most likely provide you with a copy of the statement.
By law in California, sellers must also disclose if their home is near an airport, in an area of potential flooding or in an earthquake fault zone.
When it comes to foreclosing on a home, California allows both non-judicial and judicial foreclosures. Judicial foreclosures mandate that a lender go to court in order to foreclose. In California, non-judicial foreclosures are more common, and they basically mandate that a lender must first work with a delinquent borrower to draw up a payment plan before filing notice to sell the home at a public auction. If a lender decides to do a non-judicial foreclosure, they give up the right to sue the borrower for the balance of the mortgage if the home should sell for less than the balance owed.
Like some other states, California is a community property state. This means all property acquired during a marriage — including any real estate property — must be split equally in the event of a divorce or annulment, regardless of the circumstances or whose name is on the title.
It’s important to know whether you are buying a home in a community property state, or a state with so-called equitable distribution, where a judge typically divides assets by weighing factors such as individual incomes. For example, if you plan on taking out a loan in a community property state, you may be required to include your spouse’s debt when your mortgage is under review for financing, even if the spouse is not on the loan for qualifying purposes.
In California, buyers and sellers are not required by law to hire lawyers to handle and close a real estate transaction. Instead, California is an escrow state, which means real estate transactions can be handled by licensed escrow companies, licensed real estate brokers and representatives of title companies.
In California, the typical property tax bill includes a variety of charges that can seem complicated. In 1978, the state established a 1% tax rate that is based on the value of your home, but most municipalities have additional property taxes that pay for voter-approved local infrastructure projects, such as updating school buildings.
The state does offer a few property tax exemptions. For example, some owner-occupied homes may benefit from a $7,000 reduction in the taxable value of the home. Meanwhile, disabled veterans who qualify may receive an exemption that lowers their property values by $100,000. That number is compounded by inflation, so in 2018 it was $134,706.
According to Tax-Rates.org, the median property tax for California is now $2,839, based on a median home value of $384,200, but the exact rate depends on where you live. Marin County, for example, currently has the highest property taxes in the state, averaging at $5,500 annually, while Modoc County has the lowest, with an average of just $953.
Whenever real estate is sold, either the buyer or seller (or both) usually needs to pay a property transfer tax, also known in California as a documentary transfer tax, which covers the cost of transferring the deed. In California, both cities and counties typically charge property transfer taxes. In most areas, the total city and county tax is $1.10 per $1,000 of property value. However, some California cities charge significantly more than others, upping the total property tax bill. For example, in Alameda County, homeowners in both Berkeley and Oakland may pay a total $16.1 per $1,000 of home value.
Conforming loan limits
Conforming loan limits are the maximum amounts that can be loaned for mortgages that are acquired by Freddie Mac and Fannie Mae, two government-sponsored entities that help bring both stability and liquidity to the overall mortgage market. For consumers who have good credit, conforming loans usually offer the best interest rates.
In the U.S., the conforming loan limit for a single-family home is now $484,350, but there are allowances for higher-cost areas. For these areas, the limits will be set based on the median home value, up to a maximum of $726,525. Ten California counties now have conforming loan limits at the $726,525 maximum.