When selling property, the law requires that the owner disclose certain information. This information includes any material defects, as well as any problems with the property. In several states, the owner may be held legally liable should they fail to disclose this information to the buyer upfront. The seller is legally forbidden from concealing any known material defects from the buyer. What constitutes a material defect can vary from state to state.
In general, a material defect is any fact that may have significant and reasonable impact on the market value of the property. A material defect may also be any condition that poses an unreasonable risk to other people. Additionally, any zoning issues, environmental hazards, and easement violations must be disclosed.
What Are Property Owners Required to Disclose?
Property owners are only required to disclose any information within their personal knowledge. This means that sellers are not required to hire an inspector to discover any problems that the property owner did not know existed. However, if a seller does hire an inspector and that inspector then discovers numerous defects, the seller is legally obligated to disclose those defects to any potential buyers. Additionally, a seller may only be held liable for failing to disclose if the buyer exercised reasonable diligence when inspecting the condition of the property.
A buyer may not later sue the seller for material defects that they should have identified during a preliminary inspection. Additionally, buyers may not later sue the seller if they knew about the defects before the completion of the sales transaction. Seller’s agents, or brokers, are also responsible for disclosing any defects. They must disclose all known material defects to the buyer, as well as any limitation on the ability of the seller to complete the transaction.
What Are Some Common Examples of Defects to Be Disclosed?
As previously mentioned, what constitutes a defect that must be disclosed varies from state to state. In general, a seller must disclose material and dangerous defects that impact the fair market value of the property.
Some of the more common examples of what a seller must disclose when selling their property include:
- Leaking roof or ceiling;
- Foundation cracks;
- Termite damage and infestations, as well as any other pests such as rodents or insects
- Flooding or flood damage, such as in the basement;
- Any known toxic conditions such as asbestos ceilings, mold, lead paint, etc.;
- Whether the home is exposed to any naturally hazardous conditions such as being located in a flood zone or on an earthquake faultline;
- Any deaths on the property that have occurred within the last three years. It is important to note that this requirement to disclose may vary depending on the state in which the property is located;
- Faulty electrical wiring; or
- Mechanical problems such as heating and air conditioning.
Neither the seller nor the seller’s agent may actively conceal any defects. An example of this would be a large crack in the foundation that is only visible by inspecting the property’s crawl space. For example, if a buyer wishes to inspect the crawl space, but the seller’s agent denies access claiming that the crawl space is locked and inaccessible, while also assuring the buyer that the foundation is fine, the seller may be found to have actively concealed the defect.
This is especially true if the seller’s agent knows that the foundation is compromised. Thus, in the previous example. the buyer will likely have a legal claim against the seller and/or the seller’s agent for actively concealing a defect.
How Can a Seller Avoid Legal Liability?
The best and most obvious way for a seller to avoid legal liability is to err on the side of disclosure. If the seller is unsure as to what constitutes a required disclosure, they should avoid liability by disclosing all they know. Sellers should also educate themselves on their state’s laws regarding disclosing defects and what all that includes.
Another way to avoid legal liability is to conduct an inspection and disclose the results to all potential buyers. The results of the inspection will be provided to all interested buyers in the form of a report.
Some states may require a disclosure form, which would provide additional legal protection to the seller and relieve them of legal liability. Along those same lines, a seller may want to provide written disclosure when possible. If a buyer purchases a home and later discovers a major defect, they may be able to sue the seller or seller’s agent for negligence, fraud, or misrepresentation, among other causes of action.
The buyer may place a clause in the purchase contract that states that the sale of the property depends on the completion of a property inspection, to be conducted by a qualified professional at the seller’s expense. In the event of a lawsuit, the buyer may be awarded damages; additionally, they may be entitled to have the seller, or other involved party, pay to repair the dangerous condition.
Do I Need an Attorney for Selling a Home?
As a seller, a skilled and knowledgeable real estate attorney can help you avoid legal liability prior to the sale of your property. Alternatively, as a buyer, an experienced attorney may assist you in a claim if you have suffered losses due to a non-disclosed defect.
In any case, an experienced attorney can advise you of your best course of legal action for your specific case and circumstances. Finally, they can represent you in court, as needed.