Disclosing Defects When Selling a Home

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 What Is Real Estate Law?

Real estate law provides protections to:

  • Buyers;
  • Sellers;
  • Land owners;
  • Contractors;
  • Real estate agents; and
  • Builders.

During these transactions, it is important that the sales and purchase documents are well written in order to avoid issues and delays later on. Litigation frequently results when the parties to a real estate transaction have a dispute, generally concerning:

State real estate law regulates commercial and residential real property transactions, as well as landlord-tenant relationships. Federal law protections address discrimination under the Fair Housing Act, as well as environmental violations.

What Are Disclosures In Real Estate? What Are Property Owners Required To Disclose?

When selling property, real estate 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 if they fail to disclose this information to the buyer upfront. Additionally, the seller is legally forbidden from concealing any known material defects from the buyer. What actually constitutes a material defect can vary from state to state.

Generally speaking, a material defect is any fact that may have significant and reasonable impact on the market value of the property. A material defect can also be any condition that poses an unreasonable risk to other people. In addition to disclosing any material defects, the following must also be disclosed:

  • Any zoning issues;
  • Environmental hazards; and
  • Easement violations.

It is important to note that property owners are only required to disclose any information that is within their personal knowledge. What this means is 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 can only be held liable for failing to disclose defects if the buyer exercised reasonable diligence when inspecting the condition of the property.

A buyer may not legally later sue the seller for material defects that they should have identified during a preliminary inspection. And, buyers may not later sue the seller if they were aware of the defects before the completion of the sales transaction. Other parties responsible for disclosing any defects, material or otherwise, include seller’s agents or brokers. These parties must disclose all known material defects to the buyer, as well as any limitation on the ability of the seller to complete the real estate transaction.

What Are Some Common Examples Of Defects That Must Be Disclosed When Selling A Home?

Ro reiterate, what might constitute a defect that must be disclosed varies from state to state. Generally speaking, a seller must disclose material and dangerous defects that would impact the fair market value of the property.

Some of the most common examples of what a seller must disclose when selling their property include, but may not be limited to:

  • Leaking roof and/or ceiling;
  • Foundation cracks;
  • Termite damage and infestations, as well as any other pest infestations and damage, such as rodents or other 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. However, it is imperative to note that this requirement to disclose may vary depending on the state in which the property is located;
  • Faulty electrical wiring; and/or
  • Mechanical problems, such as those associated with heating and air conditioning.

Once again, neither the home’s seller nor the seller’s agent may actively conceal any defects. An example of this would be if there is a large crack in the foundation that is only visible by inspecting the property’s crawl space. If a buyer wishes to inspect the crawl space, but the seller’s agent denies access while claiming that the crawl space is locked and inaccessible and also assuring the buyer that the foundation is adequate, the seller may be found to have actively concealed the defect.

This is especially true if the seller’s agent is aware of the fact that the foundation is compromised. As such, the buyer will most likely have a legal claim against the seller and/or the seller’s agent, for actively concealing a defect with the property involved in the transaction.

Are There Any Ways In Which A Seller Can Avoid Legal Liability?

Simply put, the best and most obvious way in which a seller avoids legal liability is to err on the side of disclosure. If the seller is unsure in terms of what constitutes a required disclosure, they should avoid liability by disclosing all that they know or are aware of. Additionally, sellers should educate themselves on their state’s specific laws regarding disclosing defects, and what all that includes. A local real estate lawyer can assist in understanding a state’s specific real estate laws.

Another way that a seller can avoid legal liability would be to conduct an inspection, and disclose the results of all inspections to all potential buyers. These results will be provided in the form of a report.

Some states may require a disclosure form, which would provide additional legal protection to the seller as well as relieve them of legal liability. Similarly, a seller may wish to provide written disclosure when possible. If a buyer purchases a home and later discovers a significant material defect, they may be able to sue the seller or seller’s agent for any of the following causes of action:

  • Negligence;
  • Fraud; and/or
  • Misrepresentation, among other causes of action.

In terms of other actions, 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. They may also state that this inspection is to be conducted by a qualified professional at the seller’s expense. Should a lawsuit result from any disputes or material defects, the buyer could be awarded damages. Additionally, they may be entitled to have the seller, or other involved party, pay to repair the dangerous condition.

To summarize, a seller can only be held liable for failing to disclose if the buyer exercised reasonable diligence when inspecting the condition of the residence being sold. This can include hiring a contractor to inspect the premises. Again, a buyer cannot later sue for material defects that they should have identified during a preliminary inspection, or that they knew about before the completion of the sales transaction.

Do I Need An Attorney For Disclosing Defects When Selling A Home?

If you are involved in a real estate transaction, whether as the buyer or the seller, you should consult with an area real estate attorney. An experienced and local real estate lawyer will be best suited to helping you understand your state’s specific real estate laws, and what your legal rights and options are according to those laws.

An example of this would be whether your state requires a disclosure form. Additionally, your real estate lawyer will also be able to represent you in court, as needed, should any issues arise requiring legal intervention.


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