A major source of litigation recently has been the failure to disclose a material property defect.  These defects can include foundation cracks, roof leaks and termite infestation.  Additionally, the existence of any environmental hazards, easements and zoning violations must also be disclosed.

What is a Material Defect?

Any fact that may have a significant and reasonable impact on the market value of the property is material. 

What is the Duty of a Seller?

A seller can be liable for damages if he does not make a proper disclosure.  The seller: 

  • Has a duty to disclose any material defects on the property to the buyer
  • Cannot conceal any known material defects from the buyer

What is the Duty of the Buyer?

A seller can only be held liable for failing to disclose if the buyer exercised reasonable diligence when inspecting the condition of the residence.  This can include the hiring of a contractor to inspect the premises. 

A buyer cannot later sue for material defects that he should have identified during a preliminary inspection or he knew about before the completion of the sales transaction

What is the Duty of a Broker?

Like the buyer and seller, a broker also has obligations.  A broker: 

  • Must disclose all known material defects to the buyer
  • Must disclose any limitation on the ability of seller to complete the transaction
  • Has no duty to conduct an independent investigation of the property or financial ability of the seller to verify the accuracy of a seller's statements

Tips for Sellers to Prevent a Dispute of Failure to Disclose 

  • Disclose all defects because they may turn out to be material defects
  • Check to see if your state requires a disclosure form
  • Provide written disclosures when possible

What Should I Do if I Have Discovered the Property Has a Material Defect?

Real estate transactions are very complex and laws vary from state to state.  An experienced real estate attorney can help you understand exactly what kind of defects must be disclosed.  A real estate lawyer can also represent you in court.