Undisclosed latent defects in resale homes are a
prevalent problem in today’s real estate market
It goes without saying that buying a home is arguably the most significant financial commitment most people will ever make in their life. The emotions involved typically can include everything from excitement and nervous anticipation to stress and sorrow.
Every buyer strives to negotiate the best price possible, and to actually end up getting what they pay for. But sometimes, after the furniture is moved in, when most of the stress is history and objectivity returns, upon closer examination of the new abode, patent or latent defects in the house are discovered that were previously unseen during the hustle and bustle of the buying process and home inspection. And they were undeclared by the seller.
Such latent defects could be a potentially leaky foundation crack, a faulty shingling job that could lead to a leaky roof, or hidden mold in the corners of the attic. Depending on the severity of the defect, the remediation cost could be overwhelming for the buyer. After all, they invested their entire savings into the purchase price and closing expenses.
If the defect was something known by the seller, but not disclosed prior to the purchase contract being executed, the buyer may commence legal action to recoup such unexpected costs of remediation and the related, foreseeable damages suffered as a result of the failure of the now previous homeowner to disclose.
Defects are legally regarded as being of two types - latent and patent
Patent defects are those that can usually be found by
a personal or professional home inspection. With
respect to these easily seen flaws, the ordinary rule is caveat emptor, or buyer beware.
Latent defects, on the other hand, are those which would not necessarily be revealed by any reasonable inquiry by a buyer, and sometimes even a home inspector, before entering into a firm and binding contract.
Legally speaking, a seller is not under any obligation to disclose a patent defect because a buyer could or should have detected the defect by doing a reasonable investigation of the house and property, including hiring a qualified home inspector. For example, a broken window is easily detected, thus a buyer would have no legal recourse after completion of the sale against the seller for such damage. An exception here is if such damage occurred after the sale was made firm and prior to completion of the sale, the time period during which the seller is obliged to maintain the property in the same condition, save for normal wear and tear, as when viewed by the buyer.
If a seller was aware of a latent defect, but failed to disclose it, this could be deemed misrepresentation. A potentially worse situation occurs when a seller attempts to mislead a buyer by concealing a patent defect. For example, the seller might lean some paneling against a foundation wall to hide a crack. Such an action could be construed as fraudulent misrepresentation for which a buyer could have legal justification to recover against the seller for the cost of repair.
A true latent defect is one that was not known to either the seller or the buyer at the time of sale and as a result, was not disclosed. If no evidence can be found to prove that the seller had knowledge of a defect and deliberately failed to disclose it, then the seller would likely be found not liable for the resulting repair costs.
However, liability for the seller becomes an issue when it can be proven that a defect was known to the seller, but could not have been discovered by the buyer, even with a home inspection. In essence, it could be said that the defect was patent (obvious) to the seller, but latent (hidden) to the buyer. Typically, this could lead to the issuance of a claim against the seller for negligent misrepresentation, and the seller could be ordered by the court to reimburse the buyer for any legitimate damages that resulted from the non-disclosure by the seller.
A claim for negligent misrepresentation against a seller would likely be successful under the following circumstances:
LIABILITY OF HOME INSPECTORS
It is commonplace for buyers to hire a certified home inspector to inspect the premises. Nevertheless, even after a thorough inspection, defects which were not identified by the inspector might be discovered following completion of the Agreement of Purchase and Sale (APS).
So, was the home inspector negligent? Inspectors usually have the buyer sign a waiver releasing the inspector from future claims in relation to their inspection. Needless to say, though, but such a release is meaningless in the event of gross negligence wherein it can be proven that an inspection was not in keeping with industry standards.
In deciding on the appropriateness of pursuing your home inspector as a co-defendant, lawyers and buyers must understand that, while home inspectors are hired for their expertise, they're limited in how thoroughly their inspections may probe. If they can't see a feature, such as the foundation wall behind finished drywall, then they cannot be assured there's no crack.
LIABILITY OF REAL ESTATE AGENTS
Being aware of the difference between patent and latent defects is
critically important to understand. Before you lay down your
hard-earned money, or even sign an unconditional APS for your own personal castle, it's important for a buyer to be
fully informed of
both the clearly visible patent defects of a property and
building, and those not typically visible latent defects, some of which might even be missed by a
thorough home inspector. An experienced real estate representative should also be relied upon to thoroughly inspect the property with the buyer before submitting an offer. The agent might see symptoms that his or her client, with less experience, might miss.
Be aware of the risks of buying a house, including your legal rights, prior to making a commitment that you might regret after you've moved into your new home. As I said earlier, the maxim, caveat emptor applies, no matter what you're buying, especially since the repair cost for patent defects is not usually recoverable from the seller.
a competent home inspector to perform a thorough inspection BEFORE you
make a commitment to buy the property. If you're in a competitive
scenario with other buyers, you may have to bite the bullet before
submitting your unconditional offer by having the inspection done before
offering. This will obviously cost you a few hundred dollars, but in such a potentially
expensive situation, better to be safe than sorry. Look at the expense as a reasonable insurance against a substantial potential future loss.
your own thorough investigation of the
house - inside and outside. If you lack the expertise and objectivity to
do so, bring along a contractor, or a family member or friend who has the
necessary experience. Don’t automatically accept the seller's agent's
assurances, for they may be unaware of any defects, or they may not tell
the truth. Click here for more info about the accuracy of listing details provided by the seller's brokerage.
review the Seller Property Information Statement (SPIS), which is a
disclosure statement designed to
disclose facts regarding the major elements of a building’s structure, including any latent defects known to the homeowner. And follow-up on
concerns. Though not compulsory, and not always available, this statement can be incorporated
into the APS.
Since most APS contain a “no other representations or warranties clause” in the contract body, it would be prudent to include any seller representations or warranties that entice you to buy the home into your APS. For example, if the seller has claimed that the award-winning fruit trees in the yard will provide you with lots of fruit and profit for years to come, unless that representation is written into the APS, you may have no legal right to recover if that statement turns out to be false.
Provided the market is not a hot one, wherein homes are selling quickly, visit your potential home at different times of the day/week. Some issues with a home are only discoverable under certain conditions. So, make sure to visit during different weather conditions or times of the week. For example, if you visit the property only once, say, on a weekend, you might not be aware of the voluminous rush-hour traffic on the street on a weekday. Such a trait might render that particular property less desirable, or at least worth less to you or any other discerning buyer. And since such a characteristic would be considered patent and not a latent defect, it would fall within the realm of buyer beware.
Ask the seller directly about any major concerns with the home you might have, emphasizing how important this is to you. And get the answer in writing! Ask your Realtor to include a representation clause in the APS. For example, if you are allergic to pet dander, share with the seller that this is a material concern for you and ask if they have or ever had pets living with them. If such a representation, which could very well deal with a latent defect, is incorporated into the APS, you would have the right of action based on breach of contract if that representation proves false. Such an inclusion could conceivably assist in recovering against the seller on the basis of misrepresentation.
So, is differentiating between patent and latent defects critical when buying real estate? Absolutely.
Having offered all this information on patent and latent defects, kindly keep in mind that I am not a lawyer. If you find yourself in such a position, I urge you to consult with your local legal representative.
Would a stigma be considered a latent defect? Click here for some ideas in this regard.
For more information and examples of what a seller is responsible to disclose to a prospective buyer of their property, visit RECO.
For the enthusiastic home seller or home buyer who is seeking more in-depth guidance - including a
little life coaching - I invite you to explore my book The Happy Agent, available through this site, in either print or e-book format, by clicking the appropriate link in the left or right column.
Or if you're considering a real estate career and are curious about the fundamentals involved in becoming a successful REALTOR® and building a sustainable realty practice from day one, I believe you'll find The Happy Agent a treasure-trove of effective, ethical selling skills, simple techniques, protocols and general industry information.
I believe you'll not find another real estate guide book like it anywhere.
As a 42+ year professional REALTOR® who has been there and done
that, I share my extensive knowledge, experience, techniques, philosophies and personal anecdotes
accumulated throughout a successful career in sales, management, brokerage ownership, training and
individual mentoring. I put my heart in it.
Whether new, a relative beginner or a veteran real estate agent of many years, the smart tools described in The Happy Agent will help you on your quest to succeed in a highly competitive business, one which notably decries an exceptionally high attrition rate.
Learn how to increase your net income, avoid enslavement to the business and enjoy a harmonious lifestyle of joy and abundance.
If you're an experienced real estate agent, don't think for a moment that you know it all; I admit I don't, though I've been around a block or two. Throughout my career, during which I was consistently in the upper production echelon - virtually from day one - I was always growing, not only from reading and participating in training seminars, but from my peers. I learned a lot about what to do, and importantly, what not to do.
I beg you not to allow your ego to make your choice whether to open your mind to the possibility of picking up a few new ideas that could conceivably enhance your practice, if not completely alter your outlook on life.
The Happy Agent was written for you, as well as curious and ambitious consumers interested in learning how to do it themselves, and do it well. With a tiny investment of time and money, consumers who opt to go it alone without an agent can expand their knowledge and improve their chances of achieving their goal by delving further into and understanding the sometimes complicated process of buying and selling real estate.
Available virtually everywhere print and e-books are sold.
A guide to help home owners sell privately, or find a good agent
For Amazon Print or Kindle
A must-read for anyone contemplating a realty career and the perfect antidote for agents seeking a more productive, less stressful direction for their own realty business.
It’s also designed as an insightful resource for home buyers and sellers curious about the ins and outs of buying and selling real estate.
"An inspiring and candid tale of one man's journey to success as a real estate agent and achieving inner freedom. This book is sure to ignite the passion and holds the key to unlocking the power that lies within us all." Gina Ceci, Real Estate Lawyer