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Real Estate Transactions and Failure to Disclose

Almost every single home buyer should be cautious of failure to disclose issues. Failure to disclose generally refers to the sellers failure to disclose material defects with the property. When sellers fail to disclose they will be held liable for damages sustained by the buyer. It is important to make sure you know your rights. Below we discuss some of your rights and the duties of sellers with regards to the sale of any residential real property.



Sellers Duty to Disclose?
When you purchase any piece of real estate the seller is required to duly inform you of known defects with the property. When sellers fail to meet this duty they will be in breach of their contractual obligation of good faith and fair dealing.

The law states that any seller of real property is required to disclose  material defects with the property. What is considered a material defect? Material defects can be different with every purchase. A material defect is generally one that would otherwise change the buyers opinion about the purchase. In other words the buyer would not  complete the transaction had they known of this issue. These defects are judged under a reasonable subjective standard. So long as the buyer would not complete the purchase then the defect would be considered material.

Buyers who purchase a home and later discover these defects will be required to make any such disclosures if they decide to re-sell the property. However, many times subsequent buyers will request significant discounts or refuse to purchase the property at all if the defects are serious. In such cases buyers are left with an asset that they will have to deeply discount in order to sell. As a result they suffer substantial losses. It is important that you bring these issues to the sellers attention immediately in order to protect your statutory filing deadline.

Real Estate Broker Liability
In certain cases real estate agents or brokers are held liable to the same extent of the seller. By statute real estate brokers owe a duty of care to prospective buyers of real property. Real estate brokers are charged with an affirmative duty to make a reasonable inspection of the property and to disclose facts which affect the value of the property.

If the agent fails to make these disclosures they will be held liable for negligence or in some cases fraud. The standard of care applicable to real estate agents is one with similar experience and education. While they are not required to inspect the entire property, they are required to inspect areas that are reasonably available for inspection.

In the event that there is non-disclosure or failure to inspect by real estate agents, then you have 2 years from the date of possession to bring a cause of action. This statutory time period sets the time limit, which you have in order to bring a cause of action against your broker or agent for failure to disclose.

What If I Bought the Property As Is?
Many sellers think that an “as is” clause will limit their liability, but that is not the case. It is almost impossible to contract yourself out of non-disclosure of material defects. This would be comparable to a doctor contracting themselves out of malpractice.

Sellers should be aware that a “as  is” clause does not limit or absolve them of liability for non-disclosure issues.  Buyers should also take note that a simple “as is” clause will not limit their rights. In fact buyers will almost always be able to pierce through this clause and move forward with any claim for damages.
It is important to remember that certain timely and statutory deadlines must be satisfied. You should act promptly to secure your rights and move swiftly to avoid missing any statutory deadlines for filing your case. Generally you have up-to four years to bring a cause of action, but this time period can be different from state to state. Additionally this time period can be further reduced depending on the cause of action.

Examples of Non-Disclosure
Common examples of non-disclosure issues include failing to inform buyers of leaks, damage to the property, flooding or the presence of harmful chemicals. There is a laundry list of what is considered failure to disclose, but it is important to keep in mind that unless the issue would adversely affect your decision to purchase the property it will not be material.

Other types of disclosure issues can be failure to disclose toxic mold or failure to disclose that toxic air borne particles exist on the property. Each of these issues can be considered failure to disclose.

If you were sold a home and have come to find material defects with the property, you should consider your legal rights. Sellers who participate in this type of concealment are actively committing fraud. It is necessary that you invoke your legal rights and hold them responsible.

Mr. Farid Yaghoubtil is a senior partner at Downtown L.A. Law Group. A Los Angeles based personal injury law firm dealing with all types of personal injury claims.

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19 thoughts on “Real Estate Transactions and Failure to Disclose

  1. Interesting article and one of the many reasons a real estate attorney should be involved when purchasing a home. Unfortunately many people purchase real estate without professional help and shortly after they move in they find the home has structural damage or is in need of other major repairs. Its certainly worth the extra time and money in the beginning to consult with parties that are knowledgeable not only of the physical structure but also the purchasing agreement you are about to sign.

  2. Always be sure to have a potential home be inspected by a professional! It’d be horrible to purchase a home infested with water damage.

  3. In the case of a short sale and mold is detected what are the chances of getting the bank to pay the cost for mold remediation?

  4. Very informative article! I wish more builders could read it and implement the knowledge it holds. – f

  5. Hi Jonatha, Brian and Krystle,
    I came across your site after finding myself in quite a situation with mold. I purchased a property about 3 weeks ago in florida. I did have a comperehensive inspection by a licensed inspector who found one area of moisture which we expected to have to address. That was really the only area of concern- we were told the roof was not leaking and the ceiling was dry, etc. The Seller’s Agent had pulled up the base board in most of the home and “primed” the walls with Killz paint. I asked about this, and he stated it was to remove some of the smell from the many pets, and the base boards were just damaged from the pets as well. The previous owners were avid dog rescuers, and this was believeable at the time. I did expect to have to clean and soon replace the HVAC as it was near or at the end of its life expectancy any how, remove paneling, deeply clean and repaint the entire house. I also planned to remodel the kitchen and baths. Well, upon removing paneling, I quickly discovered the entire house was infested with mold due to plenty of water damage. It looks like the roof had previous leaks, the windows were improperly installed, there were structure cracks in the walls, and the pets urinating on the walls exacerbated the issue. All of the drywall was just crumbling as we tore it down. 3 weeks later I am left with four concrete walls that have structural damage and studs that are also covered with mold and need to also come down. The ceiling has also been taken down, and its clear the roof does need repairs. the HVAC was completely infested with mold- of course that too is gone.
    Can you please help me navigate through my rights? I am not sure If I should file suit against the previous owners, sellers agent, inspection company, or call my insurance company, call the previous owners insurance company… Any advice is appreciated. Thank you so much.

  6. I’d start with your ins company. They should be able to quickly head you in the direction. Unfortunately you will probably have to hire an atty. hope you have taken many pictures. Good luck !!!!

  7. I agree with you that it is really essential to remember the timely and statuary deadlines, This will help us to secure our rights while buying any property.

  8. I have a quick question in regards to time lost in a transaction that DID NOT GO THROUGH. I placed an offer on a home but was under significant stress in regards to my timeline. We suspected structural issues but were assured that it was inspected and that the letter had a letter stating that the house had settled and it was no longer a problem. I lost 2-3 weeks trying to line up inspections during which the seller would not present the documents that cleared the home of all structural issues. Upon inspection we found the entire first floor rotted and had been “rigged” in numerous areas buy the homeowner and had been on the market and had offers previously. I am sure these deals failed for the same reason. I am now in a position that I may not be able to renew my current lease and have a loss of time as well as a risk of not having a home for my family for a short period of time. Am I able to file in small claims for my troubles and costs incurred for inspections etc? Even though I was able to back out before closing. Thanks.

  9. I have been looking at a home Forsale by owner. It is approx 4 years old. It is a beautiful home. I have asked all of the questions and everything coming up positive. I had no reason to doubt being the young age of the home. I finally decided to make a down payment. Signed a purchase agreement thought all was well. I called my insurance agent for a quote, he called me back and told me there was a $45,000.00 claim for an upstairs broken water line 14 months earlier. They say it was dried out and repaired properly, but if that is the case I don’t know why they didn’t tell me up front. Now my wife AND I are worried about mold. I have delayed the closing until I can get a mold inspection done.
    I signed an agreement to purchase and gave earnest money committing to purchase before I found all this out. Question, can I get out of this? Especially if mold IS present?

  10. David I can answer your question because I just purchased a home and was informed up front that if the inspection turned up issues, I had the right to back out and have my earnest money returned.

  11. We have a lease purchase on a house. We have been there 6 months and its about time to buy. I had the house inspected for mold. Report said we have black mold. we ask how serious it was and he said “I wouldn’t live here” My daughter has had a cough and head aches since we have been here. So what should I do? Do i refuse to purchase? i have made a deposit of 10,000.00 and then another (last month lease pmt of 1800.00. I have paid lease pmts of 1800. per month for the past six months. Can you advise my first step?

  12. I bought a home in southern Florida with hardwood floors. I had a home inspection and the inspector found lots of moisture, but thought it was from leaking windows, leaking toilets,, sinks, etc. The owners supposedly fixed all repairs, but when the inspector came back he till found about ten small items that were not done. The owners told their realtor that that had them completed, and they wrote down the repairs and gave them to my realtor. They did not do many of the repairs. They lied on their disclosure sheet and stated no leaks and no insurance claims. After I moved in, I felt sick all the time. I saw the handbook from the installer of the hardwood floors, he told me their HVAC pan flooded half their house, over 100 square feet, which the E.PA. for Commercial Buildings considers a Full containment Leak. The Center for Disease Control consider it a Full Containment Leak and the state of Florida Environmental Health states anything over 100 square feet. I hired a lawyer and after six months he had not deposed one person. The Aspergillus was 100% indoors and only 40% outdoors. The Aspirgillus spore count was over 500000. I read an article about hospital HVAC Duct Systems being dirty after a leak and structural repairs. 83,000 people die each year in the hospital after surgery or cancer from Aspergillus. In a country advanced as the U.S. this is totally unacceptable. My attorney has been working o the case six months draining me dry of cash. I guess they only focus o million dollar cases. He is a real estate attorney with great credential, but I am afraid I am throwing big money down the drain and I could repair the house with the money I am wasting on the attorney. Do other people find that attorneys do ot take mold cases very seriously?

  13. Hello, I purchased a home in January of 2016 and just recently the basement flooded due to a faulty foundation which was not disclosed before or after the closing. Can I sue the seller?

  14. I recently bought a house in TN. Two days after we closed and moved in, the roof was leaking like a faucet. The seller happened to come by while we were scrambling for buckets, and informed us that the roof had leaked a few weeks before that, but since we already had a contract on the house he just patched it and didn’t think he needed to disclose the leak to us. I had the house inspected, but between the time we put a contract on the house, and the closing (and after the home inspection was done) was when the roof started leaking. I would not have closed on the house had I known the roof was leaking because I would not have paid for the fix which in our case was a new roof. Is this seller liable for any of the expense for the roof repair?

  15. I purchased a home in California. It has some type of mold in the garage that was not noticed because the previous owner had their items stacked on the shelf. Once we received the keys and looked around, that’s when we saw the mold. The previous owner said that the inspector told him when he bought the house that it was just a stain. We have two mold estimates for a couple of thousand dollars but the previous owner real estate agent only wants him to give us 325.00. Our agent said she wants to stay out of it. What are we suppose to do?

  16. I just for a home on the 30 of September. We didn’t have an inspector look at the home due to a previous issue. On a Sunday we had a really bad leak that went threw the walls and ceiling. We had plumber fix. Both the main line and another line where clogged. The plumber observed black mold and said that was from the previous owners. We had restoration company and did that it would more then 2000. To fix the mold issue and not counting for the repairs of drywall and etc to fix issue.. what can I do in this issue??

  17. I purchased a condo in Dallas in May 2015. After purchase, I put about $35,000 into updating the condo. Then during the course of living here, I noticed that the ceiling of my patio was deteriorating from apparent water damage. Further, during this past summer I found out that there was a lawsuit against the insurance company that had been going on for 4 years due to hail damage to the roofs which have concrete tiles. I also found out at the HOA meeting that many people had extensive water damage due to this problem. Finally, in late 2015 the insurance paid $300,000. to replace the roofs. However, that did not take care of all the extensive damage to many of the condos. Then, two months ago, I decided to have the ceiling on my patio replaced because the wood was progressively deteriorating. Once the old ceiling on the patio was removed, extensive wood rot was found that was very old but also I believe contains black mold. The previous owner lived here for over 10 years and was acutely aware of the problems, but did not disclose any of this to me. Just finding out the extensive problems here, I want to sue both the previous owner as well as the HOA Management company for failure to disclose when they sent in the disclosure forms prior to close of my escrow. Can you tell me how very likely it would be that I could prevail in these lawsuits… The HOA is totally incompetent and have been dragging their feet on taking care of anything. I just had gutters installed as the ones that were here were taken down once the new roof was completed this July/August. The HOA would not even answer my questions in regard to this so I hired my handyman to do this for me as well as replace the ceiling on the patio because of no response by the HOA. However, the problem lies with the condo above me. The patio is completely leaking below to me and it is destroying my interior walls as well as door frames. The man that owns that unit rents it out and will not even pay his HOA dues because of their failure to take care of these issues. I really need help.

  18. I bought my house 4 years ago and I wanted to take the molding off the walls because they was a pain to keep clean and collected so much dust. When we took it off I found mold on the bottom part especially under my windows.
    Now I don’t even want to live here anymore. They said my basement got sepage but never flooded. My basement was flooded a couple years ago.
    I’m stuck and don’t know exactly what to do?
    We didn’t have the house inspected when purchased because everything looked good and went by what was told…. big big mistake!

  19. I bought my house a few months ago. Seller disclosed previous wetness in lower level, but indicated they had fixed it.
    Just discovered that there has been a continuous slow water leak since before I moved in, which then turned into a small flood due to recent heavy rains. Wet carpet has been removed, and wood paneling, to show evidence of on-going leak estimated by professionals to be twenty years old.
    New carpeting advertised by seller as a upgrade appears to have been laid down on an active slow leak as a purposeful method to deceive potential buyers. They put up paneling and installed carpeting to hide the issue.
    I wonder if I have a legal case since they practiced deception, but had also disclosed it USED to be wet.
    Now I’m sick

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