Failure to Disclose

A lot can go wrong during a real estate transaction. The worst of all being failure to disclose a material fact concerning the property being transacted by the seller and/or his agent and broker. Whether deliberate or unintentional, being a material fact alone is enough to construe the affect it may have on the value or desirability of the property.

What is a failure to disclose?

In real estate law, the term ‘failure to disclose’ holds much significance.

‘Failure to disclose’ means as an act of a seller to refuse to provide or disclose essential information about a property to a buyer.

What qualifies as essential information is any potential problem and material defect that could easily affect the value of the property being transacted.

Real estate transactions require the seller and/or his agent and broker to make full material disclosures about the property being sold.

The seller should make and provide all necessary disclosures to the buyer before the closing of the real estate deal. If not done, this amounts to a failure to disclose violation and a breach of contract by the seller.

A real estate seller’s failure to disclose or conceal material facts related to a property is a serious law violation. Failure to disclose means that the seller has committed a breach of his contractual obligations. The duties of a seller require that he/she should act in good faith and deal fairly in all matters of the real estate transaction.

Besides the seller, real estate agents and brokers also have the same level of responsibility to the buyer. In their capacity, they should also act to prevent any failure to disclose violations.

Reason for real estate property disclosure

The reason for providing the real estate property disclosure is simple. It is to inform a prospective real estate buyer with complete knowledge about the state and condition of the property.

Being complete means having the potential to alter the decision of the buyer to either continue with the purchase or obstruct the deal.

Therefore, to validate the reason for real estate property disclosure, it is important that –

• The seller provides all necessary disclosures before the closing of the sale; and
• Disclosures provided are in writing and duly signed by the seller and the buyer both.

Types of real estate disclosures that a buyer and a seller should be aware of

Depending on your state law, every real estate transaction could require several different types of disclosures.

A real estate buyer’s right is to ask and receive all the necessary disclosures that could affect his buying decision. A seller’s duty is to disclose all the relevant information that could affect the value of the real estate property.

Some of the common real estate disclosures that a seller should make are discussed below –

1. Any nuisance in the neighborhood

This generally covers information about any nuisance in the vicinity or surrounding area of the real estate property.

A nuisance is anything that appears from a source outside of the property and which may disturb the property holder.

Different states require different kinds of neighborhood nuisances. Examples could be odors or noises coming from nearby industrial, or commercial properties. Due to this, some states also require disclosing the source or possible source of nuisance. This may include an airport, landfills, shooting range, farms, etc.

2. A death in the home

Disclosing about any deaths that happened at the property is also a common form of disclosure required in real estate. Some buyers are sensitive and could have concerns or superstitions about a property where someone died.

However, this disclosure requirement also varies depending on the circumstances of the death. For example, some states may not require disclosure for death due to a natural cause or an accident.

3. Presence of potential harm or hazard

To inform the buyer that there can be a presence of a potential cause of harm or hazard on the property, requires a disclosure. Such harm or hazard could be both man-made and natural. The presence of such factors means that the property or its occupants might face any damages in the future.

For example, property located in an agricultural vicinity, or wetland, or contamination due to the presence of any toxic material.

4. Repair history of the property

Damages occurred, and corrections made in response to such issues can imply an increase or decrease in a property’s value. Thus, repairs or renovations undertaken on the property require a disclosure.

Revealing a property’s repair history also helps any buyer appointed property inspectors to pay close attention to riskier factors.

5. Damages due to water

Had there been any kind of water damage on the property, requires disclosure. This could be due to plumbing faults, rainwater coming in through leakages in the roof, or water from floods or downpour filling in the basement, etc.

Water damage could result in loss of possessions and even erode a residential property’s structure.

6. Bankruptcy and property liens

Real estate property sellers are also required to disclose issues regarding bankruptcy and property liens. For example, if they have filed for any bankruptcy and are awaiting the decision of any such pending litigation. The buyer should know whether the selling property can become part of any repayment plan as per the court’s decision.

Similarly, disclosure about any property liens outstanding on the real estate being sold is also required. Failure to disclose can result in the buyer becoming part of a lengthy suit to win his right to take control of the property.

7. Information regarding any homeowner’s association

If a residential property falls within the ambit of a Homeowner’s Association, such information requires disclosure. Generally, Homeowner’s Associations have a defined set of bylaws and membership rules which are binding on all its residents.

However, any interested buyer of a residential property may have reservations about it. Thus, a buyer should have prior information about such issues.

8. Disclosing a list of items

Besides all the above, a misunderstanding could exist between the buyer and the seller on what items come included with the property. This means that the buyer may find something missing which he otherwise assumed to have received with the property.

For example, any fixtures and fittings, or electric appliances and furniture used for showcasing of the property for open-house tours.

To prevent such issues, some state laws require disclosure as to what items come included with the property.

9. Any other possible disclosure

Based on the premise that a certain non-disclosure could impact the value of, as well as, the decision to buy a property, mentioning all such relevant disclosures is mandatory.

For example, failure to disclose pest infestation that happened in the past in the area where the property is located.

How to make real estate disclosures?

A real estate disclosures is a written document that encloses the details of all the material facts in the knowledge of the seller. They should be promptly provided before the closing of the real estate deal. Doing otherwise, such as in an untimely or late manner, deems as a failure to disclose violation.

Some states have proper specifically designed forms for this purpose, which the seller and the buyer must sign and date.

For example, the state of California requires sellers to provide the buyer with the Real Estate “Transfer Disclosure Statement (TDS)”. TDS is a comprehensive document that enlists disclosures of material facts with their details.

Nonetheless, even if your state does not have any designated form for property disclosure, provision of real estate disclosures should be as a written document. Further, a seller should get a written and signed statement to confirm that the buyer has received the disclosure document.

In any case, remember to consult a real estate attorney while drafting a real estate disclosure. This will help in avoiding a mistake that could later become a liability for you.

Real estate attorney guiding a client on real estate failure to disclose lawsuit.

How to prevent a failure to disclose violation?

Below is a set of few questions and answers that can help in preventing a failure to disclose violation. These questions are based on the part of the real estate seller under general circumstances.

The exact nature and extent of these questions will vary according to your state’s law. Therefore, it is better to seek professional guidance from a real estate attorney in these matters.

1. How to discover any material defects in a real estate property being sold so as to avoid failure to disclose violation?

The general criteria to prevent a failure to disclose violation is for the seller to disclose only the known facts. However, a state might have any specific guidelines that may require a stricter pursuit.

For example, hiring an inspector to identify any specific nature issues within a property.

2. Is hiring a property inspector necessary if the state does not require so?

When a state does not specifically require any property seller to hire a person for his real estate inspection, it isn’t necessary at all. Nevertheless, it is always good to get an inspection done before selling your property.

But getting a property inspection done is just like tossing a coin, in which case you never know which side it will land on.

This is because the outcome of a real estate inspection can be different from what you anticipated. Instead of just being a source of reliability and an attempt to gain buyer confidence and higher price, it could be otherwise.

It could bring into your knowledge a material fact that may affect the property value and thus require full disclosure. And since you now know about it, a non-disclosure would mean a breach of contract on your part.

Therefore, carefully decide and consult a real estate attorney about whether to hire a property inspector or not.

3. Is repair a must once an issue is identified in a property inspection?

Depending on the severity of the issue’s found, a state might require the seller to undertake necessary repairs. However, most state laws only require disclosure, and no repairs are mandatory upon the seller. A real estate attorney could better guide you on what and how exactly your state prescribes on treating such issues.

Still, the presence of an issue that requires a disclosure could mean a possible change in the value of the property. Therefore, it is for the seller to decide on what to do if the state’s law is silent. He can either sell the property at a reduced price or make corrections and get a better price.

Types of claims in case of a seller’s failure to disclose

When a seller commits a failure to disclose violation, a buyer can make three types of claims. These are –

1.       Breach of contract
2.       Misrepresentation
3.       Non-disclosure

1. Breach of contract claim

Most residential home sale contracts have provisions related to the “Seller’s Property Disclosure” form. This is a contractual agreement on the part of the seller and therefore requires him to fill it accordingly. Failure in doing this means a breach of contract.

2. Misrepresentation claim

Misrepresentation claims are made when the seller acknowledges something that isn’t true.

3. Non-disclosure claim

Non-disclosure claims are made when it is believed that the seller remained silent about something that he had the obligation to disclose.

Types of damages awarded in a real estate failure to disclose lawsuit

Consulting a real estate lawyer upon finding a real estate failure to disclose violation is the best choice. Your lawyer will guide you on the extent of the matter and what possible recourse you have against the seller. Usually, damages are financial benefits awarded to the buyer as compensation for his/her sufferings.

The types of damages awarded in a failure to disclose lawsuit are –

1. Compensatory damages

These relate to any out-of-pocket expenditures which the buyer incurred to make good the defect in the property. These also compensate the buyer against any reduction in the value of the property due to the non-disclosure.

2. Punitive damages

As the name suggests, these damages act to punish the seller and/or the agent and broker involved. These are awarded in addition to compensatory damages. However, this case requires the buyer’s lawyer to prove that the violators deliberately concealed material facts.

3. Rescission or rescinding the contract

Although quite rare, a buyer could be awarded the opportunity to rescind a real estate contract. This means the seller getting back his property and the buyer being returned with the complete purchase price. Such a decision intends to put the buyer in the same position as if no transaction had taken place at all.

Real estate lawyers near me

As discussed above, dealing with a real estate failure to disclose violation can be both complex and complicated.

If you are a real estate seller, you should take every possible measure to prevent its occurrence. Depending on its nature, a failure to disclose violation can become your worst nightmare, resulting in huge liabilities.

As a buyer, it is your right to receive complete disclosures before the closing of a real estate transaction. However, any situation where a buyer discovers a failure to disclose violation after the sale agreement requires prompt action.

This is because the statutes of limitations act may result in dismissal of a real estate failure to disclose a lawsuit. Therefore, filing a real estate failure to disclose lawsuit requires timely action.

All this concludes to say that hiring an expert real estate attorney by both a seller and a buyer is a must.

Attorneys Real Estate Group specializes in matters related to real estate failure to disclose lawsuits. We have tons of experience and know exactly what you want. Just like you, we have served numerous clients in getting the best possible favorable outcomes in failure to disclose litigations.

Simply, give us a call at 916-671-3138 or visit our website at Attorneysre.com. You can also get free legal consultation by filling in the form at this link. One of our attorneys will get back to you as quickly as possible and will be glad to assist you. We look forward to welcoming you soon.