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Concealed Defects in Real Estate: Legal Rights of Buyers

Victims of real estate fraud are often unaware that they are protected against these crimes. It is important for real estate buyers and investors to understand the legal rights of buyers to expect honest disclosures and more when purchasing real estate. The better you understand your rights, the better protection you have against bad actors who are private sellers and their real estate agents who fail to disclose known problems or defects within a property before selling.

What are Concealed Defects in Real Estate?

Sellers have a responsibility to notify potential buyers of known defects in the real estate so that buyers are making informed decisions about their financial commitments when purchasing a property. Concealed defects are not always obvious when conducting visual inspections and include the following types of problems and more:

  • Mold
  • Roof problems
  • Electrical system problems or issues
  • Termites (and other infestations)
  • Plumbing problems

These defects are problematic, and many are costly to repair. The fact that they are considered hidden defects is because they aren’t easily identifiable via a visual inspection. This makes them difficult to uncover and often adds to the costs of repairs once they are discovered because additional damage occurs while waiting for repairs.

What are Your Rights When a Seller Hides Latent Real Estate Defects?

Legally speaking, as long as the seller has disclosed known latent defects and you’ve agreed to purchase the property, the onus to make the repairs is in your hands. However, you are protected if the seller knew about the problems and did not disclose the defect. The challenge is proving that. One way you can prove that, however, is by looking for signs of recent repairs that disguised the damage and made it difficult to discern in a visual inspection.

If it is discovered that the seller knowingly failed to disclose a known “concealed defect” then the seller may be responsible for the costs of repairs for the defect as well as for other damage arising from the concealed problems (such as a fire resulting from faulty wiring or mold resulting from leaking plumbing). If injuries or deaths result from the concealed defects, the seller may be culpable for those as well.

Ideally, you will make an offer that is contingent upon an inspection and then follow through with a professional inspection or survey of the property. A competent inspector knows the signs to look for when examining a property and will provide a detailed summary of obvious and potential problems with the property. The inspector may also be able to discover signs of recent repairs in areas where latent or hidden problems may exist or have existed in the past. If hidden defects are discovered during a thorough inspection, you then have the right to amend your offer (provided you made the stipulation in your offer). Many buyers will consider one of the following:

  1. Require the seller to make repairs prior to the close of the sale.
  2. Amend the price of the offer to reflect the cost of repairs.
  3. Request that the seller pay a portion of the cost of the repairs.
  4. Back out of the deal altogether.

This solution only applies if you discover latent defects during the inspection. If months (or years) go by after you’ve purchased the home and the concealed defect is discovered, you will need to consult an attorney who specializes in law that protects the legal rights of buyers in real estate transactions such as this. Your attorney can help you understand the next steps to seek compensation for losses related to defects the previous seller deliberately concealed or failed to disclose

How to Protect Yourself from Concealed Defects in Real Estate?

Real estate is no small investment in its own right. It costs a lot of money to purchase real estate and the prices are only going up over time. No one wants to purchase a home that turns out to be a total money pit. That is why there are steps you can take to protect yourself during the buying process that may help you avoid the financial fallout of concealed defects in your new property.

The first thing you need to do is invest in a thorough inspection of the property before agreeing to purchase the property. In a best-case scenario, you’ll walk through the property with the inspector so that he or she can point out all the potential defects and areas of concern in real-time. Otherwise, make sure you read the document the inspector provides thoroughly. Most inspectors will include photographs as well as detailed explanations. The purpose of this is so that you are aware of needed repairs as well as hidden areas that may represent needed repairs.

Another thing you can do is purchase insurance protecting you from latent defects. This is rarely a standard inclusion on your property insurance policy and may not be available in all states. However, ask your insurance agent if you can purchase protection against latent defects as an add-on or rider to your standard property insurance.

Additionally, you can purchase a home warranty. While previously existing conditions are typically excluded, some home warranties will make exceptions if the condition is one that is considered undetectable and would not have shown up in a visual inspection or via routine maintenance.

If you’ve been the victim of concealed defects in real estate, it’s not only important to understand the legal rights of buyers and how they apply to you, but also to consult our team of talented professionals who will seek justice on your behalf.

Matthew Schwartz

Matthew Schwartz is a Shareholder at Schwartz, P.A. where he serves as the practice group leader for their securities litigation and professional negligence practice group. His practice is focused on plaintiff-side securities arbitration and litigation, representing individual investors and institutions in claims against brokerage firms, investment advisors, commodities firms, hedge funds and others. He also represents plaintiffs who have been damaged by their insurance agents, lawyers, accountants and other professionals. He is an accomplished commercial litigator who has handled a variety of business disputes and other consumer claims.

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