Failure to Disclose: What to Do If a Seller Hides Real Estate Defects

Buying a home in the California real estate market is a substantial investment. That means you’re taking a considerable risk. Even if you perform your due diligence, research the property, and have a thorough inspection performed, you are not as familiar with the house as the person selling it. At a certain point, you must trust that the seller is honest about the property’s condition.

In most cases, that trust is rewarded. But what if your nightmare comes true and your new home has problems you didn’t know about? If those problems are considered “material facts,” the seller may be liable for failing to disclose the defects.

The Duty to Disclose Real Estate Defects

California real estate law imparts many responsibilities onto sellers of single-family properties. Among the most important of these is the duty to disclose known defects, referred to as “material facts.” If a seller is aware of material problems with a property, they must provide prospective buyers with a written disclosure covering the issues.

This duty protects homebuyers from being misled into purchasing a property they would not have bought if they had all the facts. Many costly or dangerous problems may not be obvious, even to a trained property inspector. For example, a standard inspection might miss issues like lead paint, asbestos tile, and noncompliant wiring.

These problems can be dangerous and costly to fix, which would likely affect prospective buyers’ decisions regarding whether to make an offer and how much they are willing to pay. If a seller knows about these types of problems, they need to disclose them or risk substantial legal penalties.

The duty to disclose does not obligate the seller to perform an inspection themselves, though. They only need to share the material facts of which they are aware. It is still the buyer’s responsibility to perform an inspection if they want more information about the property.

It’s also worth noting that the duty to provide a comprehensive real estate disclosure is not waived if someone agrees to purchase a property “as is.” Selling a home “as is” only means that the seller will not be required to make any changes to the property or be held accountable for its conditions by the seller. The buyer still has the right to know about any known defects.

What Counts as a Material Fact in Real Estate?

So, sellers have to share material facts in a written disclosure. But what constitutes a material fact? In general, a fact is “material,” or relevant to the matter at hand, if it would negatively affect the buyer’s decision to purchase or the price they are willing to pay for the property.

The most common type of material facts are physical defects within the structure. The California Department of Real Estate provides clear guidelines regarding the issues that must be disclosed before a sale in the Transfer Disclosure Statement (TDS). Examples include:

  • Cracks in the foundation
  • Soil contamination
  • Roof leaks
  • Renovations performed without a permit
  • Construction that is not up to code
  • Faulty appliances
  • Termite or animal infestations
  • Neighborhood noise problems
  • Basement flooding issues

In general, sellers should err on the side of caution and disclose more potential issues rather than fewer. There is no penalty for being too honest, after all. Sharing something obvious or that doesn’t affect a potential buyer’s opinion of the house has no downside, while failing to disclose an issue could expose the seller to substantial liability.

Proving That a Seller Concealed a Defect

If you’ve purchased a home only to discover a serious problem, you may be able to hold the seller accountable for concealing the defect. However, you first need to prove that the seller knew and hid it from you.

Remember, sellers are not obligated to disclose facts they did not know. The responsibility for proving they knew about a defect falls on the buyer. Depending on the issue, there are several ways to accomplish this. The two strongest kinds of evidence of failure to disclose include:

  • Witness testimony: If someone actively hid a problem, other people may know about it and be able to provide testimony. Possible examples of witness testimony might be a neighbor who watched the seller hide an issue or a property agent whom the seller instructed to conceal something.
  • Purposeful concealment: Serious issues may need to be physically hidden to prevent them from being spotted during tours or inspections. If a seller purposely hides the problem, it shows they both knew about the issue and intentionally misled you. The most common examples are “repairs” that only hide a problem from sight instead of addressing the root of the issue, such as painting over mold or drywalling over a crack in the foundation.

The right evidence can make proving your claim in court significantly easier. A skilled real estate attorney can help you collect proof that the seller failed to disclose defects to support your case.

Holding Sellers Accountable for Concealing Material Facts

If you prove a seller failed to disclose defects in your home before purchasing it, legal remedies are available to you. Depending on the circumstances of your claim, you could be eligible to pursue:

  • Monetary damages for breach of contract or fraud
  • Rescinding the sale entirely
  • Canceling the contract, which might give you the right to breach of contract damages as well
  • Specific performance requirements, where the seller is obligated to fix the issue for you

The most effective way to pursue these remedies is to consult a skilled California real estate attorney. At Peterson Law, LLP, our team has decades of experience handling complex California real estate disputes. Schedule your consultation to discuss your claim and discover whether the seller may have breached their duty to disclose when you bought your home.