As a home seller it is imperative to make sure you do everything you can to avoid lawsuits from your new buyers. Failure to disclose is one of the most litigious causes of action in real estate law.
When selling property, sellers must disclose all they know about the property according to state mandated real estate form disclosures. This usually includes past insurance claims, any upgrades or improvements, damage to the property, repairs, noise issues, and more. Sellers must answer these questions to the best of their knowledge, and provide explanations and any necessary receipts to verify the claims.
But what happens when other people who work on your home make a discovery that could render the home undesirable?
California law states that a seller is liable for failure to disclose only if s/he had ACTUAL KNOWLEDGE of the defect or issue and did not disclose : a contractor’s knowledge is therefore not imputed to the seller. In lay terms, this means that if a seller hires a contractor to do work, and the contractor discovers an issue about the property that a seller would be required to disclose if known, the seller cannot be held liable unless the seller was made aware of the problem by the contractor.
Buyer duty of due diligence: The buyer must always perform due diligence to investigate the property they are purchasing, and this typically includes a home inspection and other recommended inspections. If the seller notes defects or issues the buyer can have experts come evaluate.
Keep in mind that if you are selling a property it is very important to answer ALL questions on the disclosures to the best of your ability. Back up any claims with receipts, documentation, etc. I always say it’s better to over-disclose versus under-disclose. Put everything out there so that you do not have to worry about liability down the road. If you are made aware of any issues by a third party, make sure to include them in your disclosures so the buyer can look into it further.
If you are ever unsure of whether or not to disclose something, the rule of thumb is that you should. For tricky situations I suggest obtaining legal advice…or if your real estate agent happens to be an attorney that could help too 🙂