Sellers do not have to disclose something that they don’t know about. But if it can be proven that something was known and omitted, a seller can get in big trouble.
“A seller may be liable to the buyer for the nondisclosure of material facts, negligent misrepresentation of facts, intentional misrepresentation of facts, or suppression or concealment of facts,” Zuetel explains.
Should you sue a seller for failure to disclose before the sale?
If the seller fails to disclose information about the house but you haven’t yet signed on the dotted line, you may be able to cancel the purchase. Canceling the purchase could be a lot less costly and time-consuming than suing the seller.
Laws in most states guarantee a buyer the right to cancel a transaction due to discovery of certain facts during the transaction. In California, for example, Zuetel says a buyer may terminate a transaction within a certain number of days after receiving a disclosure regarding natural hazard zones around the property.
Most real estate attorneys recommend including contingencies in the residential purchase agreement that will give buyers an out, and require any money held in escrow be returned to them (pending a review of the disclosures and the property). If your contract has this contingency in place, you should be able to cancel the transaction and walk away without losing anything but your time.
Should you sue a seller for failure to disclose after the sale?
Things get more complicated if you buy the property. That’s when you may land in a courtroom, but a lawsuit could still be avoided, says Zuetel.
“The dissatisfied buyer can contact the seller to determine whether the parties can work out an agreement or settlement of the issues,” he notes.
In fact, some purchase contracts will contain a provision that the buyer and seller must try mediation before the filing of a lawsuit, while other purchase contracts will require that disputes between the buyer and seller must be arbitrated, rather than litigated in court.
If you do end up suing the seller, you could seek monetary damages for the seller’s failure to disclose information or misrepresentation of the property. The amount you sue for can include damages for the difference between the amount that the buyer paid and the fair market value of the property at the time of the sale, Zuetel says.