Latent Defects in Real Estate: What Buyers + Sellers Need to Know

“To disclose or not to disclose – that is the question.”  - William Shakespeare (if Hamlet had been a real estate lawyer)

If you’re buying or selling real estate, you’ve probably heard the term “latent defect” thrown around. But what does it really mean, and how does it affect the obligations of sellers and the rights of buyers? This article will break down the concept of latent defects, the seller’s duty to disclose, what buyers can do if they discover a problem after the deal is done, and what sellers should be aware of regarding their own exposure. We’ll keep things practical and jargon-free, so you can navigate your next transaction with confidence.

The Buyer Beware Principle (“Caveat Emptor”)

Let’s start with the basics. Most real estate deals operate under the principle of “buyer beware” - sometimes referred to by its Latin name, “caveat emptor”. Simply put, it means the buyer is responsible for examining the property and accepting its condition, warts and all. As a buyer, it’s your job to do your homework: check the roof, test the plumbing, and preferably bring in a home inspector. The law expects you to take reasonable steps to uncover any issues before signing on the dotted line.

But what if you do everything right and still end up with a nasty surprise that wasn’t visible or detectable?

Seller’s Disclosure Duty: The General Rule + the Latent Defect Exception

Generally, sellers aren’t required to point out every flaw in a property. If a problem is obvious - like a cracked window or stained carpet - the buyer is expected to notice it during their inspection. However, there’s a big exception: latent defects. These are problems that:

1. Are known to the seller, and
2. Cannot be discovered by a reasonably careful inspection.

Think of them as the “hidden traps” in the world of real estate.

Latent Defects Explained: The Two-Pronged Test

To hold a seller liable for a defect, two things must be true:

1. The defect must be truly hidden. That means even a diligent buyer (or a professional inspector) wouldn’t reasonably find it during a standard inspection.
2. The seller must have known about it. If the seller was unaware, or if the defect was discoverable, the seller are usually off the hook.

For example, imagine a basement that floods only during extremely rare weather events, and the seller knows about it but doesn’t mention it. Or perhaps there’s a mold problem hidden behind finished walls, which the seller chose not to disclose. In both cases, the defect is hidden and known to the seller - therefore making it a latent defect and creating a positive duty for the seller to disclose.

On the other hand, if the buyer could have spotted a leaky faucet or a sagging door, those aren’t latent defects - they’re the buyer’s responsibility to detect.

Buyer’s Avenues for Compensation

If you discover a latent defect after closing, here’s what you can do:

• Gather evidence. Document the defect thoroughly - photos, inspection reports, and any communication with the seller.
• Prove the seller knew. Find proof (emails, previous repair records, or neighbor testimony) that the seller was aware of the issue.  This may be tougher than you think as a devious seller is unlikely to cooperate with your efforts.
• Seek legal advice. Consult a real estate lawyer to discuss your options. You may be entitled to compensation for repairs or, in rare cases, to rescind the sale.
• Consider mediation. Sometimes, disputes can be resolved amicably without court involvement, saving time and money.

Keep in mind, the burden is on the buyer to show both that the defect was hidden and that the seller knew about it. This can be challenging, but with good documentation and expert advice, many buyers succeed in getting compensation.  Also keep in mind that pushing this matter to a formal resolution will be time consuming and expensive – especially if you’re involving lawyers.  In doing that analysis, you need to weigh the cost of just covering the cost of the repairs yourself versus the cost of trying to hold the seller liable.  Unfortunately, the costs of formally trying to get compensation could be in the thousands of dollars and it will be difficult for a lawyer to give you any reasonable estimate so you need to do this analysis carefully before going too far down that road.

Seller’s Perspective: Disclosure, Risk Mitigation + Legal Counsel

If you’re a seller, honesty can sometimes be the best policy. Disclose any hidden defects you’re aware of, even if you worry it might scare off buyers. Failing to do so can lead to expensive lawsuits down the line. If you’re unsure whether something qualifies as a latent defect, consult with a real estate professional or attorney before listing your property. You’ll protect yourself and maintain your reputation as a trustworthy seller.  Even if it is something that a reasonable buyer should be able to discover, disclosing it upfront helps protect you from a potentially expensive legal fight later on if the buyer thinks you failed to disclose something.  Especially in the case of something that could be hazardous to a buyer’s health, this area of the law could evolve to protect buyers and put an greater onus on sellers so it is worth considering that extra risk when weighing the issues.

Practical Tips for Buyers + Sellers

Buyers: Always arrange a thorough inspection. Ask direct questions and request written disclosures from the seller. Don’t hesitate to consult professionals if you have concerns.

Sellers: Make a list of all issues, big and small. Disclose anything that isn’t obvious, especially if it could affect the buyer’s enjoyment or safety. When in doubt, err on the side of transparency – especially if you want to reduce the chance of a fight later on.

Conclusion

Latent defects can be a headache for both buyers and sellers, but understanding your rights and responsibilities makes all the difference. Remember, most transactions rely on “buyer beware,” but hidden problems are a special case. Whether you’re buying or selling, stay informed, document everything, and seek professional advice when needed. With a little diligence and open communication, you can avoid disputes and ensure a smooth real estate experience.

I hope you find this advice helpful as you navigate your real estate journey. If you have any questions or need further assistance, feel free to reach out.