Disclosure of Issues Not Readily Observable to a Buyer

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You are excited because you have a great listing with a motivated seller to sell his property. The property is being sold "as is," and buyers are encouraged to do any, and all inspections that they believe are necessary before buying the property. Have you fulfilled your duties?
 

Assume that the interior of the home was recently painted, and the seller happens to mention that there have been leaks throughout the master bedroom. However, he assures you that the home has not leaked in the last month since the painting had been completed, but you are aware that there has been little rainfall in the seller's neighborhood during that time.

A full-price offer comes in after the buyer has completed his due diligence, including a full roof inspection, and the buyer’s realtor advises you that he is anxious to close as his inspections came back clean and he loves the property. Do you need to take any steps to advise the buyer that there have previously been leaks in the master bedroom?   What if your seller tells you that you can’t disclose anything about the home to the buyer because the property is being sold “as is”?

Your seller may even tell you that the water stains on the bedroom walls, which are now covered with a new coat of paint, were merely a "cosmetic" issue, and there is no need to disclose it to the buyer. The seller might also remind you that your commission is dependent upon the property closing and that he may seek another realtor to represent him if this sale does not go through.

Disclosure laws are largely creatures of state law and vary from state to state. A common theme is that sellers must disclose those matters that are not readily observable to the buyer but affect value. To be sure of what is required in your particular state, you may need to speak with an attorney experienced in these matters.

In any brokerage relationship in Florida, a realtor is obligated to disclose all known facts that materially affect the value of a residential property that is not readily observable to the buyer. If such facts are not disclosed by the seller when they are known to the seller's realtor, the seller's realtor may also be liable to the buyer on theories of negligence and fraudulent misrepresentation.

Could you convince a jury that you are not liable for disclosing the prior roof leaks because the buyer had his own inspections?   Perhaps. However, Florida courts have made it clear that the decision as to whether you are liable or not is a determination that must be made by the finder of fact. If there is a jury involved, you should be fearful of the sympathy the jury panel will have for a homebuyer plaintiff who purchased his dream home, only to find that the master bedroom leaked after the first major rainstorm he experienced after moving into the residence.

Moreover, Florida courts have found that damage from water leaks is not just a “cosmetic issue” and that the same must be disclosed. Syrud v. Today Real Estate, Inc., 858 So.2s 1125 (Fla 2d DCA 2003).

Whenever there are hidden conditions of any type which could materially affect the value of a property in Florida, it is best to err on the side of disclosure, and if you are in doubt, you should consult with counsel. These situations will require adept communication with your seller but having the difficult discussions about disclosure resolved before the buyer purchases the property will help keep you out of the courtroom and out of the crosshairs of the Florida Real Estate Commission.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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