Property Disclosures
Sellers and licensees must reveal known material facts, and a broker must make sure every agent in the office does so. This topic covers the duty to disclose, the federal disclosures that apply nationwide, and the difference between defects a buyer can and cannot discover independently.
The Duty to Disclose Material Facts
A material fact is one that could affect a reasonable buyer's decision or the property's value or desirability. Sellers and their agents must disclose known material defects; failing to do so, or actively concealing them, can be misrepresentation or fraud and a source of broker liability. This modern duty limits the old rule of caveat emptor. Puffing (opinion-based sales talk) is legal, but stating a false fact, or staying silent about a known latent defect, is not. Brokers should adopt office procedures that document disclosures to manage risk.
Latent vs. Patent Defects
A patent defect is obvious or readily observable on ordinary inspection, so the buyer is expected to notice it. A latent defect is hidden and not discoverable by normal inspection, such as a cracked foundation behind a finished wall or a chronic seasonal flood. A seller or agent who knows of a latent material defect must disclose it, because the buyer cannot find it independently. A broker who learns that an agent concealed a latent defect must act, because knowledge imputed to the firm can create liability for the whole brokerage.
Federally Required Disclosures
Federal law requires a lead-based paint disclosure for most residential housing built before 1978: the seller or landlord must reveal known lead hazards, provide records, deliver the EPA pamphlet, and give buyers a period to test. Other disclosures may apply for a property in a special flood hazard area or with certain environmental hazards such as radon, asbestos, or underground storage tanks. Many states add their own disclosure forms, but the pre-1978 lead rule is nationwide, and a broker must ensure the office uses the correct current forms.