“Should that have been disclosed?” It’s a question that real estate licensees often hear when they’re following up with clients after a closing. In fact, clients often call their agent to ask whether something should have been disclosed. Answering it takes quite a bit of work. In this article, you’ll learn the first three things my firm looks at when vetting these cases, plus the “rule of thumb” that helps simplify the process.
First, look at the SPDS. I can’t tell you how many times I’ve seen someone try to bring a non-disclosure claim over something that was actually mentioned in the SPDS. Sometimes it’s pretty blatant—I’ve seen individual buyers initiate mediation over issues that were listed in the SPDS plain as day. Sometimes it’s more subtle. For example, sometimes people disclose water damage, but they were out of town when it happened and unaware whether a leaky pipe or a leaky roof caused it. In every case, you want to go over the SPDS with a very practical eye and ask yourself whether the problem is truly surprising after reading the SPDS.
If the SPDS doesn’t reveal the problem, your next step is to find the section of the form where that problem should be disclosed. As you review the questions, keep in mind that some are narrow and discrete. Others are broader and more open. The form is thorough enough that the more common disclosure problems will be covered in multiple questions. But your goal is to find at least one question that should have prompted an honest person to reveal the problem. Once you identify the relevant sections, ask yourself: “do I strongly feel that the seller lied in answering that question?” Although buyers can recover for simple non- disclosure, their cases are better and easier if the seller flat out lies. It’s the difference between oversight and an intentional fraud.
Next, consider the inspection. Read the entire inspection report carefully and consider whether a reasonable buyer who read the whole report would have known about the problem. These inspection reports get reviewed in nearly every real estate mediation. And in the cases that go to trial, they’re often an exhibit.
Finally, there’s the issue of materiality. If the buyer is sincerely surprised by something that the seller lied about or omitted, you need to consider whether it’s the type of issue that would be important to an ordinary or reasonable buyer. As a practical matter, all but the most insignificant conditions are typically material. That’s why the standard advice to sellers is: “When in doubt, disclose!”
Aside from those technical issues, the practical answer is that anything truly surprising to the buyer that is important enough to disturb the buyer’s sleep or prompt him to worry multiple times should have been disclosed. My years of experience handling real estate trials have taught me that important issues in properties don’t go unnoticed. If it’s actually important, the seller figures it out. I have a lengthy checklist in my office that I use to help people find the proof they need to win that claim, and it hasn’t failed yet. And if something was important enough to be worth lying over, it’s material.
As a realtor, that practical answer may be the most important one for you. If your client feels genuinely surprised by some condition on a recent purchase, and it really bothers him, it’s an important enough problem to discuss with a lawyer.
Samuel Doncaster is a trial lawyer who’s very active in real estate fraud cases. He routinely helps people get their money back when they’ve been cheated in real estate deals. If you have a client who needs help with a disclosure issue, you can help them set an appointment by calling (602) 427-4437 for a strategy session. That strategy session comes with a risk-free, 100% money-back guarantee.