Residential Property Sales In Maryland: Understanding Latent Defects

In a residential real estate transaction, both buyer and seller face some degree of risk. The buyer, or course, may be concerned that the home they’re buying has defects of which they’re unaware. Maryland law does require sellers to disclose known defects, and, after a sale, homeowners who discover undisclosed defects may try to hold the seller accountable through legal means.

Before buying or selling a home, it’s important for both seller and buyer to understand their rights. In this two-part blog, we’ll look at the legalities of disclosing defects.

Defining Latent Defects

Section 10-702 of Maryland’s Real Property Article defines latent defects as those that:

  • A buyer would not reasonably be expected to ascertain or observe by a careful visual inspection, and
  • Would pose a direct threat to the health or safety of the purchaser, or any occupant of the property (such as a tenant or houseguest of the purchaser).

This rule applies only to single-family residential real estate with no more than four single-family units.

Examples of latent defects include termite damage, mold inside walls, and faulty electrical systems. A seller who is aware of such problems must disclose them by filling out a Maryland Residential Property Disclaimer Statement. Sellers who are unaware of latent defects can instead sell the home “as-is,” which should protect them from liability, in the event such defects are discovered after sale.

Material Defects vs. Material Facts

Sellers must disclose latent defects, because they are considered “material” – meaning, they affect the home’s sale price and play a role in whether a buyer would decide to purchase a home. Material facts differ from material defects, in that they don’t necessarily have to be disclosed.

A property owner who sells a home independently – without the use of a real estate agent – is not required to disclose material facts. For example, if the property owner were selling the home because his neighbors are extremely noisy and unruly, he would not be obligated to disclose that information to potential buyers. Real estate agents, however, must disclose any material facts of which they are aware.

Buyers may prefer to buy a home only through a real estate agent, to ensure they’re getting the most reliable information about properties. Even so, that’s not a surefire way to avoid a bad deal.

A Case of Misrepresentation

In 2011, the Maryland Real Estate Commission suspended the license of an agent who deliberately concealed serious defects from a couple. After buying a home, the couple found numerous defects, including problems with the plumbing and electrical systems and a leaky roof. They learned the furnace and hot water heater could not be connected (because of a carbon monoxide leak in the basement) and discovered the home was infested with mice. An exterminator told the homeowners that the home had a history of mice infestation.

The real estate commission found the agent violated professional ethics by failing to disclose the defects – she also did not reveal the material fact that the home was, at the time of sale, about to enter foreclosure. The couple that filed the claim against the real estate agent failed to provide proof that their mortgage payments constituted an actual financial loss, so they received no compensation.

Lusk Law, LLC, specializes in assisting buyers and sellers in real estate matters, helping to avoid litigation when possible, and we’re ready to actively represent our clients in court when litigation is necessary. Our experienced attorneys have provided legal counsel and representation to clients in Frederick County, Howard County, Baltimore County, Baltimore City, Carroll County, Washington County, Montgomery County, Anne Arundel County, and other counties in Maryland. We have also represented individuals who have made claims with the Maryland Real Estate Commission. With over a decade of experience in representing individuals in real estate matters, we’re ready to offer a consultation concerning your case. Please call us at 443-535-9715 or fill out our contact form if you have any questions about this topic.

Check back in next month to see the next blog entry on residential property sales and defects.

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