Navigating Real Estate Disclosure Requirements
Buying and selling real estate is often the largest transaction for most consumers. Attorneys can help counsel clients on how to respond to allegations of non-disclosure after closing, or for buyer or seller protection before closing.
In Minnesota, the best way to protect yourself as the buyer is to conduct as much due diligence about a property before you close on the property. If something is discovered during the inspections, then the deal can be cancelled. But we so often see that once buyers make an offer on a property they become attached to it, or they don’t want an inspection to kill the deal. This leads to buyers turning a blind eye to issues at the property, or relying too much on bargain inspectors that only do a basic visual inspection of the property. We get many calls from buyers that discover issues with their property post-closing that they believe the seller should have disclosed.
The law in Minnesota is that sellers must disclose material facts that could adversely and significantly affect use and enjoyment of the property. The seller must have personal knowledge of the defects. This means that minor issues that arise after closing will not trigger liability under the statute. It has to be material and that is often a disputed, fact-based question. This also means that a buyer must show the seller had actual knowledge of the material defect.
We often hear that the discovered condition is so obvious that the seller “must have known”; but there needs to be more evidence than just the existence of the defective condition. It is difficult to prove a seller had actual knowledge of material facts. It is also difficult to prove damages in these cases because you have to prove “out of pocket loss.” Most buyers believe they can just calculate the cost to repair the issues and sue the sellers for that amount, but that is not the case. An expert will need to testify as to the difference between the sale price and the fair market value of the home with the defect. Repair costs alone are not enough. Statutory failure to disclose claims must also be brought within two years after closing.
These cases are difficult, but an experienced attorney can provide the necessary evaluation up front, and if it is necessary to proceed with litigation against the seller, to have an opportunity to recover damages.