Sued by Buyer for Failure to Disclose Alleged Property Defect? Their Pre-Sale Inspection May Save You

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Sometimes buyers discover issues, problems or defects in real property after closing a purchase/sale. When these problems prove serious or costly to repair (or when good ole' Buyer's Remorse rears its head) buyers frequently file suit against the seller/former property owner.  

The usual allegations are that the Seller is liable for damages based on "failure to disclose," "misrepresentation by non-disclosure," fraud, breach of contract and/or violation of the Texas Deceptive Trade Practices Act ("DTPA").  Suits are most common when the Seller's written disclosure does not identify the alleged property defect.

However, in many instances, a Buyer's pre-closing inspection (preformed by a third-party inspector) may absolve the Seller from liability.  This is particularly true when the third party inspector is retained by the Seller, conducts a thorough inspection, and has a reasonable opportunity to discover the alleged defect.  Whether or not the defect is actually discovered is often immaterial.

The law requires a Buyer seeking to recover from a Seller's non-disclosure to prove that he or she relied on a misrepresentation (including by failure to disclose) of the Seller in consummating the purchase. Eagle Props., Ltd. v. Scharbauer, 807 S.W.2d 714, 723 (Tex. 1990).  However, a line of court cases establishes that, in the eyes of the law,  a buyer's inspection of a house's condition may constitute a new and independent basis for the purchase of the property, which intervened and superseded the seller's alleged misrepresentation. "The common thread of the decisions reaching this conclusion is that, regardless of the result of his investigation, the buyer's decision to undertake such an investigation indicates that he or she is not relying on the seller's  representations about the property." Bartlett v. Schmidt, 33 S.W.3d 35, 38 (Tex. App.-Corpus Christi 2000, pet. denied).

Texas courts have held that -- even when false and fraudulent representations are made concerning the subject matter of a contract -- when the person to whom they are made conducts an independent investigation into the matters covered by the representations before closing, it is presumed that reliance is placed on the information acquired by such investigation and not on the representations made to him.  Marcus v. Kinabrew, 438 S.W.2d 431, 432 (Tex. Civ. App.-Tyler 1969, no writ); see also Kolb v. Tex. Emprs' Ins. Ass'n, 585 S.W.2d 870, 872 (Tex. Civ. App.-Texarkana 1979, writ ref'd n.r.e.); Lone Star Mach. Corp. v. Frankel, 564 S.W.2d 135, 138 (Tex. Civ. App.-Beaumont 1978, no writ); M.L. Mayfield Petroleum Corp. v. Kelly, 450 S.W.2d 104, 109-10 (Tex. Civ. App.-Tyler 1970, writ ref'd n.r.e.).   

Thus, when faced with a claim for failure to disclose a condition of real property formerly owned by them, a prudent response is to seek out the Buyer's property inspection and call an experienced real estate lawyer.  With a little luck and a well-presented defense, many times a pre-sale inspection may save you from liability.