Trusted Real Estate, Business and Asset Protection Attorneys

Is a real estate agent ever liable for latent property defects?

On Behalf of | Oct 13, 2023 | Real Estate Transactions |

Real estate agents help people list their properties for sale and also guide those seeking to make a purchase through the home search and offer process. Agents have a lot of responsibility and have to provide support to those going through the sometimes emotional personal transition from one living arrangement to another.

As a result of how invested they are in the process, agents are often the ones who face pushback first when there is something potentially wrong with a property. New homeowners may seek to take legal action against an agent who represented them or a seller in a situation with latent property defects after determining that they may be liable for significant undisclosed defects that were not identified prior to their closing.

Sometimes, agents might be partially responsible

Buyers expect that the agent representing them knows how to review disclosure paperwork. They will often expect their agent to assist with a cursory inspection during a tour or walkthrough of the property. Buyers who believe that sellers have failed them because of their inability to spot issues with the property might try to hold their agent responsible.

Latent property defects derive their name in part from how difficult they are for the average person to identify. In situations where an agent could theoretically identify a latent defect, their errors and omissions insurance coverage might help reimburse disappointed buyers surprised by issues that they did not find before closing. For that to occur, the buyer would need to prove that another agent would likely have noticed the issue.

Other times, buyers may believe that about an undisclosed defect. Professional insurance could also help in that scenario. However, agents are often unaware of latent defects and would therefore have no direct responsibility for them after a closing.

Professionals in the real estate industry may need to be very careful about how they communicate with their clients and prospective buyers so that they understand the importance of a proper inspection. So long as an agent has done their job properly by providing accurate information and appropriate guidance to their clients, they will typically have minimal personal risk in a scenario involving latent property defects.

Agents may take additional steps to protect themselves from potentially expensive claims by including special terms in their contracts and carrying appropriate insurance. Understanding the potential professional risks related to common real estate complaints after a transaction may benefit a professional who is worried about their finances and their reputation. Seeking legal guidance is a good way to gain this kind of clarity.