Buyer Beware

When a Washington State Court of Appeals, (in the case known as Douglas v. Visser) reached a verdict, the decision stunned many in the real estate community because it signaled the strong swing of the legal pendulum back toward the legal principle of caveat emptor, otherwise known as “buyer beware.”               

Visser purchased property with the intent of renovating and renting it, but quickly found significant dry rot and moisture issues so they decided to cheap out the repairs and sell. They instructed their laborer to “polish the pig” and proceeded to conceal the defects with paint and trim. After their purchase, Douglas soon realized the full extent of the hidden issues (that had partially been discovered by their inspector), when they hired a mold specialist who told them it would be cheaper to demolish the house and rebuild than to repair the existing structure. The Douglases sued for fraudulent concealment and won at the trial court. However, on appeal the Washington Court of Appeals reversed the trial court and held in favor of Visser.

Even though the Appeals Court labeled the deceptive conduct of Visser “egregious”, the ruling was clear that the buyer (Douglas) had received constructive notice of the defects prior to closing, through their own inspection of the property, but  failed to investigate further and therefore could not hold the seller liable.

So what does this mean to sellers? Does the seller have no responsibility to disclose? Quite the contrary! The seller cannot escape their common law duty to disclose (RCW 64.06). They do this by providing a completed “form 17” within 5 days of mutual acceptance. That form is not part of the transaction, but requires the seller to disclose known defects in the physical condition of the property.       

So what if the seller omits key details or fabricates lies? Since the buyer also has the common law duty to investigate the property, they not only have the chance, but the obligation to verify the accuracy of the seller’s disclosure and/or engage the services of experts for further investigation if need be. Realtor®-produced-purchase-forms provide opportunity to do that by insisting that “best practice” is for buyer to perform their own inspection of the property by a licensed inspector of their choice.

The buyer loses their power for a remedy if they choose to close without complete investigation, or choose to close when they have even partial knowledge of potential defects. Thus the wise doctrine of caveat emptor (Buyer beware)!