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When you shop for the perfect residential property on the market, you likely expect a well-kept building or otherwise trust that the seller will inform you about any defects that might impact your decision. So, what is a material defect in real estate?

Anthony Law Group’s real estate attorney in Scottsdale, AZ, explains why detailed disclosures protect the buyer from risky purchases and the seller from potential legal action later on. We keep our clients informed about these topics that impact their buying experiences. Below, you’ll find out what happens when a seller fails to disclose serious defects.

What Is a Material Defect in Real Estate Dealings?

A material defect is an element that has an adverse impact on the value of the property or posits an unreasonable risk to the occupant. The defects may influence how the seller markets and prices the house when placing it on the market or can dissuade a buyer from completing the transaction. They typically fall into either known or undisclosed defects.

Known Defects

Known material defects include issues the seller already knows and can inform the buyer about in the purchase agreement. The home inspector typically uncovers these problems during their inspection. The seller should disclose whether they sought repairs or left the issues untouched.

Undisclosed Defects

What is a material defect in real estate? Undisclosed material defects refer to the second type. Since the seller has a legal obligation to inform a buyer about the property’s defects, they will have already outlined all known concerns. However, the initial home inspection may not uncover hidden problems that occur out of view.

A buyer may purchase it without knowing about these undisclosed defects. Had they known about them, they may have negotiated a lower price or not purchased the house at all.

Examples of Defects

Now, you might wonder what defects requiring disclosures from the seller might look like. The examples below are fairly common in the housing market:

• Termite damage: Even if the seller took steps to eradicate these pests and finish surface repairs, they must still outline the issue and potential concerns that might arise in the future.
• Broken or missing heating and air conditioning amenities: Many household occupants depend on HVAC for comfort and indoor environment regulation. Disclosures regarding these appliances are essential to ensure you know what you may face.
• Significant plumbing damage: Plumbing issues like rusted pipes and leaky supply lines might prevent a buyer from closing the sale.
• Unstable electrical systems: Faulty wiring or outdated electrical panels can be a safety liability and often demand prompt repairs from the new homeowner.
• Water damage defects: Did the house ever suffer from flooding or moisture seepage in the past? That may cause potential issues later that the inspector may not uncover.

So, what is a material defect in real estate? It’s a term that describes issues related to the structural integrity, safety, and usability of the house. Are there such things as non-material defects?

What About Non-Material Defects?

A non-material defect is just an imperfection that the seller doesn’t have to highlight. The flaw doesn’t make the building less safe or significantly impact the value. For example, the seller may not outline chipped exterior paint in their sale agreement. They may also not reduce the cost.

You can see that the paint looks flakey and faded, but it doesn’t dissuade you from the purchase. You can easily repaint the outdoor surfaces and won’t face significant repairs to make the building habitable.

How Should a Seller Inform Potential Buyers About Defects During the Buying Process?

Before a seller places a house on the market, they go through various professional services to avoid issues with undisclosed defects. The process below will protect them from a future lawsuit and the buyer from dangerous living conditions.

Working With a Home Inspector

The home inspector inventories and documents known defects of all varieties. They’ll include specific information about the defects found during their property inspection. The seller decides whether to repair the house and will detail their decision in the sale details.

Partnering With a Real Estate Agent

A real estate agent helps the purchaser assess the house defects and decide whether they significantly impact the purchase price. They ensure the seller can properly disclose the defects in a way the purchaser understands.

Making Disclosures in Writing

The seller should list these defects and their details in the property purchase agreement. The written disclosure ensures the purchaser can measure the property cost against the flaws and determine whether the market cost is worth it. Some sellers might disclose house defects verbally as well as via the written agreement.

What If You Discover Undisclosed Defects After Closing the Real Estate Transaction?

If the seller didn’t disclose concerning issues regarding the building and surrounding landscape, work with a real estate attorney to draft and issue a demand letter. The demand letter makes the seller aware of the undisclosed defects you, the buyer, have discovered.

From there, the seller may take full liability and send a home inspector to look into the disclosures. Ideally, they’ll mend the issues without you having to take further legal action. Otherwise, you and your lawyer might open a lawsuit in small claims court to cover the potential risk and protect your financial situation.

Your attorney will collect evidence to determine whether the seller intentionally failed to disclose the issues or whether the real estate agent and home inspector share some responsibility. These parties rarely share liability but may face consequences for misrepresentations during the claims process.

Take Legal Action With Counsel From Anthony Law Group in Scottsdale, Arizona

What is a material defect in real estate? This building or landscape issue can significantly influence the property’s safety and value. If you purchased from a seller that failed to list all defects in their material disclosure, request professional help from our real estate attorney at Anthony Law Group. We help clients in Scottsdale, Arizona, navigate small and large claims court systems. Call 602-362-2396 to discuss your claims with our team.