Can You Count on a Home Seller to Tell You About a Property?

If you're buying a home, you should understand the concept of caveat emptor in real estate. Caveat emptor is a Latin phrase that means "let the buyer beware." It's sometimes used as shorthand to describe a buyer's obligations during the real estate purchase process.

Buying a home is confusing enough without random Latin phrases thrown in, so we'll explain in simple language what caveat emptor means and how you can protect yourself during the home purchase process.

What Does Caveat Emptor Mean in Real Estate?

As mentioned above, caveat emptor means "let the buyer beware." But what does this mean when buying a house?

The principle of caveat emptor means, in a nutshell, that you are expected to do your due diligence or do your own research when you're purchasing a home.

This doesn't mean the seller has no obligations to you. Many states have disclosure laws that require sellers to inform buyers about material defects or known issues. Still, ultimately, the principle of caveat emptor is that it is your responsibility as a buyer to ask questions, find out information about the home you're interested in, and make sure it's a good home for you to purchase.

Ultimately, this guiding principle affects buyer and seller liability. A seller can be liable for problems if they violated disclosure laws, but if they had no duty to disclose and you didn't do your research as a buyer, the liability for the issue potentially lies with you.

Caveat Emptor vs. Caveat Venditor

Caveat emptor is an opposing legal principle to caveat venditor, which means "let the seller beware.” Caveat venditor places responsibility on the seller to disclose known defects and to ensure they have accurately represented the property.

Today, modern consumer protection laws mean that most real estate transactions are a blend of caveat emptor and caveat venditor.

The seller has some obligations to make disclosures to buyers, especially of latent defects, or hidden defects a buyer wouldn't easily discover, while buyers still have the responsibility to do things like conduct home inspections, review HOA, zoning, and other documents, and ask questions about key issues.

What Caveat Emptor Means for Homebuyers

Caveat emptor makes clear that a buyer has an obligation to perform their due diligence before moving forward with purchasing a home. Typically, this means taking an active role in evaluating a home by:

• Identifying any visible issues (sometimes called patent defects) that can be easily seen
• Hiring a home inspector
• Confirming the seller has clear title (owns the home without competing ownership claims)
• Reviewing property disclosures
• Understanding HOA and zoning rules
• Asking questions about the property before agreeing to the sale
• Investigating the property's renovation history and permits

Under today's consumer protection laws, liability -- or responsibility for problems -- does not automatically belong to the seller when issues are discovered after closing.

Issues that arise are likely to be the responsibility of the buyer, which is why a buyer should conduct comprehensive investigations and understand the details of the home before closing. That way, they still have a chance to negotiate with the seller about resolving the problems.

How Caveat Emptor Works: An Example

Caveat emptor means a buyer is responsible for problems that they should have -- but failed to -- discover through reasonable diligence before purchasing.

For example, if a buyer was planning to use a property as a rental property but failed to check the zoning laws or read the HOA bylaws prohibiting this use, the buyer likely wouldn't have any recourse against the seller.

When Caveat Emptor Does Not Apply

Caveat emptor does not apply when consumer protection laws impose an obligation on a seller to disclose a defect. For example, sellers are typically required to disclose material defects that they are aware of or should know about -- especially if the defect is a latent one that a buyer wouldn't have been able to easily discover.

Some states have specific laws that require disclosure of high-risk or sensitive issues. For example, sellers may have to disclose a stigmatized property, or a property where a crime happened. They may also have to disclose the presence of mold, water damage, and past issues with basement flooding.

Even when there are no express consumer disclosure laws, sellers are also typically not allowed to lie or hide known and serious problems from a buyer. So, if a seller paints over a moldy wall so the buyer can't see the damage, that would be an example of a situation where caveat emptor likely doesn't apply.

Caveat Emptor vs. Seller Disclosures

Real estate disclosure laws now exist in many states. These laws establish rules for seller disclosures, or specific things a seller must tell a buyer.

In fact, many sellers must complete a set of standard forms that provide information about the home when it is listed for sale. These forms usually require sharing details about environmental and health hazards, structural problems with the property, and natural disaster risks, among other things.

The specific required disclosures vary by state, but even when there are disclosure requirements, buyers still ultimately have the responsibility to investigate the property and make informed choices before buying.

Buyer Beware States and Disclosure Laws

Because disclosure laws vary by state, there are some locations where consumers have very little, if any, protection in place. The buyer-beware states, where disclosure laws are very limited, include:

• Alabama
• Arkansas
• Georgia
• Massachusetts
• North Dakota
• Virginia
• West Virginia
• Wyoming

While home buyers should know that the consumer protection laws are very limited in these locations, the reality is that buyers everywhere in the United States still have significant responsibility for making sure a home doesn't have serious issues before they buy it.

Tips for Buying a Caveat Emptor Home

When you're buying a caveat emptor home, here are some tips to help you protect your investment and make sure the home meets your needs.

• Review disclosures carefully: It's your responsibility to review and understand any disclosures a seller provides.
• Get a professional home inspection: A home inspection can reveal issues sellers may not know about or may not have to disclose, so you can discover any potentially serious or costly issues with the home before closing.
• Ask for clarification in writing: If you're confused about anything in the seller's disclosure or about any details of the home sale, ask the seller to provide written clarification -- both so you can develop a deeper understanding and so you can have proof of what the seller is telling you.
• Work with experienced real estate professionals: An experienced real estate agent will understand what to look for when evaluating a home and what questions to ask so you can find out all information you need.
• Budget for potential repairs: If you spot signs of past repairs at a home, this can give insight into problems that might affect your use of the home in the future.
• Understand financing implications: Many banks require a home to be safe and structurally sound in order for them to provide a loan to buy the property.

Final Thoughts: Understanding Caveat Emptor Before You Buy

You must understand caveat emptor before you buy a home, so you'll know what a seller is required to tell you and what details you need to investigate on your own about a property.

If you're ready to make a purchase, you also need to be ready with financing when the right house comes along. Contact Freedom Mortgage today to get prequalified for a home loan so you're ready to move forward quickly when the time comes to make an offer.