Latent Defects and Your Buyer or Seller
I want to preface everything I say here by saying I am not an attorney. Everything I say here has been researched and is believed to be accurate. You should ask your Broker for best practices should you ever encounter a case of Latent Defects, as each area has its own disclosures and best practices.
What is a Latent Defect in Real Estate?
According to Google and several sources online, a latent defect in real estate is a hidden issue in a property that can’t be easily found during an inspection and that the seller knows about and is not visible, could not be reasonably expected to be uncovered by the buyer before the purchase is made and could endanger the health or welfare of the buyer and their quiet enjoyment of their new home.
What are some examples of Latent Defects?
Structural issues like foundation problems - basement only leaks when the wind blows from a north-easterly direction during a hurricane
Faulty wiring - breakers trip when you plug 2 appliances into sockets on the same breaker
Plumbing problems - the basement floods when the new owner ran laundry, had a shower, and ran the dishwasher within a short time of each other
HVAC Problems - carbon monoxide builds up in the furnace when it runs on a regular basis.
When are latent defects discovered?
Latent defects aren’t often obvious until after the sale has closed, and might not occur unless acted upon on a regular basis or by just living in the home.
How does a buyer protect themselves against latent defects?
In the Maryland Residential Property Disclosure and Disclaimer Statement (required to be provided by the seller unless it meets certain criteria as specified in the addendum on page 1 of the addendum) gives the seller notice in two places that they must disclose any known latent defects.
What recourse does the buyer have in the event of a latent defect?
If the buyer discovers a latent defect after moving into their new home the buyer may be able to negotiate a settlement with the seller. This could involve the seller paying for repairs, lowering the price, and compensating the buyer directly for their loss. If all else fails, the buyer may file a claim with the Maryland Realtors for mediation within one year of closing.
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