Has Caveat Emptor Been Replaced By Caveat Venditor In Sales of Real Estate?

​​​It is often stated that the purchase of a house is the average person’s biggest investment decision of his or her life. Because of the importance of the decision, a significant body of law exists that governs your rights and duties as a buyer or seller of real estate. That body of law has changed over the years such that buyers are afforded far more protection than they were previously when they purchased real estate. Indeed, no longer must the buyer beware; the seller now faces potential liability if certain disclosures are not made. Today, buyers and sellers of real estate need to be aware of their rights and obligations when buying or selling.​Caveat emptor, Latin for “let the buyer beware,” is a legal doctrine that generally places the burden on a buyer of property to examine the property before purchase and take responsibility for its condition and any defects that become known after purchase. The doctrine can be traced back to sixteenth century English courts, but became generally accepted during the 1800s, a time during which courts considered the purchase of real property to be “a game of chance.” The courts reasoned that a buyer deserved whatever he got if he relied on his own inspection and did not extract an express warranty from the seller when buying real estate.​Following World War II and the explosive growth in the residential real estate market, legal scholars began to advocate for the recognition of implied warranties in the sale of houses. Implied warranties regarding products had long been recognized in the sale of personal property. Application of caveat emptor to the sale of personal property but not to sale of real property thus offered greater protection to the purchaser of a $5.00 dog leash than it did to the purchaser of a $100,000 house.

​Most jurisdictions have abandoned caveat emptor in the sale of real estate noting that the doctrine is a vestige of the past when the buyer and seller were in equal bargaining positions and each could readily protect their interests. Today, however, the seller, broker or builder of real estate and the buyer of real estate are not in equal bargaining positions.  The seller,  broker and builder of real estate have superior access to information about the real property compared to the buyer’s access. Courts, therefore, have imposed an affirmative duty on sellers of real estate, real estate brokers and builders to disclose certain information including defects about real property to potential buyers. In light of this duty, caveat venditor, that is let the seller beware, seems to have replaced caveat emptor in real estate transactions.

​A seller and a buyer of a house should be aware that now caveat venditor governs the transaction. As a seller, you are required to disclose visible defects or hidden defects of which you are aware. For example, if you know that the basement of your house habitually floods, you need to so advise potential buyers. As a buyer, through your broker or attorney, you need to ask questions about the condition of the house and obtain in writing a statement from the seller or broker about the conditions and defects in the house. Even though caveat emptor has been replaced by caveat venditor, a buyer who does not inquire about the condition of a house may have difficulty recovering damages if a defect is discovered after the closing. Comparatively, even without receiving inquiry from a buyer, a seller needs to disclose defects in the house. Taking these steps is the best way to avoid a problem in the future regarding the condition of the house that you either bought or sold.

If you have an issue regarding whether you improperly failed to disclose a defect and a buyer is making a claim against you or whether you were not advised of a defect and you want to make a claim against a seller, builder or broker, you may reach out to Bathgate, Wegener & Wolf at 732-363-0666.

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