Unethical, and Possibly Illegal, Property Practices to Watch Out For: Part 2, Nondisclosure

by Isaac Benmergui, Esq on December 26, 2013

Look at any niche in the law, not just in real estate; full disclosure is almost a national policy! If you’re hiding something, you’re in trouble (basically a criminal). In particular, real estate law is such that if someone tells you to “not disclose something” for the sake of preserving a deal, you’re playing with fire.

The issue of nondisclosure could be anything: a broken pipe in the house, black mold, whatever. It doesn’t matter what it is – if you nondisclosuredon’t say anything about it, you, the seller and possibly others could be held liable for major consequences, either legally or even physically. How so? Take this particular situation, for example:

Let’s say a broker had a client owning a local bank, agreeing on a hefty construction loan for a hillside property. Everything’s all fine and dandy until the geological report comes back, stating that the hillside unfortunately seems to be so unstable that it could slide into the adjacent house, causing a major disaster. Obviously, the sad thing is this: the bank would have to shut down due to that issue, causing clients to lose out on millions of dollars. Now, naturally, the broker could try to “keep a secret” and let the deal go through.

What happens when there’s heavy rainfall, causing the hillside to collapse, utterly destroying the current property? Imagine if that financial banking client resided in that property. The immediate and uncompromising ethic here is to be completely honest and give options – the buyer could’ve easily brought in another inspector just to be sure, negotiate some kind of concession with the lender, or simply cancel the transaction. Sure, the buyer would potentially lose the deal, but they definitely might’ve saved countless costs, premiums and other unfortunate expenses due to the possible disaster. I call that a win in my book.

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