From a legal perspective, real estate sale agreements are the way in which buyers and sellers allocate the risks attached to the purchase and sale of real property. For example, in Oregon, the seller ordinarily bears the risk of a casualty loss (fire, storm damage, vandalism) on the property until the date of closing. This allocation of risk usually is evidenced by a contract term requiring the seller to maintain insurance on the property until the closing of the sale.

Buyers usually always assume the risk of latent (hidden) defects in the property. To mitigate this risk, Oregon law and, most often, the sale agreement (depending on which is used) provide that most sellers of Oregon residential property must disclose known information about the property's condition to potential buyers. If the seller fails to disclose a known defect in the property, the buyer would have a claim against the seller for breach of contract and, possibly, fraud.

Of course, "defect", like beauty, is in the mind of the beholder. What is a quirk to the seller (squeaky stair) may be a defect to the buyer. Therefore, to the extent the seller knows anything about the property's condition, past and present, the seller should disclose it. This is because, even if the seller is not liable for failing to disclose the squeaky stair, he or she likely will have to hire an attorney to defend the claim.

Another mitigation of the buyer's risk of purchasing a defective property is his or her right to have the property professionally inspected. There are many kinds of inspections available for a buyer to choose from. Typically, buyers have a general professional home inspection by a person licensed to conduct such inspections, but general home inspections have their limitations. Fences, decks and outbuildings are typically not included. Sewer or septic tank inspections are not included or cost an additional fee. The inspector is not necessarily qualified to evaluate electrical, plumbing and HVAC systems. The inspector also will not move furniture, boxes and the like which may be particularly problematic when inspecting a basement or attic and general inspections do not include air quality or asbestos inspections.

No one can eliminate all risk associated with the purchase of a new home. If you are considering a home purchase, discuss with your agent how much information you need about the house to be comfortable in going forward and select the inspections needed to insure your comfort. By the way, I recommend that buyers purchase all of their own inspections. Terms like "seller will inspect and repair the furnace as necessary" are like candy to litigators who would want to know "necessary in whose opinion?", "what if it can't be repaired", etc. If the buyer arranges for the inspection, the buyer will know exactly what work should be done and can negotiate for the exact repairs he or she wants.

The information in this document is presented for informational purposes only and not for the purpose of providing legal advice. It is not intended to create and does not create an attorney-client relationship between Brooke Law Office LLC and the reader. Please contact an attorney for advice regarding your specific situation.