The Limits Of Caveat Emptor In Real Estate Sales

Traditionally, when a property owner agreed to sell real property, it was up to the buyer to check out the real property as much as they wanted. If the buyer liked what they found, they could go ahead and buy the real property. If they didn’t, they could go buy other real property instead. The buyer bore the burden of understanding the real property being sold, including whatever deficiencies it had. If the buyer acquired the property and later found issues or problems with it, those were the buyer’s problem. The buyer ordinarily wouldn’t have a claim against the seller.

Those ancient principles of “caveat emptor” (let the buyer beware) have eroded significantly over the years in real estate. State legislatures have tried to improve the residential sales process by requiring sellers to disclose certain information. In commercial real estate sales, buyers typically demand that sellers provide a package of representations and warranties, assurances about the property. Those assurances mostly relate to factual matters a buyer can’t readily check out for itself. A seller can’t just shrug its shoulders and tell the buyer to make up its own mind about the property without involving the seller.