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Claims and Remedies for Real Estate Misrepresentation and Fraud

Kent Berk:  Hi, I’m Kent Berk. I’m an attorney of the Scottsdale, Arizona Law Firm of Berk Law Group where we handle real estate, property, probate, and other types of cases in Arizona.

We sometimes get calls from people who purchased a building or a residence and feel that they’ve been deceived or defrauded into purchasing the real estate. They wonder, ‘what are the different claims and remedies that might be available to deal with the situation?’

Fortunately, Arizona has a variety of laws that protect buyers who have been defrauded or deceived into purchasing real estate. One example might be where you buy a piece of real estate and the seller new there had been leaks in the roof or that the house had been flooded, but didn’t disclose it to you.

The variety of claims that you might be able to pursue under Arizona law. The first one is an actual claim for fraud, intentional misrepresentation where the seller knew about it and deliberately withheld the information in order to deceive and defraud you into purchasing the property.

Another claim is for negligent misrepresentation where a seller might not have withheld the information intentionally, but the seller knew or should have known that the information should have been disclosed.

Another type of misrepresentation cases an innocent misrepresentation where the seller didn’t know and arguably should not have known, but they should have disclosed it, anyway, because it was material information. Now you might wonder, What are the potential remedies?” There are two main remedies that a buyer can pursue if they are able to establish a legal misrepresentation.

The first one is damages. Typically, the buyer of real estate is able to get the difference between the value of the property that they purchased versus the value of the property that they thought that they were purchasing. That difference, the diminution in value, is typically the method of quantifying the damages for the purchase of real estate based upon a misrepresentation.

Another remedy is rescission where the buyer gives back the property and gets back the purchase price and any other amounts that they might have spent in buying the property, or in maintaining the property, or making renovations, or whatever else.

That’s just a basic overview of the remedies that may be available to a buyer who’s been deceived into purchasing real estate. So, a related question you might ask is, “Well, what does a seller have to disclose?”

Typically, under Arizona law, sellers obligated to disclose any material information about the property. Material information is information that may affect a buyer’s decision to buy the property or the amount that the buyer would be willing to pay for the property. The buyer doesn’t necessarily need to show that the information would have affected their decision. So, as long as it might have, then the seller is typically obligated to disclose the information.

Now, some people think that even if the seller doesn’t get a Seller’s Property Disclosure Statement, that long check list that most sellers fill out, that the seller is relieved of the obligation of disclosing material information. In most circumstances, that’s not the case.

Even if the seller doesn’t fill out a Seller’s Property Disclosure Statement, there’s a warranty in the typical form, Residential Real Estate Contract, that most real estate transactions use. That provides a warranty that survives closing is that the seller has in fact disclosed to the buyer all material information about the property.

If you have any questions regarding a real estate misrepresentation case, please don’t hesitate to contact us. Thank you.