What Facts Are Considered “Material” To a Property’s Value?

Arizona law requires disclose of material facts that a reasonable person would consider important when deciding whether to go forward with a real estate transaction. Hill v. Jones, 151 Ariz. 81, 84–85, 725 P.2d 1115, 1118–19 (App. 1986). From a buyer’s perspective, this means that anything that may reasonably be considered important should be disclosed, although there are some situations where disclosure may not required. However, determining exactly what is “material” or important can be a difficult task.

To begin with, information that the potential buyer specifically inquires about must be disclosed. Universal Inv. Co. v. Sahara Motor Inn, Inc., 127 Ariz. 213, 215, 619 P.2d 485, 487 (App. 1980). Even if this information does not seem important to the seller, it needs to be disclosed once the buyer asks about it.

The seller has a duty to disclose known defects. This does not mean that the seller must know everything about the property or face liability for non-disclosure, just that the seller disclose what he or she has knowledge of.

It should also be noted that the seller’s agent may also have a duty to disclose. While the agent does not owe a fiduciary duty to the opposing part in the deal, a limited duty does exist to disclose certain information, if the seller would have that duty and the seller’s agent also knows about the material information.

Latent defects must be disclosed by the seller (if known to the seller) because they are not readily discoverable by the buyer, even if the property is being sold “as is”. However, if defects are discoverable by the buyer, and the buyer is given a chance to inspect the property, the buyer may not be able to rely on the seller’s failure to disclose.

To summarize, information known to the seller. that affects the property’s value or may impact the buyer’s decision to proceed with the transaction must be disclosed. In addition, anything the buyer specifically asks about must be answered to the best of the seller’s knowledge, even if the seller does not think it is important. The buyer should be given a chance to inspect the property, but the seller will still be responsible for disclosing defects that cannot be easily discovered by inspection.

Chernoff Law handles business and real estate litigation matters, including disagreements arising out of the purchase or sale of real estate in Arizona. Contact us to discuss your case with an experienced real estate attorney.

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