Failure to Disclose — Water Intrusion

Industry: Residential Real Estate

A buyer purchased a 1,960 sq ft home for $780,000. Six months after close, the buyer discovered significant water intrusion through the basement that required $85,000 in foundation waterproofing and mold remediation. The buyer alleged the listing agent and seller knew about the problem — pointing to fresh paint in the basement and a prior disclosure that was vague about 'minor moisture.'

Claim amount: $185,000

Outcome: The listing agent's E&O carrier defended. Discovery revealed prior permits for drainage work and seller emails mentioning 'the water issue.' The agent settled for $185,000 — $100,000 in buyer damages plus $85,000 in defense costs. The seller faced a separate claim directly.

Lesson: Thorough investigation of any prior work or permits related to water, drainage, or structural issues is the most important disclosure due diligence for listing agents. A specific, accurate disclosure is always better than vague or incomplete language.