Caveat Emptor in Real Estate Sales

The Court of Appeals recently reaffirmed the proposition that “a purchaser of property has no right to rely upon the representations of the vendor of the property as to its quality, where he has a reasonable opportunity of examining the property and judging for himself as to its qualities.” Dickerson v. Strand, 904 N.E.2d 711, 715 (Ind.Ct.App.2009).

In Dickerson, the Dickersons purchased a house from Strand and German, which had evidence of termite damage known to the Dikersons. Id. at 713.  Before the sale, Strand and German had a visual termite inspection and treatment for a termite infestation. Id.  A later inspection made in anticipation of the home’s sale revealed that the termites had caused “major structural defects.” Id.

The purchase agreement provided the sellers would repair the damage, and it gave the right to the buyers to inspect the home before closing.  Id.  The buyers did not inspect the house, and the sellers made a substandard repair.  Id.  Upon discovering the damage, after the purchase, the buyers sued the sellers for fraud. Id. at 714.

The court state that “a purchaser of property has no right to rely upon the representations of the vendor of the property as to its quality, where he has a reasonable opportunity of examining the property and judging for himself as to its qualities,” and it further held that the rule applied even as to fraudulent representations, where an inspection is reasonably possible.  Id. at 715 (citing Cagney v. Cuson, 77 Ind. 494 (Ind. 1881)).  It also requested that the Supreme Court reexamine the precedent upon which the Court of Appeals based its opinion.  Id. at 716.

The court went on to state, in a footnote, that the result may change where a reasonable inspection would not reveal a defect of which a vendor had knowledge, but in Strand, the buyer was on notice of a potential problem and a revealing inspection would be relatively easy.  Id. at 716.