In recent blog posts, I discussed important parts of a real estate sale, including selecting a broker and due diligence. In today's video, I will examine what a buyer who has been defrauded can do about it.

I have seen many purchasers suspect that a seller misrepresented the condition of the property to them. When this happens, the purchaser must act quickly to determine what remedies are available.

Of note is the "Entire Agreement" clause, also referred to as a "merger clause." These clauses exist in most real estate contracts. With this clause, it becomes much more difficult for a buyer to complain to the seller about an undisclosed problem.

Basically, Entire Agreement clauses limit a purchaser to relying on only representations that are spelled out in the contract; specifically excluding any statements that were made prior to entering into the contract.

When a purchaser believes it was duped into a sale by the seller, a purchaser can either:

- Affirm or "keep" the contract and sue for damages;

- Or demand rescission of the contract. This is the undoing of the purchase contract. It brings the parties back to their starting point, as if the contract had never happened.

If the buyer chooses to rescind, then he or she must demand in writing that they want to unwind the transaction. By doing this, an aggrieved purchaser can point to evidence of misrepresentations that are broader than the narrow scope of most purchase contracts.

Rescission should be demanded as soon as the facts that support the claim are discovered. Waiting six months to demand rescission is too long. So, if a purchaser discovers flooding and suspects that the seller knew of the flooding problem and misrepresented the condition, then he or she must rescind soon after learning of the property's propensity to flood.

Also, if a purchaser seeks to rescind, then she must refrain from any actions that an owner would typically do. For example, the buyer should not go and remodel a home, because that indicates an intent to honor the contract and keep the home. Similarly, applying for a refund of property taxes indicates an intent to keep the property and will likely defeat a rescission claim.

Rescission is a process that should be navigated swiftly and carefully. Purchasers in this situation should talk to an experienced attorney to determine the best course of action.

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As always, please let me know if I can help.

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