What Is a Latent Defect in Real Estate?

A latent defect is a hidden issue with a property that is not discoverable through a normal visual inspection. Latent defects may be known to the seller but not visible to the buyer or inspector without invasive investigation.

✅ What Counts as a Latent Defect?

  • Hidden water damage: Moisture problems behind walls or under flooring.
  • Concealed mold: Mold growth not visible without opening walls or cabinets.
  • Structural issues: Foundation cracks or settling hidden behind finishes.
  • Electrical hazards: Improper wiring inside walls or inaccessible areas.
  • Past repairs concealed: Covered-up roof leaks, patched drywall hiding damage.
  • Underground or encased issues: Hidden plumbing leaks or drainage problems.

Latent defects are specifically defined by being not discoverable through ordinary inspection — even by a professional home inspector.

💡 Why Latent Defects Matter to Buyers and Sellers

  • Legal risk for sellers: In many states, sellers must disclose known latent defects, even when selling FSBO.
  • High-cost issues: Latent defects often involve major repairs that impact value.
  • Inspection limitations: Because latent defects are hidden, buyers rely on seller honesty and disclosures.
  • Material defect overlap: A latent defect that affects value or safety becomes a material defect — and must be disclosed.

📍 FSBO Tip: When Hidden Problems Become Disclosures

If you’re aware of a hidden problem that affects the property’s value, safety, or structure, you must disclose it to avoid legal issues after closing. Failing to disclose a known latent defect can result in:

  • Lawsuits for misrepresentation
  • Contract cancellation
  • Repair compensation to the buyer
  • Loss of earnest money disputes

Review your state’s seller’s disclosure requirements to understand what must be reported.

Looking for more real estate terms? Visit our Real Estate Dictionary.

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