After close of escrow, a buyer discovers a known roof leak that the seller was aware of but intentionally omitted from the Transfer Disclosure Statement. The buyer's most appropriate legal remedy is to:
- ARescind the contract, since TDS violations automatically void the sale
- BFile a complaint with the DRE against the seller for a license violation
- CWithhold the final loan payment to the lender until the roof is repaired
- DPursue damages against the seller for fraud or breach of disclosure duty, since rescission rights expired at closing
Show answer & explanationAnswer & explanation
Correct answer: D. Pursue damages against the seller for fraud or breach of disclosure duty, since rescission rights expired at closing
The TDS rescission right applies before closing; once escrow has closed, the buyer's remedy for an intentional omission shifts to a damages claim against the seller for fraud, negligent misrepresentation, or breach of disclosure duty rather than rescission of a completed sale. Sellers are not licensees (unless acting as one), so DRE complaints and loan withholding are not appropriate remedies here.
Why the other options are wrong
- A. Rescission rights under TDS apply only before close of escrow; the sale doesn't automatically void afterward.
- B. The DRE regulates licensees, not private sellers who are not real estate professionals.
- C. Withholding loan payments to a lender has no legal connection to a seller's disclosure violation.
TDS Remedy After Closing
Once escrow closes, a buyer's remedy for an undisclosed known defect shifts from rescission to a damages claim for fraud or breach of disclosure duty against the seller.
- Rescission right exists only during the disclosure period before closing
- After closing, buyer may sue for fraud, negligence, or breach of contract
- Seller's intentional concealment strengthens a fraud claim
Memory trick: Before close, walk away; after close, make them pay