What is caveat emptor in real estate?

Caveat emptor is a commonly used phrase in real estate deals, and you may hear it applied to everything from large corporate contracts to small private transactions. It’s a particularly important concept for buyers to understand, as it generally serves as a warning that a property is being sold as-is — flaws and all.

What does caveat emptor mean?

Caveat emptor is a Latin phrase that translates to “let the buyer beware.” The phrase provides notice to a buyer that the property being purchased may have unforeseen defects, and it puts the responsibility on the buyer to perform due diligence before closing the sale.

Caveat emptor protects sellers from any liability if the property doesn’t meet the buyer’s expectations. In other words, as long as the seller tells the truth about the state of the property, he or she is off the hook for any problems or defects found after the sale closes.

“The buyer cannot recover damages from the seller for property defects” in a caveat emptor sale, says Chase Michels, of the Michels Group at Compass in Hinsdale, Illinois. “The only exception is if the seller concealed defects or misrepresented the property.”

Caveat emptor vs. caveat venditor

Caveat venditor, another commonly used phrase, is the reverse of caveat emptor. It means “let the seller beware” and is designed to protect buyers.

“It protects the buyer of a property who is privy to less information about the property than the seller,” says Michels. “This guarantees the buyer that the property will function as advertised and nothing is being hidden.”

Caveat emptor example

Let’s say Ernest is selling a pair of shoes, which he advertises only as “never worn.” Following the principle of caveat emptor, that’s not enough information for a buyer, who would likely also want to know what material they’re made of, what color and style they are and what size they are, among other details.

What must a seller disclose?

In many states, homesellers are required to provide what’s known as a seller’s disclosure statement as part of the closing process. This document discloses details and information about any issues associated with a property that the seller is aware of.

There are also places where caveat emptor is widely used. In such cases, sellers are not required to provide written disclosures outlining any issues with the property. Instead, it is up to the buyer to discover these things on their own.

However, even in states where caveat emptor is used, sellers are typically expected to reveal any issues before finalizing a sale. The seller cannot actively withhold information about the property. “If they lie or conceal something, they can be held liable for it after the fact by the buyer,” says Michels.

States that lean toward caveat emptor

All states technically allow caveat emptor sales, but there are some states where it is more commonly used, says Michels. Some of the states that lean toward caveat emptor include:

• Alabama
• Arkansas
• Georgia
• North Dakota
• Virginia
• Wyoming

Bottom line

Caveat emptor in the United States means a property is being sold as-is, and the buyer accepts it in its current form. When a caveat emptor is in place, a seller is released from any liability if a property does not meet your expectations. Before proceeding with this type of real estate transaction, be sure to do your due diligence and find out exactly what you’re buying.