Buyer Duties and Justifiable Reliance in Texas Property Deals

In any Texas real estate transaction, buyers have a legal responsibility to protect themselves through due diligence. While the law does hold sellers and agents accountable for misrepresentations, buyers cannot claim to be victims if they ignored warning signs or failed to investigate. The legal doctrine of justifiable reliance plays a critical role in determining whether a misrepresentation claim will succeed or fail.

This article focuses on the buyer’s role in real estate transactions, how courts define justifiable reliance, and when a buyer’s failure to act can defeat claims of fraud or negligent misrepresentation.

Buyers Are Not Passive Participants

Texas law expects buyers to act reasonably and with ordinary care. They are not entitled to blindly accept everything a seller, agent, or broker tells them—especially when they have access to records, reports, or inspections that contradict those representations.

Buyers have a duty to investigate:

  • Title records and surveys
  • Inspection reports and appraisals
  • Disclosures and legal notices
  • Zoning regulations and building permits

If a buyer fails to review available information, courts may find that their reliance on a misstatement was not justified—regardless of whether the statement was false.

What Is Justifiable Reliance?

Justifiable reliance means the buyer had a reasonable basis to believe the misrepresentation was true, and had no reason to doubt it under the circumstances. Courts will evaluate:

  • The sophistication of the buyer
  • Whether the buyer had access to contradictory information
  • Whether the buyer waived rights or ignored red flags
  • Whether the buyer conducted an independent investigation

Reliance is more likely to be justified for first-time homebuyers than for commercial developers with in-house legal teams. The more experienced the buyer, the higher the expectation of diligence.

Case Law Spotlight: JPMorgan Chase Bank v. Orca Assets

In JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648 (Tex. 2018), the Texas Supreme Court ruled against a commercial lessee who relied on verbal statements about mineral rights, despite clear contradictions in written lease documents. The Court emphasized that the presence of red flags and conflicting documentation defeated any claim of justifiable reliance.

This case is a key example of how Texas courts prioritize written documentation over oral representations, particularly when the buyer could have discovered the truth with minimal effort.

When Buyers Lose Misrepresentation Claims

Buyers may lose fraud or negligent misrepresentation cases if they:

  • Sign “as-is” contracts without reservation
  • Fail to read disclosures or inspection reports
  • Waive the right to inspect the property
  • Have expertise that should have raised suspicion
  • Rely on opinions or estimates rather than facts

For example, if a buyer purchases a home with visible cracks in the foundation but takes no steps to investigate, they may have difficulty proving they reasonably relied on the seller’s “no known defect” disclosure.

What Buyers Should Do to Protect Themselves

To establish justifiable reliance, buyers should:

  • Conduct thorough inspections using licensed professionals
  • Review title reports, zoning records, and surveys
  • Retain legal counsel in complex or high-value deals
  • Ask follow-up questions on ambiguous disclosures
  • Document any verbal statements with written confirmations

Even if the seller lies, the buyer’s own diligence—or lack of it—will be scrutinized. Courts are less sympathetic to buyers who sleep on their rights.

Are “As-Is” Clauses the End of the Road?

No—but they complicate things. An “as-is” clause may bar recovery unless the buyer can prove fraud or misrepresentation. In such cases, the buyer must show that the seller:

  • Actively concealed a known defect
  • Made a knowing misrepresentation
  • Prevented or discouraged a full inspection

If fraud is proven, an “as-is” clause may be voided. However, if the buyer knew about the clause and had every opportunity to inspect, they will have an uphill battle in court.

Justifiable Reliance in DTPA Claims

The Texas Deceptive Trade Practices Act (DTPA) does not use the exact term “justifiable reliance,” but Texas courts have read it into DTPA claims where the plaintiff alleges false, misleading, or deceptive acts. A DTPA plaintiff must show that:

  • They relied on a false or misleading statement
  • The reliance was reasonable under the circumstances

This requirement prevents the DTPA from becoming a strict liability statute. Courts will still expect buyers to act with some degree of care before invoking its protections.

Summary

Texas real estate buyers must do more than sign papers and hope for the best. They are expected to investigate, read disclosures, ask questions, and protect their own interests. A failure to do so can sink even a valid claim of misrepresentation or fraud.

In the next article, we’ll turn to real estate agents and brokers—their duties to clients and non-clients alike, and the circumstances under which they can be held personally liable for misstatements made during the transaction process.

Next: Broker and Agent Liability for Misrepresentations