Intentional Misrepresentation and Real Estate Fraud in Texas

Intentional misrepresentation—commonly referred to as fraud—is a serious allegation in Texas real estate law. When a party deliberately provides false information or conceals important facts with the intent to induce another to act, the law provides strong remedies for the victim.

Unlike negligent misrepresentation, fraud requires intent. And if proven, it can lead to rescission, damages, and even punitive awards. In this article, we’ll break down the elements of fraud in the real estate context, explore common fact patterns, and highlight the legal distinctions that separate fraud from negligence.

What Is Intentional Misrepresentation?

Intentional misrepresentation (fraud) occurs when one party knowingly or recklessly makes a false representation of material fact, intending another to rely on it, and that reliance causes harm.

Elements of Common Law Fraud in Texas

To prevail on a fraud claim in Texas, a plaintiff must prove:

1. The defendant made a material misrepresentation.
2. The representation was false.
3. The defendant knew it was false or made it recklessly, without knowledge of its truth.
4. The defendant intended for the plaintiff to rely on the representation.
5. The plaintiff relied on it.
6. The reliance caused injury.

Fraud may also include material omissions when there is a duty to disclose—such as when a seller knows about hidden defects and conceals them to induce a sale.

Examples of Real Estate Fraud

Fraudulent behavior can occur in residential and commercial transactions alike. Common scenarios include:

• Sellers misrepresenting foundation issues, roof damage, or flood history
• Falsifying occupancy or rental income for investment properties
• Failing to disclose unpermitted improvements or zoning violations
• Providing forged documentation or title reports
• Agents making false statements to close a sale and secure commissions

Courts consider whether the misrepresentation was about a present or past fact (as opposed to a prediction or opinion) and whether the plaintiff’s reliance was justified under the circumstances.

Materiality and Justifiable Reliance

For a fraud claim to succeed, the misrepresentation must be material, meaning it would influence a reasonable person’s decision. Texas courts also require justifiable reliance—the plaintiff must not ignore red flags or fail to exercise ordinary care.

For example, if a buyer signs a disclosure stating “property sold as-is” and has inspection rights but chooses not to inspect, a court may find that reliance on earlier verbal statements was not justified.

However, if the seller or agent actively concealed the defect, courts are more likely to find that fraud occurred—even if an inspection was possible.

Fraud vs. Negligent Misrepresentation

While both claims involve false statements, there are important distinctions:

Proving Fraud in Court

Proving fraud often hinges on documentation, witness testimony, and circumstantial evidence. Courts may infer intent from patterns of deception, profit motive, or cover-ups.

Effective evidence includes:

• Text messages, emails, or advertisements with false claims
• Statements contradicting public records or surveys
• Testimony from prior buyers or neighbors
• Evidence of concealment (e.g., painting over water damage before showings)

Expert testimony may also be helpful to establish that the misrepresented fact was material or that the defendant had reason to know it was false.

Fraud Remedies in Texas Real Estate

If fraud is proven, Texas law permits significant remedies, including:

• Rescission: Undoing the transaction entirely
• Actual Damages: Cost of repairs, reduced property value, or lost profits
• Punitive Damages: Available if malice or gross fraud is proven
• Attorney’s Fees: In limited cases, particularly when fraud overlaps with DTPA claims

Fraud claims may also provide a stronger litigation position than breach of contract when there are disclaimers or “as-is” clauses, because fraud can render such clauses unenforceable.

Statute of Limitations and Discovery Rule

The statute of limitations for fraud in Texas is generally four years. However, the discovery rule applies: the clock starts when the fraud was—or should have been—discovered with reasonable diligence.

This rule helps plaintiffs who are unaware of concealed defects or falsehoods at the time of closing but later discover the truth.

Conclusion

Intentional misrepresentation is a high-stakes area of Texas real estate law. The burden of proof is stricter than in negligent misrepresentation claims, but the rewards are potentially greater—both in terms of financial recovery and leverage during litigation.

In the next article, we’ll shift focus to the obligations of sellers in Texas real estate transactions, including disclosure duties, common pitfalls, and when a seller’s silence becomes actionable.

Next: Duties of Sellers in Real Estate Transactions