Seller Disclosure Duties in Texas Real Estate Transactions

In Texas, sellers of real estate have important legal obligations to disclose certain information about the property being sold. These disclosure duties are not just ethical—they’re legally enforceable. Failing to comply can lead to claims for fraud, negligent misrepresentation, or violations of the Deceptive Trade Practices Act (DTPA).

This article explores what sellers must disclose, what forms are required, and how silence—or selective disclosure—can give rise to significant liability.

What Must a Seller Disclose in Texas?

Under Texas law, residential sellers must provide a Seller’s Disclosure Notice (pursuant to Texas Property Code § 5.008). This document requires the seller to disclose known conditions that materially affect the value or use of the property. Examples include:

  • Previous flooding or water penetration
  • Roof leaks or foundation issues
  • Termite or pest infestations
  • Malfunctioning HVAC, plumbing, or electrical systems
  • Code violations, zoning changes, or boundary disputes

The key word here is known. Texas does not impose a general duty to investigate or discover problems. However, if a seller knows about a defect and fails to disclose it, they may be liable—even if the buyer had inspection rights.

What If a Seller Makes a False Statement?

Liability arises when a seller makes an affirmative misrepresentation or fails to disclose a known defect:

  • Affirmative misstatements about property condition may support a fraud or negligent misrepresentation claim.
  • Omissions can also be actionable if the seller knew about the defect and failed to disclose it when there was a duty to do so.

Courts have held that even if a buyer had the right to inspect, the seller’s misrepresentation may override any contractual disclaimer. This is especially true if the seller actively concealed the problem (e.g., painting over water damage).

Case Example: Silence Can Be Fraud

In Spoljaric v. Percival, the Texas Supreme Court ruled that “[a] failure to disclose material facts may be equivalent to a false representation when there is a duty to speak.” This principle has been applied in real estate cases where sellers knew of serious defects and stayed silent to induce a sale.

Example: A seller fails to disclose prior flooding, despite knowledge of standing water in past rainstorms. If the buyer discovers the issue post-closing, the seller may be liable under fraud or DTPA theories—even if the buyer signed an “as-is” contract.

When Is There a Duty to Disclose?

Sellers generally have a duty to disclose when:

  • They know of a latent defect that is not readily observable
  • The defect materially affects the value or usability of the property
  • The buyer does not have equal access to the information

If these conditions are met, failing to disclose the defect may support a claim for fraud by nondisclosure.

Exceptions to the Disclosure Requirement

Texas Property Code § 5.008 lists several exceptions to the requirement to provide a Seller’s Disclosure Notice. Disclosure is generally not required if the sale is:

  • To a spouse or relative
  • Made under a court order or foreclosure
  • From one co-owner to another
  • Part of an estate or trust distribution

Even when these exceptions apply, sellers may still be liable for affirmative misstatements or intentional concealment.

“As-Is” Clauses and Their Limits

Many real estate contracts include “as-is” clauses. While these can limit a seller’s liability for future conditions, they do not shield the seller from claims of fraud or known misrepresentation.

In Prudential Insurance Co. v. Jefferson Associates, the Texas Supreme Court ruled that “as-is” clauses are enforceable—unless the buyer proves that the seller engaged in fraud, made misrepresentations, or concealed material facts. If fraud is proven, the clause becomes voidable.

Seller Liability Under the DTPA

Sellers may also be liable under the Deceptive Trade Practices Act if they engage in conduct deemed false, misleading, or unconscionable. The DTPA covers:

  • False statements about characteristics or condition
  • Omissions that mislead or deceive
  • Failing to disclose material facts known at the time of the transaction

Even individuals who are not licensed professionals can be liable under the DTPA if they act in a “business capacity,” such as flipping homes or frequently selling investment properties.

Best Practices for Sellers

To avoid liability and reduce the risk of litigation, sellers should:

  • Fully and accurately complete the Seller’s Disclosure Notice
  • Update disclosures if something changes before closing
  • Disclose known issues—even if they believe the buyer will find them during inspection
  • Avoid making verbal representations about conditions that are not confirmed
  • Consult an attorney if they are unsure whether to disclose something

Disclosing more than required is often safer than disclosing too little. Courts favor transparency—and juries punish concealment.

Summary

Sellers in Texas have significant legal duties in real estate transactions. Failure to disclose known defects or making false statements can expose sellers to lawsuits, rescission of the sale, and financial penalties. The law protects buyers from deceit—and holds sellers accountable for both what they say and what they leave unsaid.

In our next installment, we’ll examine the flip side: the duties and responsibilities of buyers in Texas real estate transactions—and how failing to investigate can defeat even a strong misrepresentation claim.

Next: Duties of Buyers and Their Limits in Misrepresentation Cases