A buyer makes an offer on a Council Bluffs property and includes $3,000 earnest money. The purchase agreement is fully executed. Before closing, the buyer discovers the seller failed to disclose a known material defect — a history of basement flooding — on the Iowa Residential Property Seller Disclosure Statement. The buyer wishes to exit the transaction. Under Iowa law, which remedy is MOST directly available to the buyer based on the disclosure violation?
Correct Answer
A) The buyer may rescind the purchase agreement and recover the earnest money based on the seller's failure to disclose a known material defect under Iowa Code Chapter 558A
Iowa Code Chapter 558A requires sellers to disclose known material defects on the Residential Property Seller Disclosure Statement. A history of basement flooding is a material defect that must be disclosed. When a seller knowingly fails to disclose a material defect, the buyer has grounds to rescind the purchase agreement and recover earnest money. This statutory remedy is the most direct and immediate relief available to the buyer under Iowa's disclosure law.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
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