A buyer and seller in Albuquerque have executed a purchase agreement for a residential property. Before closing, the seller discovers a significant foundation crack that was not disclosed on the New Mexico Residential Real Estate Disclosure Statement. The buyer learns of the defect and wants to cancel the contract. Under New Mexico law, which of the following best describes the buyer's rights?
Correct Answer
A) The buyer may cancel the contract and recover earnest money, because the undisclosed material defect constitutes a breach of the seller's disclosure obligations
New Mexico requires sellers of residential property to complete the NMREC-approved Residential Real Estate Disclosure Statement disclosing known material defects. A significant foundation crack is a material defect that should have been disclosed. Failure to disclose a known material defect is a misrepresentation and breach of the seller's statutory disclosure obligation. The buyer is entitled to rescind the contract and recover earnest money on the grounds of material misrepresentation or non-disclosure. This is supported by New Mexico's disclosure requirements under NMAC Title 16, Chapter 61.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
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