A hidden property problem not discoverable through a reasonable inspection, which must be disclosed if known.
Why Latent Defect matters on the exam
This term belongs to Property Disclosures. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Latent Defect
Every Freehold question shows why the right answer is right — and cites its source.
A seller's agent knows about a material latent defect in the foundation but says nothing when a prospective buyer directly asks whether there are any known problems with the property. This deceptive silence can constitute:
Puffing, since silence is not a statement
A protected exercise of the duty of confidentiality
Fraudulent concealment
No violation at all, since the agent said nothing false
Show answer & explanation
Fraudulent concealment — Deliberately staying silent about a known material defect when directly asked is treated as fraudulent concealment, since it is functionally equivalent to making an affirmative misrepresentation.
Source: PSI National Real Estate Exam Content Outline §5 General Principles of Agency
A seller knows the basement floods every spring, but the damage is not visible during a showing. This is an example of:
A patent defect that needs no disclosure
A latent defect that must be disclosed
Merely a stigma that cannot be disclosed
Normal wear and tear
Show answer & explanation
A latent defect that must be disclosed — A latent defect is a hidden problem not discoverable by ordinary inspection. Known latent defects that materially affect the property must be disclosed, since buyers cannot reasonably discover them on their own.
Source: PSI National Real Estate Exam Content Outline §6 Property Disclosures
A latent defect is best described as a defect that:
Is obvious to absolutely anyone who simply walks casually through the property one single time
Occurred only after the buyer took possession
Is hidden and not discoverable through a reasonably careful visual inspection
Results only from the normal wear and tear of ordinary daily use over the years
Show answer & explanation
Is hidden and not discoverable through a reasonably careful visual inspection — Latent defects are hidden conditions that an ordinary inspection would not reveal, which is why sellers who know of them have a heightened duty to disclose them to buyers.
Source: PSI National Real Estate Exam Content Outline §6 Property Disclosures
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