In real estate transactions, understanding the difference between a seller’s failure to disclose an adverse material fact and a mistake in belief is important—especially in New Mexico, where disclosure duties are shaped not by statute, but by case law.
New Mexico does not have a specific law that requires sellers to disclose adverse material facts. However, case law has established that sellers can be held liable for fraudulent nondisclosure if they are aware of a defect or condition that materially affects the value or desirability of the property and fail to inform the buyer. The courts look at whether the seller had actual knowledge and whether the fact was material. For example, if a seller knows that the basement floods during heavy rain but doesn’t disclose it to the buyer, that could be considered a failure to disclose an adverse material fact. The buyer may have a legal remedy once the issue is discovered—often after the transaction closes.
By contrast, a mistake in belief involves a seller acting on a genuine but incorrect assumption about the property. In these cases, the seller doesn’t know the truth and has no reason to suspect otherwise. Take this example: a seller tells a buyer that the utilities are buried underground and located within the property boundaries. That’s what they were told when they purchased the land five years earlier, and they’ve had no reason to question it. During the buyer’s due diligence period, a utility locate reveals that the utilities are actually situated within a utility easement that runs just outside the property line. If the seller was unaware and had no reason to doubt the original information, this would likely be considered a mistake in belief—not a failure to disclose.
While many states have formal disclosure statutes, New Mexico relies on case law to establish the duty to disclose material facts. New Mexico law also specifies, that sellers do not need to disclose events like natural deaths, suicides, or crimes on the property—underscoring that only adverse material facts are at issue.
The distinction hinges on knowledge and intent. If a seller knowingly withholds a material fact, that’s nondisclosure and could be actionable. If they convey information they reasonably believed to be true, and that belief was based on credible past representations, it may fall under mistake in belief.
Buyers should use their due diligence period to verify important details, while sellers are best served by disclosing anything they actually know to be relevant. In a state like New Mexico, where disclosure law is grounded in legal precedent, caution and clarity benefit everyone involved in the transaction.
Jarred Conley is not an attorney, and the information provided in this article is for general informational purposes only. It should not be construed as legal advice. For guidance specific to your situation, please consult a qualified attorney licensed to practice law in New Mexico.
