I've explained it as best as possible without writing a treatise on the subject. Here is a
treatise for your enjoyment.
The statutory law would vary from state to state, but not by much. My experience is cancellation or rescission of the contract (which doesn't preclude still going after money damages and attorney fees).
My example of head pumping to the bilge might be too obvious, so I'll go with another example. Buyer #1 sees that there is a leak around the shaft.
Seller says the stuffing box needs repacking and he has the packing material onboard but never got around to fixing. A no-cost 1 hour project. Assume that is truly what the Seller believes.
Surveyor says he doesn't think that's the problem. Boat is hauled and the Surveyor says the stuffing box is fine. The problem is that the shaft tube has corroded apart. Yard also inspects and gives an estimate of 2 weeks and $20K. Seller refuses Buyer #1 counter to reduce price.
Buyer #2comes along. Seller says the stuffing box needs repacking and he has the material onboard but never got around to fixing. A no-cost 1 hour project.
Buyer #2 purchases without a survey, repacks stuffing box, doesn't fix so hauls the boat at the same yard. Yard manager says "Hey, we hauled this boat last month for a survey. Did you get the shaft tube fixed?"
You think Seller is going to skate? Not in any U.S. jurisdiction that I know of. Seller gets his boat back (rescission of contract) and a lawsuit to recover haul fees, survey fees, moorage fees and anything else spent because of the misrepresentation. Including attorney fees in most jurisdictions.
One might think that if the Seller just stays silent or says "I dunno to all questions" that he might get away with it. Maybe not willful misrepresentation, possibly negligent misrepresentation. A closer call, but unlikely to pass the smell test with judge and jury. This is especially true if the Seller was handed a copy of the survey and yard estimate. That was my original point. It makes the Seller think harder about Buyer #1 offer.
I bought my first cruising boat and retired early based on this legal theory, so I know that it exists. My client didn't pay me a penny, my fees were paid by the defendant. I named the boat after the client.