A realtor not disclosing a known defect in an empty real estate lot?

A friend who is a builder bought a piece of real estate paying over $40,000 thousand dollars. This being an empty lot inside of the city limits. My friend thought, there could not be anything wrong with an empty lot. Well, come to find out this piece of ground had a spring that rises to the top, then watering his grass quite nicely. I also know the realtor who sold the builder the property and the realtor knew about the spring. I had heard that realtors had to disclose any known defect in a piece of real estate. The realtor advised me that the builder should have done his due diligence before purchasing the property. Was my builder friend defrauded and what might he's chances be at a successful lawsuit? Thank you.