My experience has been that sometimes people do disclose, but they don’t exactly know what they are disclosing.
And sometimes new owners insist on buying a horse they really shouldn’t because it’s in their budget.
And sometimes trainers take horses on that they think they can fix, and they really can’t.
I’ve been involved in one of these crazy transactions with a troubled horse, and things get wild really fast. In my case, I was just a friend who somehow ended up involved and the horse ended up in my barn for the grand old price of $1 after things deteriorated to the point the horse didn’t even want to be ridden anymore.
What was the problem? In this case, it was a small issue (perhaps physical, not sure because he passed the PPE, but as you well know that can be complicated) which turned into a very large one when the trainer (not me) decided that galloping the horse in deep sand would “fix” his formerly minor balking issue. This caused a bilateral hind suspensory issue that was also non-obvious and then the horse’s attitude turned to absolute poo (for good reason) and his minor balking issue became a major “let’s dump the rider” issue.
In this horse’s case, the fault really lay with the new owners who insisted on buying a horse that was outside of their skill level because he was a “cheap warmblood”. It also lay with the trainer, who told them she could fix them after they purchased him. I felt terrible for the horse, whose fault it definitely wasn’t. I suppose the original owner should have known that something might have been wrong, but she did disclose all of his behaviors and new owner just…glossed over all of it.