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What to do With Sellers That Hide Defects

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Most people dream of one day owning a home. That anticipation and excitement is one of the joys, and rewards of working hard and preparing for a secure future in life. At times this dream can become a nightmare as the result of the previous homeowner’s failure to disclose certain defects with the home despite being compelled to do so by law. The new owners, as a result of this deception, are then faced with, delays, unexpected repairs, and renovation costs that they should have been made aware of before the closing.

In most states, and in most instances, if defects are not truthfully disclosed prior to closing the new homeowner is protected by law and can seek recourse through either arbitration or the courts, and may be entitled to compensation. Depending on the instance a buyer can sue the homeowner, the inspector, and the agent. They can all share the blame for the improper disclosure depending on the circumstances at the time of closing.

Some of the more common defects that result in this type of problem are:

  • Broken septic tanks
  • Building code violations
  • Contaminated well water
  • Defective foundations
  • Defective electrical and wiring
  • Defective HVAC systems
  • Defective plumbing
  • Hidden water damage
  • Porch and other additions built without a building permit
  • Renovations and additions built by unlicensed contractors
  • Roof leaks

Although the statute of limitations for breach of a written contract is different in each jurisdiction it can be as much as six years from the date that the breach of the written contract was discovered. Regardless of the time period homeowners who think they have been deceived should immediately discuss their potential claims with a real estate attorney as time is very important to satisfying a dispute.

A Typical Example of a Dispute That Arose Because of a Failure to Disclose Defects

A homeowner purchased a property from a seller who had inherited the property that was listed for sale. The seller claimed to have little or knowledge of the dwelling’s history or any defects. After the buyer had closed on the property, and was living in the home for a very short time, a rain storm revealed that there were very bad problems with the roof because it was leaking profusely. All of this was occurring despite the fact that the home inspector had certified that the roof was rather new and in good condition. There was also a termite inspection that stated there were some water stains on a bedroom ceiling but these concerns were erroneously minimalized.  

The buyers had not been given the termite inspection report in a timely manner from their real estate agent and they had hired an inspector on their own who did issue a report only three days before the close of escrow. At the time the report was delivered to the buyer the negotiating deadline had lapsed and they had packed up their previous house and were already in the process of moving.

When the termite inspector gave the buyer his report, and it was evident that there was something wrong, they approached their real estate agent who then brushed their concerns aside by telling them the stains were most likely caused by old leaks and were nothing to worry about. The agent then defended the seller by telling the buyer that there was no way that the seller could have known this otherwise they would have disclosed the problem before the closing. This was most likely false as they had paid for the termite report.

So the question arises who is responsible and liable to compensate the buyer for their troubles, legal fees, and needed repairs: the seller, the buyer’s agent, or the home inspector? The previous owners were, according to law, the party compelled to disclose the defects that were on the termite inspector’s report, including the evidence of probable leaks in the roof which makes them liable. Further, the real estate agent neglected their obligation to the buyer when they did not advise them they had a legal right to dispute the problem despite the negotiating deadline having passed. The problems were of such a magnitude that the contract was voided at that point and the buyer did have recourse which he was not told. Because the seller was in violation, and the negotiation deadline was invalid, they are now liable for repair costs and they share that responsibility with the agent.

The agent was obligated to show the buyer a copy of the termite report once it was made available to them. Because of the agent’s neglect, which did not allow the buyer the proper time to review the report and dispute the sellers claims of there being no problems, they were unable to protect themselves. Any reasonable judge would never accept the agent’s excuses for failure to pass on the inspection report.

The agent further implicates himself by advising the buyer that the problems were slight, that the seller was acting in good faith, and that the buyer had nothing to worry about. He should have demanded on behalf of his client, the buyer, further assessment of the problem by a licensed roofing contractor. It appears as if the agent was only considering their commission and not the buyer’s interests as they are obligated to do.

Although the inspector appeared to have done their job there is a question of negligence on their part, too. If they did not see the roof defects, or chose to not record them he too will be held responsible and would have to contribute to the expense incurred by the buyer. If the agent had truly been looking out for their interests, rather than trying to close the deal, he should have demanded further evaluation of the roof by a licensed roofing contractor before the close of escrow.

The fact that the roof problems were only made evident after the closing, and that all three of the parties involved are culpable to some degree, the buyer should now conduct a thorough inspection of the dwelling to determine if there are any other inherent defects that need to be addressed before further problems arise and they possible incur further costs.

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