Owning and Renting Property

Buying a Home — Dealing with Undisclosed Repairs

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The day has finally come to close on your new home. However, your excitement fades when you learn that the seller refused or failed to make repairs that were noted during the inspection — or worse yet, you discover the defects after you move in. It’s not an uncommon situation in the real estate world, but now you’re left wondering what your next steps are — and whether they should involve legal action against the seller.

Discovering defects before you move in

Ideally, home defect issues should be worked out before you get to the closing, whether it’s a cracked foundation noted during the inspection or water damage discovered during your final walk-through. At this point, your agent should work with the seller’s agent to explore different options toward recourse. Some examples are:

  • Ask the seller for the responsible parties to pay for the repairs.
  • Negotiate a credit on your closing fees, meaning the seller pays more at closing.
  • Have the appropriate amount from the seller’s proceeds placed in escrow until the problems are fixed.
  • Refuse to continue with the closing until the repairs have been made to your satisfaction.

How to address undetected home repairs after the sale

What if there was something wrong with your newly bought house at the time of purchase, and someone (e.g., the seller, the seller's agent or the inspector) could or should have told you about it beforehand, but didn't? If problems come to light days, weeks or years later, you may be left wondering if you are going to have to shoulder the entire financial burden or if it’s an issue the seller should ultimately pay for. Follow these steps to address any issues that may appear:

1. First, determine who is responsible for the repair.

If you think you’ve been wronged and want to sue those involved in the sale of your home, the responsible parties might include one or more of the following:

  • The seller: Nearly every U.S. state has laws requiring sellers to advise buyers of certain defects in the property, typically by filling out a standard disclosure form before the sale is completed. Some states' disclosure laws are more comprehensive than others, and if a feature isn't on the list, the seller may not be required to speak up. Also, the seller isn't usually required to scout out problems. But if there's clearly a place where the seller should have stated a problem but denied it, try to figure out whether the seller in fact knew about the problem. For example, if the seller patched over or hid problem areas, or if the neighbors have told you about the seller's previous efforts to deal with a problem, the evidence is on your side.
  • The seller's real estate agent: Some states' laws make sellers' agents liable for failing to disclose problems they observed or were told of by the sellers; though often their duties are fairly limited. Again, check your state's disclosure laws and try to figure out whether the problem would have been apparent to the broker, but not to you, before the sale. An attorney familiar with residential real estate transactions in your state can determine what obligation the seller has in disclosing the problem.
  • Your inspector. Hopefully, you got a home inspection before buying. In theory, the inspector should have spotted problems that the seller wasn't even aware of. If the inspector missed problems that an expert (a professional peer) should have noticed, the inspector may be liable. Read over your inspection report to see what it said about the area in question.

2. Find out if you have a legal case.

Once you've figured out the possible responsible parties, you'll want to know whether their action — or inaction — entitles you to compensation. If your situation meets the criteria below, you may have a case. The following legal principles are fairly general, but should apply to different situations in most U.S. states.

  • The defect was there before you bought the home. Problems that started since you bought or are a natural result of your home's aging or your lapses in maintenance are yours to deal with. Of course, determining when a problem started can get complicated. For example, a blockage in your sewer line may be a new problem, or it may be a recurrence of a long-time issue with roots growing into the pipes. You may need a professional's analysis. But if the problem could have started before you bought the house, keep reading.
  • It's not an obvious defect that you could have seen yourself before buying. If you saw a huge crack running across the living room ceiling at the open house and you've only now decided to bring it up, you probably have no recourse. But if it was hidden by a false ceiling, the matter may be worth pursuing. Don't worry if your inspector should have seen the problem. That just means you've got a potential claim against the inspector, too.
  • No one told you about the defect before the sale, or someone actually lied to you about it. The responsible party may have been the seller, the seller's agent or the inspector, as explained above.
  • You relied on the lies or nondisclosures. If, for example, you took the seller's word that a remodel job was up to code in deciding to buy or in setting your price, you acted in reliance. In this case, reliance damages may be recovered if the party failed to fulfill their obligations.
  • You've incurred monetary damage as a result of the defect. Your costs of repairs or related damages (such as destruction of your personal property due to a flooded basement, or a decrease in your property value due to an undisclosed environmental hazard) will become legally speaking, the "damages" that you may collect.

3. Consider alternatives to court.

Even if you determine you have a legal claim against your home seller, selling agent or inspector don't rush to court quite yet. You may be able to recover what you're owed more cheaply and with less stress by using one or both of the following options:

  • Demand letter. Send a demand letter to the responsible party asking for the costs to repair the defect.
  • Mediation. Tell the responsible party about the problem and — assuming they don't agree to compensate you or fix the problem right away — ask if they would agree to go to mediation with you.

4. File a lawsuit.

If you aren't able to resolve your dispute with one of the methods above, you'll have to decide whether to file a lawsuit. You could potentially sue someone based on any of the following, or some combination of:

  • Breach of contract.
  • Breach of warranty.
  • Failure to disclose (according to your state's statute).
  • Fraud.
  • Negligence.
  • Negligent misrepresentation.

Here's how to take the first steps to filing a lawsuit:

  • Make sure you're within any appropriate deadlines ("statutes of limitation"). Every state puts limits on how long you have, from the date you discover a problem or reasonably should have discovered it, to sue someone.
  • Consider small claims court. Filing in small claims court allows you to proceed with your case without a lot of the expensive administrative hassles of a "regular" lawsuit. You can represent yourself and in some states, attorneys are actually forbidden.
  • Decide whether to bring suit in state court. If the amount of money damages you're asking for exceeds the small claims court limit, your next option is filing suit in state court, most likely with the help of an attorney.

An attorney can help you weigh the pros and cons

As you consider your ability to prove wrongdoing, as well as the potential for being compensated for the damage to your home, ask for assistance. Seek information from your state consumer protection agency or enlist the guidance of an attorney who works in the real estate area of law to help you determine your best course of action.

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