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Inspector's discovery is huge red flag

September 23rd, 2008 4:07 PM by Ron Mastrodonato

Inspector's discovery is huge red flag
What could buyers have done to avoid getting stuck with major repairs?

September 23, 2008

By Ilyce Glink
Inman News

Q: We closed on our new house just two weeks ago and we already have a huge problem. When we had the house inspected in May, the professional home inspector we hired told us to ask the seller for a written disclosure about the water issues in the basement.

The seller wrote that there had been a one-time water event and that he fixed the problem. When we moved in on Aug. 1, we noticed a strong mold odor from the basement and the area was crawling with insects. Clearly, the problem wasn't resolved.

We now have a huge problem because I became sick and we have 2-year-old twins who also got sick. What recourse do we have? It will cost many thousands to make the house livable, as the basement and attic have mold that must be cleared out.

A: In addition to the problem of cleaning up from this mess, another issue you have to face is proving that the sellers knew this was an ongoing issue. The fact that your inspector called your attention to it and told you to ask for a written disclosure about water issues may help you going forward.

However, you also have to be prepared for the fact that this is the result of a major one-time water issue that just wasn't fixed. It's possible the seller thought he had repaired the problem, but didn't. It's also possible he never cleaned up after the mess happened.

Did you get a copy of a receipt from the company that the seller hired to make the repairs? You might want to call and ask for this, and then follow up with the company to find out what was actually done.

Did you do a final walk-through of the property before closing? If you did, did you notice the mold or insect issue? If so, you should have brought up the issue again, at the closing. You could have delayed the closing or held back monies until you had a chance to look further into the issue.

In addition to chatting with the seller and securing the phone number of the company that assisted him, you should also talk to a real estate attorney or a real estate litigator who specializes in disclosure issues who can help you figure out your legal options.

Finally, many home inspectors will suggest to their buyers that they should investigate certain issues further. In some cases, an inspector's recommendation can be ignored, but in others it's essential. But in any case, when an inspector raises the issue, it should be a huge red flag for the potential buyer.

Certainly, if the inspector saw a problem, the inspector should have told you about the problem in addition to telling you to get more information about it.

As a suggestion for other buyers that may face a similar recommendation in a home inspection, the buyer should stop at that point and ask more questions. What problem has the inspector spotted? What raised the red flag? What could be the cause of the problem? What's the worst-case scenario caused by that potential problem? What's the worst-case scenario for the cost to repair that problem?

If the buyer has that information, he or she can at least have a better understanding as to the issue involved. Some inspectors flag these comments in bold letters; others mark these items as urgent; and still others merely make a passing reference to the potential problem.

In some inspections, it can be difficult or impossible to find the cause of a problem without cutting into walls or performing other invasive tests on a home. Once the inspector has flagged a potential problem, the potential buyer should be on notice that the problem could end up being minor, or it could be a major headache and money-pit issue.

If your seller knew of the water problem, failed to disclose the problem to you but was required under your state laws to disclose this type of problem, you might have a case against him. But it will be up to you, in many cases, to prove that the seller knew of the problem, failed to fix it, failed to disclose it to you, and it was a big deal.

Once you know what the costs to repair the issue are and if you sit down with an attorney to explore your options, you will have a better idea as to whether you can expect to go after the seller or not.

Q: Five years ago I bought my first property. It was a single-family home with a studio apartment attached. I have just been notified by code enforcement that the previous owner never pulled permits for the studio.

Can I sue him for the costs I will incur in rectifying the situation? Also, I noticed on all of his real estate deeds he uses an incorrect address. Does this affect the validity of the transaction?

A: In most states, you have a certain number of years to sue the seller for failing to make accurate disclosures or for breach of contract issues. Since you bought the property five years ago, it's likely that the statutory period expired. You should discuss your legal options with a litigator who has experience in real estate and seller disclosure law.

In terms of the transaction being valid, you should go back to the title company or escrow company that helped you close your deal and discuss the "inaccurate" address issue with them. However, the address of a home is usually not as important when you buy and sell real estate as the legal description of the property. If the legal description is correct but the address is wrong, you are probably fine -- but a real estate attorney could verify that for you.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

Posted in:General
Posted by Ron Mastrodonato on September 23rd, 2008 4:07 PM


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