Buying a home is one of the largest financial transactions most people engage in during their lifetime. Despite its significance, many people make the decision to purchase prior to hiring a professional home inspector to examine the current condition of the structure and property. This has been particularly true in the Puget Sound Region’s hot housing climate. Demand has exceeded supply and we have seen a race for housing involving waiver of inspection contingencies and all cash purchases. An emotional decision may cause a buyer to turn a blind eye to potential evidence of a problem because they have already become set on purchasing the home of their dreams.
This year a large number of home purchases in Washington occurred during the spring and summer months. This also happens to be when Washington’s typically wet climate turns dry and the temperature heats up. The excitement of moving into your new home can quickly turn into fear or anger if after you move in and the fall rains arrive, you learn for the first time of a major problem with the home that you believe the seller should have told you about. Maybe the roof begins to leak, or you find wood rot that was covered up, or water begins to rise in your basement. If you learn of a serious defect in your home that you believe the seller knew about and should have disclosed to you before the sale, you may have a legal claim against the seller, the seller’s real estate broker, your home inspector, and even your real estate broker.
Homeowner’s insurance, a product warranty, a home warranty, or another similar product may cover some or all of the cost of repair. You should always review any applicable policy of insurance to determine if coverage exists.
If there is no coverage for the defect, you should next determine whether someone had a legal duty to tell you about the problem. The buyer or seller’s broker, the seller, and the buyer’s home inspector are all people who may have known about the problems you learned of after moving in. If any of the above individuals knew of the defect but failed to disclose it to you, you may be legally entitled to recover the cost of repair and any additional damages caused by the defect.
If the seller knew of the problem and failed to disclose the existence of the problem on the Form 17 Seller Disclosure Statement, the seller may be liable to the buyer for negligent or intentional misrepresentation. If the seller took steps to cover the problem up, the seller may be liable to the buyer for fraudulent concealment.
The most difficult aspect of these types of claims is finding the “smoking gun” to prove the seller knew about the alleged defect. Building permits issued by the county or city, contractors, repair records, or even neighbors may be sources of information to help prove that the seller knew of the problem.
In the past several years, Washington case law has taken a seller-oriented approach, and held that the seller is not responsible for the defect if the buyer knew or should have known of the existence of the defect, no matter how slight the buyer’s knowledge. For instance, if your home inspector identified wood rot in one area of the home, a buyer has a duty to investigate wood rot in all areas of the home. Washington courts have repeatedly affirmed the legal principal of caveat emptor, meaning buyer-beware. A buyer should make sure to investigate any defects it learns of – both in areas where the defect is known to exist and throughout the entirety of the home.
Real Estate Broker:
The next question to ask is whether the listing broker or selling broker was aware of the defect. A real estate broker is under no duty in Washington to investigate the condition of the property or the truthfulness of the seller’s representations and is not liable for the seller’s misrepresentations. But, if the broker was aware of the defect, and the defect is material to the purchase transaction, a broker is obligated to disclose the existence of the defect to the buyer. Again, the difficulty lies in proving that the real estate broker had knowledge of the defect.
Even when the housing market is not red hot, it is customary in Washington for a buyer to hire a home inspector referred by their broker and pay them $300 – $500 to walk through the interior and exterior of the home for three or four hours and tell the prospective buyer about the current condition of the home.
You should ask the inspector if there are any areas of the home he or she will not inspect. If so, find someone who will or hire a second inspector to inspect the other areas.
Do not settle for a home inspector that limits his or her liability for missing defects to the cost of the home inspection. You may have to pay a little more, but the home inspector should stand by their inspection.
Once you hire a home inspector that stands by their inspection, review it carefully with the inspector and your real estate broker. Make sure you understand the consequences of the identified defects and if it is possible for the defect to exist in other areas of the home. If the home inspector says no, have them put it in writing.
If the home inspector missed a defect that they should have noticed, you may have a claim against the home inspector.
What Can You Do to Protect Yourself?
- Hire an attorney to review the transaction documents prior to closing. Retain the attorney before mutual acceptance and, if possible, in advance of writing an offer. Give the attorney enough time to review the documents before closing to negotiate additional representations and warranties by the seller or resolve potential issues of contention before they become problems.
- Request the seller represent and warrant to the buyer that the property is free from any material defect(s) known to seller and not disclosed to buyer and that all information the seller provides to the buyer concerning the property has been provided after due investigation by the seller.
- Expressly incorporate the representations made by the seller in the Form 17 Seller Disclosure Statement into the terms of the Real Estate Purchase and Sale Agreement.
- In the era of smartphones and GoPro video cameras, take video of each room of the home, the exterior, and the boundary lines prior to closing the purchase transaction. If a problem arises later, you will have documentation of the condition of your home when it was originally inspected and when the purchase was closed.
If you believe the seller concealed a defect or failed to disclose a defect that he or she knew about, you should consult an attorney right away. Washington’s seller misrepresentation laws are complicated and are best interpreted and explained by an attorney that handles these matters every day.