Ask any experienced residential real estate attorney about his or her most difficult case. The answer will probably involve a “bad house.” While not exactly a legal term, a bad house is one where the buyer alleges the seller knew about a serious structural defect, but failed to disclose it to the buyer before purchase.
Proving the seller knew of the undisclosed defect, which the buyer usually discovers shortly after the purchase, can be very difficult. Since it’s human nature to look for someone to blame, a home buyer usually looks first to their seller, then to the realty agent, and finally to the professional inspector if one was involved.
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But buying a truly bad house can usually be avoided by following the correct steps. Even brand-new houses have their defects. A local building inspector’s approval is no guarantee. However, whether a new or resale house is involved, home buyers can minimize their chances of making a serious mistake.
HOME SELLER DISCLOSURES ARE NOT GUARANTEED ACCURATE. Many states now require home sellers to provide written disclosures of known defects. If the seller lied and failed to disclose a defect, which the buyer can prove the seller knew about, the seller is liable to the buyer for damages.
Incidentally, the easiest way to prove what the seller knew is usually to ask the neighbors. They often know as much about a neighboring house as the seller knew.
For example, shortly after I bought my current home, one of my neighbors came over to get acquainted. After a few pleasantries, he said, “I suppose the sellers told you about when that hill behind your house slid. There must have been at least three feet of mud against the house.”
When I replied that the sellers hadn’t said a word about the hill slide against my house, he quickly added something about how all the new drainage toward the street probably took care of the problem.
That was 26 years ago. Every time there’s a heavy rain, I look at the steep hill behind my house and wonder whether it will slide again. Perhaps it’s a good thing the seller didn’t disclose the slide, which was apparently corrected properly, because otherwise I might not have purchased my otherwise very desirable home.
HOME BUYER’S FIRST DEFENSE AGAINST BUYING BAD HOUSE
Today’s smartest home sellers, before putting their homes on the market for sale, obtain professional home inspection reports. If any serious defects are revealed, sellers should have them corrected so they don’t become detriments to a successful home sale.
The best realty agents recommend home sellers also have customary or required inspections completed before marketing the home, such as for termites, energy efficiency, well-water quality, septic system, radon, and building code compliance. Savvy home sellers then have any defects corrected to avoid later problems.
However, the home buyer’s first line of defense against buying a bad house is to hire his or her own professional home inspector in addition to the required or customary specialized inspections. To avoid wasting money, the buyer’s professional inspection should be completed after the seller accepts the buyer’s purchase offer.
Before hiring a professional home inspector, buyers should check the inspector’s credentials. Be wary of an inspector recommended by the realty agent. The inspector might be known as “easy” because realty agents don’t want to recommend a tough “deal killer” inspector.
Personally, I prefer a home inspector who is a member of the American Society of Home Inspectors. This organization has the toughest experience and membership standards. Local ASHI inspectors can be found at ASHI.com or (800) 743-ASHI.
The cost of a professional home inspection should be around $300. That’s cheap because a typical inspection requires at least two hours, plus time to write the report. Smart home buyers and their realty agents accompany their professional inspectors to discuss any problems discovered.
Although I’ve used this example many times, it’s worth repeating. Several years ago, I looked at a run-down house that had a bad fireplace crack. Fearing the entire fireplace needed expensive replacement, I made my purchase offer contingent on a satisfactory professional inspection of the entire house. When I accompanied my inspector, I asked him to check the chimney especially close. After inspecting it completely, he reported the chimney was fine and the crack could be repaired with special fireplace mortar cement for about $150.
Later, I learned many prospective buyers rejected that house because of the ugly fireplace crack. Fortunately, I made my purchase offer contingent on a satisfactory professional inspector’s report, as smart home buyers should always do. If I had disapproved the report, I would have been entitled to refund of my good-faith earnest money deposit.
Incidentally, hiring a professional inspector is also a great way to avoid buying a “sick house.” Don’t hesitate to ask your professional inspector about moisture and mold, radon, asbestos, lead-based paint, formaldehyde, carbon monoxide and other negative influences that concern many home buyers.
HOW TO HANDLE “AS IS” HOME SALE
Recently I had the pleasure of visiting Sarasota and Tampa, Fla., where I observed many modestly priced fix-up homes with for-sale signs. As these are my favorite type of profitable home purchases, I was drooling at the profit opportunities.
Although I didn’t have time to investigate, when a run-down home is offered for sale “as is” that means it is offered in its present condition and the seller won’t pay for any repairs. However, in most states, sellers must disclose in writing the known defects of as is homes. Selling a home as is is not a way to avoid defect disclosures.
However, to avoid buying a bad house, prospective buyers of as is homes should condition their purchase offers on a satisfactory professional inspection report to be obtained by the buyer after the seller accepts the purchase offer.
IF BUYER DOESN’T ASK, SELLER USUALLY DOESN’T HAVE TO TELL
Except for statutory defect disclosure requirements, which vary by state law, if a buyer doesn’t ask, the seller usually doesn’t have to disclose. It’s up to the home buyer to ask about special concerns.
For example, if the roof leaked, but the seller had a new roof installed a year ago and it hasn’t leaked since then, the seller isn’t required to disclose the roof previously leaked. However, if the seller knows there is toxic mold in the attic from the leak, the mold problem should be disclosed.
But some problems are of special concern to just a few buyers. Death on the premises is one of these potential problems that bother some buyers but not others.
To illustrate, a few years ago, a San Francisco real estate broker was sued by his home buyer for failing to disclose there had been a suicide in the house. The broker knew about the suicide, but didn’t disclose it because the event had nothing to do with the house’s structural condition or desirability. However, the buyer came from a country where suicide on a property is considered a bad omen. After learning about the suicide, the buyer sued the realty broker. The jury found the broker had no liability because the buyer didn’t ask if there had been a recent death on the property.
CONCLUSION. The best way to avoid buying a “bad house” is for the buyer to ask lots of questions and make their purchase offer contingent on a satisfactory professional home inspection. Buyers should strive to learn everything possible about the home before purchase.
More details are in my special report, “How to Avoid Buying a Bad House,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at (800) 736-1736 or instant Internet download at www.bobbruss.com.
Real Estate Center).