A home seller’s worst nightmare is to be sued by the buyers after the deal is done. This is precisely what happened to a California home seller who was less than forthright about the condition of his property.
California is one of many states that require home sellers to comply with disclosure requirements when they sell. The seller mentioned above was sued because he failed to disclosure a drainage problem.
To make matters worse, the seller had finished off an area of the basement to create a den. This extra room was one of the reasons the buyers purchased the property. During the first heavy rain after the transaction closed, the basement flooded, and the den was destroyed. The buyers sued the seller and won.
Although there is a trend nationally toward mandatory seller disclosures, some states still don’t require sellers to disclosure defects when they sell. Other states only have voluntary disclosures. Be sure to check with your real estate professional about seller disclosure requirements in your area.
Some sellers who are subject to disclosure requirements foolishly think that if they disclose known defects, this will keep their home from selling. However, this is rarely the case. Buyers usually don’t sue about information they had before they bought a property. If they do, they rarely win. Legitimate lawsuits are often about defects that weren’t disclosed to the buyers before the transaction closed–defects that the buyers were sure the sellers knew about, but intentionally withheld.
Disclosure laws came into effect to protect buyers. Thorough and accurate disclosures also protect sellers from future litigation. So, rather than skirt the issues, sellers are much better off if they disclose any fact that might be material to a buyer’s decision to buy, or the price he might pay.
HOME SELLER’S TIP: Two frequent after-closing problems involve claims regarding square footage misrepresentations and concealment of unfavorable reports. Sellers tend to round up the square footage of their home. For instance, a house that had 1,865 square feet when the sellers bought it suddenly has 1,900 square feet when they sell it.
A far better practice, is to round down, rather than up. This is hard for some sellers to do, because bigger is usually thought to be better. But, it’s not better if you’re sued later. If you feel you need to reference square footage at all be sure to include the word “approximate.” It’s also a good idea to reference the source of the square footage information, and include a statement that it might not be accurate and it won’t be verified. This way, the buyers are put on notice to research this information, if it’s important to them.
As a buyer, you do have a duty to protect yourself. Buying a home is a major investment. So, don’t rely solely on a seller’s disclosures. Have the property inspected and if you need more information from the seller, ask for it. Don’t rely on the fact that the law may be on your side if you get into a dispute. A legal proceeding can exact an emotional toll, not to mention the time it may take out of your busy life.
Concealing unfavorable reports rarely pays off. One seller decided not to disclose estimates he’d obtained to replace his roof. Unfortunately, his neighbors took care of this disclosure for him. The buyer became chummy with the next-door neighbor soon after he took possession of the property. The neighbor told the new homeowner that the seller was planning on replacing the roof before the next rainy season.
THE CLOSING: The buyer made a claim against the seller who ended up paying for a new roof, and the buyer’s attorney’s fees.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.
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