DEAR BOB: About three months ago, my wife and I bought our first home. The seller provided a termite inspection report showing “all clear.” We didn’t hire our own inspector. Bad mistake, we now realize. About a month ago, we started remodeling. The contractor discovered serious termite infestation in some of the beams under the house. When we contacted the termite inspection company, they denied liability because their inspection was for the seller, not us. The repair cost is estimated at about $5,000. Does the seller’s termite inspector have any liability even though the termite damage was easily accessible? – Byron B.
DEAR BYRON: The termite inspection company is probably hiding behind the legal principle of “lack of privity of contract.” That means the termite inspector contracted with the seller, not you, so the inspector has no legal liability to you.
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However, in most states, termite inspectors are licensed by a state agency. If you file a complaint with that state agency about that inspector who provided a faulty inspection to the seller, you might get results.
Your situation reminds me of a similar circumstance I encountered several years ago. When I resold the house about a year after purchase, the buyer’s termite inspector discovered serious damage, which he said was obviously more than a year old.
I immediately contacted my big nationwide termite inspection company, which quickly admitted a faulty inspection and paid for the necessary repairs. After that experience, I always hired big, well-known termite inspection companies rather than the “little guys” who might not stand behind their inspections.
CAN CO-OWNERS BECOME LIABLE FOR JUDGMENT LIENS?
DEAR BOB: My two sisters and I inherited a house. We hold title as tenants in common. One of the sisters is in big trouble for an auto accident she caused and she has inadequate insurance. The victim has serious injuries. If the case goes to trial, a big judgment against our sister is likely. Can the judgment holder force the sale of our rental house? Mike R.
DEAR MIKE: The exact answer depends on state law where the rental house is located. As a general rule, a judgment creditor can attach the interest of a co-owner but cannot force the sale of the co-owned property. Needless to say, the situation won’t be pleasant.
However, if your sister deeds her presumably one-third interest in the house to the judgment credit to settle the lawsuit, that co-owner could then force a sale of the property in a partition lawsuit. Please consult a real estate attorney to best protect your interests.
NO STEPPED-UP PROPERTY BASIS IN A DIVORCE
DEAR BOB: About five years ago, my husband and I divorced. I got the house, which has greatly appreciated in market value since then. When I received my ex-husband’s quit claim deed, did I get a new stepped-up basis to market value as you often discuss when a property is inherited? – Sharon V.
DEAR SHARON: No. Stepped-up basis applies only to inherited property received from a decedent.
Because you received title from your living husband, you took over his adjusted cost basis and did not receive a new stepped-up basis to market value, as you would have if he had died. For full details, please consult your tax adviser.
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