DEAR BOB: Five years ago, my husband and I bought our home. After moving in, we immediately noticed the significant sloping floors. For example, there is a 1-inch drop that extends from one bedroom wall to 2.5 feet from the wall. We had to put 1-inch wood blocks under our dressers so they are level. Our refrigerator slopes more than 1 inch from front to back. We discovered the washing machine drain pipe was not connected, and it drained under the house into the crawl space. We had to use lots of plumber’s goop to get the pipes to stay connected. I feel sure the sellers knew about these problems. As my child, who weighs 90 pounds, skips through the house, things fall off the walls. Once, all my china fell out of the china cabinet. Our neighbor just told us our house had been moved onto the foundation, as it was not built on site. If we had known about these problems, we would not have purchased. I now realize the importance of getting a professional inspection before home purchase. If we decide to sell, we don’t think we can realize any profit. Do we have any recourse? – Kimberly R.
DEAR KIMBERLY: You and your husband must be the world’s most patient home buyers. You should have been yelling and screaming when you discovered all the defects (unless you purchased the home “as is” and the seller disclosed all known defects).
Purchase Bob Bruss reports online.
But the fact that you purchased a house that had been moved to the site, whether it was relocated or was a new modular house at the time, is not a defect that must be disclosed to home buyers.
In most states, the statute of limitations for suing your home sellers for misrepresentation has expired. Your only possible legal recourse against the sellers is for fraud, which would be very difficult to prove in court unless there was clear misrepresentation.
The statute of limitations for fraud (deceit) begins to run in most states when the misrepresentation is discovered. If you discovered all the problems described several years ago, you should have sought legal recourse against the sellers years ago. For full details, please consult a local real estate attorney.
SPENDING $10,000 TO EARN $40,000 MIGHT BE A GOOD INVESTMENT
DEAR BOB: I recently inspected a clear-cut “fixer-upper house” that will require at least $10,000 for repairs. I am a building materials salesman and know a “fixer” house when I see it. After the house is fixed up, I estimate it will be worth at least $40,000 more than its market value today. If you were in my situation, with limited financial resources, would you buy it if the seller will carry back the mortgage for just 12 months? – Steve R.
DEAR STEVE: Yes. That sounds like a great investment. But the short 12-month seller financed mortgage puts big pressure on you to get the house fixed up fast and either sold or refinanced. I’ll bet you can do that, especially considering your experience with building materials.
WRITTEN PARTNERSHIP AGREEMENT PREVENTS PROPERTY PROBLEMS
DEAR BOB: Almost a year ago, I co-invested in a four-unit apartment building with a partner I met at the local real estate investor’s club monthly meetings. We were both single guys, eager to get started investing in real estate. After several months of seeing each other at the monthly meetings, plus attending several weekend seminars, we decided to co-invest together as partners. I found the property, arranged the mortgage, and hired the fix-up contractors. My co-owner provided the $26,000 cash down payment. As a busy dentist, he doesn’t have time or desire to get involved in the fix-up work. We co-signed a $20,000 home improvement loan to upgrade the property. It turned out beautifully and is now fully rented at top rents. The problem is I want to sell. But he wants to keep the property for five years while it appreciates in market value. How can I get my equity of about $60,000 out? – Kathy R.
DEAR KATHY: Now you know you and your co-owner should have had a written partnership agreement to provide for a situation like the one you describe.
Your obvious first step is to ask your dentist co-owner to buy out your $60,000 equity. Even if you take a discount, that might be your best alternative.
If the dentist refuses to buy you out, your legal recourse is to bring a partition lawsuit to force the sale of the property with an equal division of the net proceeds.
In the future, please consult a local real estate attorney to prepare a partnership or LLC (limited liability company) agreement to prevent a situation like this.
The new Robert Bruss special report, “24 Key Questions: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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