Just curious about the normal legal considerations of this situation, if anyone could shed some light.
A ‘friend’ and her husband my girlfriend works with have been trying to sell a home they own (investment/apartments) for several months now. This latest time it was almost all said and done, and the buyer went and got a second more extensive inspection done, only to find extreme termite damage and issues with the foundation. The buyer backed out, and the sellers are now in some serious trouble as they have basically spent the money they thought they would be getting.
They don’t have the cash to have repairs made, and need to sell the house at a certain price to cover the amount they owe. This girl has therefore been announcing to everyone that her husband will be ‘hiding’ the problems so that the next potential buyer won’t know, and they can still ask a high price.
So, without considering the extreme wrongness and stupidity,
Is a seller legally required to disclose all issues with the property?
What kind of damages can the other party seek if they find out after they buy? Would they have to prove the seller had previous knowledge?
This is bothering me to the point that I am tempted to make some annonymous report, but who the heck would I call to report this?
I actually have personal experience with this as a buyer.
I bought my house in Colorado and lived there for a whole year before I found out that the basement flooded with every rain storm and has been like that for years. The previous owners never disclosed this, nor fixed the damages caused by years of flooding (it was all behind the drywall).
I contacted a real estate attourney and he politely informed that I indeed had a winnable, cut and dry case. He also politely wished me the best of luck collecting the money from the previous owners.
You can sue all you want, win all you want, but actually getting the money out of someone was going to cost more than I was getting ($6000).
What your friends are doing is definitely wrong and they will have a judgement against them, however the chances of them paying are slim to none.
No idea about 1 or 2, but one tack you could probably take with number 3 is to call up the listing agency and ask them what their policy is on participating in such shenanigans. They’ll most likely denounce it and say they wouldn’t knowingly participate, so if you offer to tell them about one of their agents that is letting that sort of thing happen, a reputable agency might be inclined to put a stop to it (now that they know you know they know).
Does your state require a Seller’s Disclosure to list a property. If they do, and the sellers filled it out incorrectly, contact the real estate agent. We frown on such things here.
Also, any intelligent buyer will get a building inspection, and inspectors always look for termites.
Some terms you could consider, google, wiki, to your heart’s content.
For our sellers:[ul]
[li]Fraud[/li][li]Fraud in the inducement[/li][li]Breach of contract[/ul][/li]
For you and your GF, should you get involved:[ul]
[li]Tort of another[/li][li]Intentional interference with contract[/li][li]Intentional interference with prospective business advantage[/ul][/li]
That’s just off the top of my head. Standard disclaimers apply: laws vary, IANYL, IANLIYJ, YMMV, read at your caution, etc.
A final word: karma is a bitch. It’s hard sometimes to watch others game the system; we want them to get theirs. Sometimes, though, it’s best not to get involved.
Yes, they would.
But that wouldn’t be at all hard in this case. The inspection report that dissuaded the first set of (almost) buyers would clearly specify the termite problem, and they surely saw that. Plus the inspection company, and those first buyers would have no reason not to testify that they informed the sellers of the problem. Might even be glad to do so, if they think the sellers were trying to cheat them.
Also, this problem will eventually (probably fairly quickly) come to light, and whatever work the sellers did to ‘hide’ the problem will be fairly obvious. And that effort will in itself be evidence that the sellers knew about the problem.
I think they are going to have to fix the problem, or plan on accepting a lower price for a house with a known problem. An attempt to hide it probably won’t work.
If the sales contract says “As is”, there’s not a hell of a lot anyone can do about the shenanigans, except have a really good property inspection and take a walk from the sale.
Not sure it’s the case in every state, but in Indiana you can’t get a mortgage without a termite inspection. It would be about the hardest major fault to cover up during a sale.
Selling for a reduced price “as is” is probably their only realistic option.
The rules vary by State but in many States, reporting is mandatory not optional. You can’t avoid the obligation to report what you know. To do so is fraud and makes the contract voidable.
Your State may have different rules. IANAL, etc, etc.
A sales contract for a house that says “as is” means that the seller will not correct defects. It does not relieve the seller from disclosing known defects. (The same phrase is often used when selling cars to mean something totally different.) IANAL but my real estate agent told me this when I was selling my house.
This matches my experiences precisely, based on sale of my late parents’ house and on sale of a condo rental property. In the case of the former, we truthfully said “I don’t know” to most of the questions, since we had never actually lived in the house.
We’ve been advised that any sensible buyer will always have an inspection, and that most if not all mortgage companies require it. Heck, when we got a home equity loan, the bank insisted we provide a termite inspection certificate for our **brick ** house.
There’s a fair amount of wood even in a brick house. The floors, for example, are probably wood. And most of the interior (non load-bearing) walls also.
So they’re probably sensible in requiring the inspection.
I know any smart buyer would get a good inspection, but I do wonder what happened to thier first buyer’s inspection. I think the first buyer ended up not being able to get the loan amount, and it had nothing to do with the condition of the house.
Sometimes karma also could mean doing the right thing in hopes that I don’t get screwed when I buy a house some day
But I know what you are saying. I don’t really know if I’ll do anything besides rip into the girl and her husband next time I see them, if they mention they are going to do this.
