Property Inspections and Disclosures - Sellers Obligations

Let's Talk About.....Property Inspections and Disclosures - Seller's Obligation
By: Alan Orlowsky

To view my Part 1 Property Inspections and Disclosures follow link: previous article.

 When it comes to Property Inspections it is important to realize the Seller's Obligation and what they need to disclose regarding the property. Let's talk about what their rights are and discuss good guidelines when purchasing Real Estate.


Seller´s obligations 

The sellers are not required to actively look for defects, only to state what defects they are aware of, if any. For example, they do not need to hire an engineer to assess the property's structural integrity or review floodplain maps.

Sellers also do not have to disclose previous defects that have since been corrected. If a flood control system has been installed in the basement, for instance, the sellers would not have to disclose previous flooding problems - assuming the problems have not recurred since the system was installed.

Inspect, no matter what

Even if you receive the seller´s disclosure report and are satisfied with it, you should conduct a thorough inspection of the property. Take the time to find a qualified inspector: Get recommendations from friends, your lender, or real estate professionals who aren't involved in your deal. (Realtors involved in the deal are likely to favor lenient inspectors who will understate defects, because they want the deal to settle quickly.)

Generally, a sales contract will include an inspection contingency clause, which makes the contract contingent on a satisfactory inspection by the buyers within a limited period, typically five to ten days.

 

Post-inspection options

If your inspector finds defects that weren't in the disclosure report, that doesn't necessarily mean the seller concealed or intentionally omitted them. They simply may not have been aware of them. At this point, your main concern is not whether the inspection report was fraudulent, but how serious the defect is and what you want to do about it. You have several options:

• Terminate the agreement
• Ask the seller to repair the defect
• Revise your offer (lower the price)
• Don't change the deal (repair the defect at your own expense)

You should also conduct a final walk-through inspection immediately before closing, especially if the seller has removed furniture and furnishings since your inspection.

At this point, the sellers have a legal obligation to report any new defects, or defects that they become newly aware of. But you do not now have a right to rescind the contract unless the seller knew of the defect prior to completing the disclosure form.

Fraud 

If you discover, after you close the deal and take possession of the property, a significant defect that was not disclosed by the seller, you can certainly contact the seller and ask them to pay the expense of repairs. In some cases, they might comply with your request in order to avoid legal action.

On the other hand, they might respond: We didn't disclose that problem because we didn't know about it, so we're not obligated to pay? Maybe they're telling the truth, maybe not. If you think they're lying, and they falsified the disclosure report, you can bring an action under the RRPDA (within one year of closing) or sue for fraud in state court. If you win the lawsuit, the sellers must pay the cost of repairing the defect, plus court costs and possibly attorneys fees.

To prevail in court, of course, you would have to prove that the seller was actually aware of the defect and failed to disclose it. Your attorney can do this by introducing repair estimates, inspection reports, appraisals, or statements from contractors or neighbors who were aware of the problem before the property went up for sale.

Anxiety and excitement 

Often the sellers are anxious to sell their property, and fail to adequately reveal defects hoping that they'll be overlooked. At the same time, many buyers are excited about the property and tend to rush through the inspection phase of the negotiations. Protect yourself by taking advantage of every opportunity that the law allows to uncover possible problems before you make what might be the biggest investment of your life.


If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.