Home Inspection Reimbursement For Inadequate Seller Disclosure

Q: I signed a contract to buy a lender-owned foreclosure through an agent. Our agent ordered a home inspection and it was scheduled for February 17th at 1:00pm.

As the inspection was finishing up, our agent told my wife that she heard from the listing agent four days earlier that there had been a death in the house. Later that evening, I started searching the Internet and calling neighbors and discovered there was horrible police shoot out incident in that house in which two residents were killed.

Because of this, we canceled the contract. We lost $720 for the inspection. If our agent told us about what she heard from the listing agent as soon as she learned about it, we could have done the research immediately and canceled the home inspection before we were obligated to pay for it.

Because she neglected to disclose an important fact quickly, we incurred the loss of $720. Do we have a legitimate case against her? Should we file in small claims court? Please advise. Thanks.

A: I’m not an attorney, but I do wonder if you have a winnable case.

Buyers have an obligation to find out everything they can about a property. It’s called “Caveat Emptor,” or buyer beware. Anything that is public record – a shooting would likely qualify, but so would a highway that has been approved even if construction has not yet begun – does not have to be disclosed to you by the sellers or anyone else.

You could have plugged the address of the property in which you were interested into a Google search engine before you even made an offer and all of the news on the property would have come up.

Sellers are, in most cases, required to disclose any material defects to the property that are hidden and are not public record. So if the seller knows that the foundation leaks, but paints over it or somehow covers it up and you don’t find out until after you’ve moved in, then you may have a case for damages. But the bar is pretty high: The judge must believe that the seller knew or should have known about the problem, and the burden of proof is on you, the buyer.

Should your agent have told you immediately that she found out there was a death in the house? Probably. But do her actions rise to a level that she should be penalized for her failure to tell you is another question that must be answered.

If there had not been a shootout but rather a different minor crime, should she be obligated to tell you? If she found out by reading the papers, could she have assumed you would have also known? If the information she had about the home was accurate, the issue about the shooting in or around the home did not affect the real estate. What if the shooting had been next door or a block away?

When issues arise where a real estate agent clearly breaks her ethical duties to disclose matters to a buyer, you can pursue the issue further. In those cases, you can have a conversation with the agent and perhaps the managing broker of the firm about the agent’s lack of care about her client’s interest and what you expect from her in the future.

In those cases, the agent could share in the client’s costs and even more. But in your situation it’s not clear that the agent had a duty to tell you what happened. If the laws in your state require your real estate agent or broker to inform you of these kinds of issues, the agent or broker was at fault; otherwise the broker was not technically at fault

But I think you should have done your own research. After all, this is the biggest purchase of your life and you’re the one who is going to live on the property.

April 3, 2009


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