Seller Disclosure Laws and Home Inspections

Q: If you believe the seller lied on the home sale disclosure form, how long after you purchase a house do you have to pursue your legal options?

A: Most states have seller disclosure laws. These laws are intended to force sellers to say what they know about their homes and protect buyers from buying homes with known problems. Seller disclosure laws require a seller to disclose to the buyers all know material defects in the home. A seller is not required to disclose everything about a home, just material problems known to the seller. Seller disclosure laws might vary from state to state and the forms vary. Some forms are one page forms while others, like California, have multi-page seller disclosure forms. For each of these forms, the intent is roughly the same — to give a buyer a fair chance at knowing what the seller knows about his or her home when it comes down to material defects in the home.

But the seller is usually not required to disclose matters outside of the home or matters that the buyer could find out on his own. For example, if the high school across the street is planning a multi-year renovation that will impact the neighborhood, the seller might not be required to disclose that information in most states. That information might have been in the local newspapers and is not material to the home that the seller is selling.

The key issue is to determine what the material defect is. For example, if the seller knows that the foundation of the home is crumbling and the house is ready to cave in, that certainly must be disclosed. However, if the home has a leaky faucet in the kitchen, that probably does not need to be disclosed.

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Assuming that your question relates to a material defect you discovered in the home after closing on it, you would then look to your state laws regarding these kinds of disclosures.

Some states require a buyer to sue the seller for that failure to disclose within one year of the closing on the home. If you are willing to do some legwork and have access to the Internet, you should be able to look up the statute that talks about the seller disclosure requirements. That law should also state the time period a buyer has to bring suit against a seller.

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Obviously, you can hire an attorney, walk through the issues with her and she can tell you the time limit you have to bring suit against the seller. She can also give you some advice whether it’s worthwhile to sue the seller. In some states, seller disclosure laws allow a buyer to recover attorneys’ fees when pursuing a seller for a faulty disclosure. But if you proceed to sue the seller, make sure you have a good case. If you lose the case, you’ll not only be out of luck with the issue that you feel the seller lied about, but you’ll also be out the attorneys’ fees.

Just because you can hire an attorney after the fact does not change the circumstances that you should hire a great home inspector before you buy a home to perform a thorough home inspection of the home you are about the buy. What you want to avoid is putting yourself in a situation where you end up with the problem and have to sue. What you want to do is get the seller disclosure form and also perform a home inspection before the purchase and sale agreement or contract for purchase of the home goes hard.

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If you find that you have the right to sue the seller, you may be able to sue the seller in small claims court, but you won’t be able to recover attorneys’ fees in that case for your own time. You generally can only get those fees reimbursed when you actually hire an attorney and that attorney actively participates in the case.

If you have resold the home and took a loss because of the disclosure issue, you may still be entitled to compensation from the original seller. Seller disclosure laws were not drafted to force a buyer to have to choose between suing the seller and holding on to the home or selling the home.

The idea behind seller disclosure laws is to provide buyers with an opportunity to learn from the seller about material defects in the home before buying the home. Furthermore, if the seller failed to disclose something and the buyer found out about the failure before closing, the buyer could walk from the deal. Once the deal has closed, the laws give the buyers the right to sue the seller and recover from the seller the cost of fixing the problem.

Finally, if you are buying a home that has been foreclosed on by the bank, you might not get any disclosure form from the bank. If you don’t get any disclosure form, you should make sure that your inspection of the home is truly a good and thorough. It will be your only chance to find out what’s wrong with the property and you don’ want to miss out on the big items.

Again, the best real estate advice you can get if you are buying the home in a short sale or foreclosure is to perform a home inspection with a great home inspection. In a short sale you might get a seller disclosure form but you already might know that the seller’s don’t have much to lose. They lost their equity in the home and may not have much else. If they lie on the form, you may not have much to get if you sue the seller. Again, this is why a great home inspector and a thorough home inspection is a must these days. Don’t buy a home without conducting a home inspection.

We have other articles on Seller Disclosure Laws under our Topic Page.


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