To avoid legal snarls when buying a new home, inspect the home carefully, check legal descriptions closely, read the title report and don't rely on real estate agents for legal advice, experts say.
POULSBO — Jessie and John Bates thought they got a real deal on their first home, a newly remodeled rambler they bought in 2007 for $190,000. But over the next 18 months, they experienced a series of problems with the 14-year-old home, including failed plumbing, sodden insulation, black mold and rats.
When they tore up a bathroom to fix corroded pipes, their 8-year-old son Tyler had to be rushed to the hospital with breathing problems.
Finally, the Bateses spoke to neighbors and heard the home had likely been used as a meth lab by previous renters. The couple hired a private company to test for chemical residue. The test, which confirmed their fears, cost $283.
“So cheap,” Jessie Bates says. “It would have cost so little to do upfront, and we would have known and never bought it.”
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Today, the Bateses are building a new home from scratch on the same site in Kitsap County with borrowed family money, while mulling legal action against theirseller.
Most home sales go off without a hitch, and the new owners don’t find any unforeseen problems. But as the Bateses’ experience shows, when things go wrong in a home sale, they can go very, very wrong.
Real-estate contracts have grown lengthier. And new potential problems — such as your home turning out to be a former meth lab — have emerged. As a result, many home buyers and sellers may not have all the information they need to make sure their rights are protected, says Adam Morrow, a lawyer and real-estate agent with Sound Counsel Realty in Seattle.
“Basically, people get into trouble because they rely on real-estate agents for legal advice, which they’re not qualified to give,” he says.
These are some of the most common legal snarls that entangle home buyers and sellers.
The liability box. Home-sale contracts have a form called the Real Estate Transfer Disclosure Statement. Otherwise known as Form 17, this page has a very important little box. If a seller checks the box, they agree the buyer can sue them if they later discover a problem. If they leave it unchecked, the buyer can’t.
It’s a critical item that sellers and buyers should negotiate on, says Marc Holmes, a broker and a lawyer at Craig Blackmon in Seattle. When he’s advising buyers, he tells them to make sure it’s checked; sellers, he advises to leave it unchecked.
“No” vs “don’t know.” Seller-disclosure forms list possible house problems, from rats to septic trouble. The choices are to say “yes,” “don’t know” or “no,” meaning the seller knows the problem doesn’t exist. Many sellers check “no” as it seems more reassuring to buyers, even if they don’t really know. But the “no” answer opens the door to future lawsuits if a problem is found later.
In the Bateses’ case, the seller checked “no” for rats, septic and plumbing problems, Jessie Bates says.
Look at the title report. If a title report references other documents, those documents need to be read, even if it takes some sleuthing to find them.
Morrow worked for one prospective homebuyer who wanted to purchase a Bainbridge Island property. The title report indicated a release had been required when the home was built. Digging up that release revealed that the builder was required to sign a liability waiver because the property was a known landslide area.
“If we hadn’t looked at this aspect, he probably would have bought it,” Morrow notes, “and ended up with a home that eventually would slide down a hill, or might be unsalable.”
Inspect carefully. A typical home inspection isn’t thorough. It won’t check the health of your septic system in some counties, for instance, and inspectors may not even crawl under the house. Hire a highly experienced inspector, let them know you want a detailed inspection and listen carefully to what that person tells you, Holmes says.
If you have any doubts, get another home inspection or conduct additional tests. Ultimately, buyers often don’t have a good legal claim against a seller because their problem is something the buyer should have found on inspection.
Bank-owned. When a bank owns a property, there’s no seller to disclose information about problems with the house. Be aware that banks sell property “as is, where is,” says Holmes, and make sure your inspection is very comprehensive. Don’t be in a hurry to grab a bargain.
New construction. New homes and condos lure buyers into a sense of false security that everything must be fine, and they tend to gloss over the inspection, says Holmes. Note that builders sell things “take it or leave it” and often have complicated sale contracts that greatly limit their liability, so be sure to read closely before you sign.
“The number of condo-construction defect cases filed each year,” Holmes notes, “is truly amazing.”
Double-check descriptions. Properties are sold with a precise, legally binding description provided by the title company, which spells out its exact location and size. But often, a vague description or just a street address is entered instead — and the next thing you know, you haven’t purchased exactly the property you wanted. Holmes says incorrect descriptions spawn many lawsuits.