Real Estate Q&A – What to Do about a Disclosure Dilemma?

By Thomas Musil

RISMEDIA, May 30, 2008-(MCT)-Q. We recently purchased a home and since moving in have had found there are numerous defects which were not disclosed or discovered by the home inspector. We are in the process of obtaining estimates to have an 800-square-foot, second-floor tiled patio ripped out, adjusted and redone. The floor is not level, so water does not drain properly and seeps down below into the interior, into decorative (and supportive) columns, and into a stucco enclosed structure. It is very large. The entire floor has to be done since the tile is no longer made and cannot be salvaged to be reinstalled. We are guessing it may cost anywhere from $10,000 to $30,000, depending on how extensive the damage is when the floor is taken out. Every contractor who has come is hesitant to give a bid because they are afraid of “opening a can of worms.”

The previous owner obviously tried, probably more than once, to use interior caulk on the cracked grout. In addition to this problem, there’s the non-functioning water softener, a locked exterior door with no keys, a missing garage door opener, a missing Next-Day Air letter left on the front porch during the time she rented the home back from us, missing house plans, inadequate smoke detectors, a flooded living room, a corroded and non-functioning stove vent underneath the foundation, ant infestation, showers that are leaking inside the wall, non-functioning electrical outlet, completely plugged exterior rain water pipes and a damaged built in Sub-Zero refrigerator.

We are trying to take the inspector to small claims court; however, he is avoiding being served. I did file a complaint with California Department of Real Estate against the listing agent but not her broker. I am taking the agent and the previous owner to small claims court for the water softener, missing garage door opener and garbage removal. We just discovered the patio problem. Do you think I should drop the small claims and go after the previous owner and agent for the expense of rebuilding our patio? Every time we have asked the previous owner’s real estate agent about any of the above problems, she has claimed she knew “nothing” about it. She lived here for seven years.

A. It appears that you have strong case given the failure of the seller and the real estate agent to disclose the condition of the property. It is not clear from your letter if there is an arbitration agreement in force to resolve disputes. You should review your purchase documents to determine if an arbitration agreement is in force and the time requirements for filing a complaint.

With the real estate agent living in the property, the listing broker should have supervised the actions of the agent to assure full disclosure of all material facts to prospective buyers. Clearly, anyone living in a property for seven years would observe the problems you identified.

It appears that you have a strong case-but you should realize that you purchased an existing property. The 800-square-foot tiled patio was not new and it is unlikely that you will receive the entire cost of replacing all of the existing tiles with new tiles. Courts generally look at what you bargained for when you purchased the property. Clearly, you did not buy a new home and you should not expect to be compensated for the entire cost to correct the patio floor. You need an attorney to evaluate your best options in this case.

Dr. Thomas Musil is the director of the Shenehon Center for Real Estate in the Opus College of Business at the University of St. Thomas in Minneapolis. He has more than 25 years of experience in real estate as a broker, analyst, consultant and expert witness in real estate litigation and arbitration disputes.

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