First of all, if you've purchased a house recently, I'd like to offer my sincerest congratulations. From curious tours to nervous offers, from finalizing financing to signing the mountains of closing paperwork, from saying goodbye upon moving out to saying hello upon moving in (after, of course, a great deal of sweaty, labor-intensive furniture wrangling), buying a house is a big deal, and making it a home is an even more profound one.
But what happens when - halfway through the honeymoon period - you decide to touch up some exterior paint, only to find that the previous owners had used some of that paint to cover up large amounts of rotting wood? And later when you're cleaning the basement you find that the most recent rainstorm has flooded through an undisclosed flaw in your home's foundation?
In other words, what can you do when you discover previously unknown defects in a newly purchased home?
The good news is that there is a possibility to recover against the person who sold you the home. But that possibility is conditioned on several factors, such as exactly what the seller disclosed, whether you waived any defects, and more.
To begin, there are a number of disclosures that a home seller must make to buyers before the sale of the home. Under Wisconsin law, a seller must notify a buyer of any condition or defect that would have a significant negative impact on the property value or the health and safety of future occupants, or defects that would significantly shorten or negatively affect the normal life of the property. This is very often done in a form called the "Real Estate Condition Report," required by Wisconsin law. Feel free to take a quick look at the form here:
As you can see, the form has a number of questions that the buyer must answer about different parts of the house, namely, whether they are aware of certain defects (such as defects in the roof, the electrical system, the foundation, etc.).
Again, a "defect" is something that will have a significant negative impact on the home or the safety of its occupants. Which can be problematic, because even though sellers are usually encouraged by their brokers or attorneys to err on the side of caution and over-disclose, sometimes sellers do not disclose things that may be significant flaws. And whether something constitutes a "significant flaw" is also up for dispute. Does a crack in the foundation count? What about a half board of rotting wood? These questions can be difficult to answer.
In addition, sellers only have to disclose defects that they were "aware" of. And while sellers cannot blind themselves to obvious defects which they should have been aware of, some sellers (especially those who may not have lived in the home very long) genuinely aren't aware of, say, the rotting wood behind the baseboard or the troubles with the septic system.
What's more, even if there is a defect, and the seller does disclose it on the inspection form, there's a chance that you waived the defect by closing on the home without demanding that the seller correct the flaw.
Duties Upon Discovery of the Defect:
Disclosures aside, if you do discover a defect that you feel the seller should have disclosed, there are two things that you should do.
First, be sure to inform the seller of the defect. This will give the seller a chance to either explain themselves, or - if you're lucky - offer to fix the defect. At the very least, contacting the seller will open up communications, and ideally enabling you both to solve the problem before ending up in court.
Second, even if you already contacted the seller (and especially if the seller isn't willing to fix the defect) you must try to fix the problem yourself, if you are able. This is called mitigating damages. It's taking steps to keep the defect from getting any worse - the idea being that it's in no one's best interest to let the home continue to decay. This is a critical step, too - if a court finds that you failed to mitigate damages, it will cut into the amount you are able to recover.
If you have already closed on a home and discovered a defect that the seller both (1) didn't disclose, and (2) isn't willing to fix, then Wisconsin law allows you to sue for your losses. For instance, let's say the seller failed to disclose that there was a termite infestation in one of the walls. If that wall collapses and damages your property, you can potentially recover triple your losses, plus court costs.
In addition, if the seller deliberately tried to mask the problem - for instance, by covering rotting wood with large amounts of paint - then the seller may be guilty of fraud, and you can recover any funds use to repair the property, plus your court costs.
Again, though, these remedies will only be available if the seller was actually aware of a defect and hid it from you.
In short, it is a seller's duty to disclose defects that may have a significantly negative impact on the home. Exactly what a seller should be aware of, or exactly how "significant" a defect must be before reporting it is a matter of some debate, but regardless, if you do find a defect in your newly purchased home, you should both (1) contact the seller; and (2) if the seller fails or refuses to respond, fix it yourself or hire someone to do so. Afterward, you may wish to pursue damages or reimbursement through the legal system.
Buying a house is a rewarding, but sometimes exhausting process, and nobody likes to find defects in the place they call home. If you should discover a defect, however, hopefully this small guide has served to give you an idea of what steps may come next. Of course, if you do have an issue with seller disclosure, or would like more information, feel free to contact Parks Law Offices. And together, perhaps we can make home-buying a bit less of a hassle.
Danny Garcia is an Associate at Parks Law Offices, whose practice emphasizes landlord/tenant law, criminal law, and litigation, among other areas. He recently spent a large portion of his Sunday afternoon replacing and repainting a piece of siding that had been eaten away by ants.