Expert: liznarr - 6/12/2008

Question
QUESTION: I sold my home two months ago, and now my buyer wants me to pay for repairs to the home that she states I purposely tried to hide from her.  My claim is that I did not hide the problem, and in fact, disclosed to problem to my seller's agent.  While I do understand the buyer's perspective, and may even agree to help with some of the repairs, I do not feel that 1)I should be obligated to pay the entire amount, if any at all and 2) That my seller's agent should be responsible if in fact he did not disclose the problem to the buyer's agent, as claimed.  Listed below is the full story.  Any help/advice you can give me would be greatly appreciated.  

The problem with the house is that, during extreme rainfall, water will seep into the basement and garage.  This usually happens 1-2 times a year, though, with the extreme rain occurring throughout the midwest lately, I assume this has happened more frequently.   

When I first decided to sell my home, I found a copy of the previous seller's disclosure statement regarding the water, and the repair comment was "Fill Dirt".  I had 2 tons of dirt unloaded and placed in the trouble area in front of my house.  Several weeks later we had a heavy rain storm, and no water entered the basement or garage, so I had assumed the problem was fixed.  Therefore, when I listed my home for sale, I checked 'No' on the seller's disclosure statement that water does not enter the premises.  Approximately 2-3 weeks later, while I still owned the home, water entered the basement during a rainstorm.  I notified my agent of the situation, and stated that I would be glad to complete another seller's disclosure statement, or to simply amend the current one.  He said an amendment was fine, and he would take care of it.  

My home sold approximately 6 months later, which is almost 2 months ago.  

Since the new owner took possession, the basement has had water seep into it.  The new owner now wants me to pay for having a sump pump installed and other repairs associated with it.  The owner's contention is that I purposely hid the fact that water enters the basement.  Obviously my side is that I did not hid this issue at all.  

However, after doing some investigating, I have learned that my agent did NOT modify the seller's disclosure form, which is why the buyer believes I knowingly hid this problem.  

Obviously I will be contacting an attorney at some point, however I wanted to get your opinion on the matter.  Do you feel that my agent is partly/completely responsible for not updating this information, or notifying the buyer of this problem?  The one item I believe I have in my favor - I have a copy of an e-mail I sent to my agent stating that this needed to be corrected, and his response stating that he would handle it.  

Any thoughts you have would be greatly appreciated.  I would simply pay the repair bill, but it is several thousand dollars, and I lost money on the sale of the home to begin with, so I don't have access to that kind of money.

Thank you,
Scott

ANSWER: Hi Scott,

When filling out disclosure forms, recent repairs or work such as your fill dirt, should have been disclosed, along with the reason “why” you did it.  You did not say whether or not you disclosed this fact to your Purchasers.

The State-mandated disclosure form in my state asks, “As Seller of the property herein identified, do you have knowledge of ANY problem (malfunction or defect) with any of the following?”   Note that the question does not specify any “current” problem, but rather asks the question “any” problem.  In your situation, again and in “my” state, I would have advised you as a Seller to indicate a previous water infiltration, but that you had brought in fill dirt to see if that corrected the problem.

You should read your disclosure carefully to see if it asked about a “current” problem with water entering the premises, or if the question assumes “any” problem, ever, or even if the question asked was generic such as “are you aware of ANY malfunction….”

As information for you, simply putting additional dirt on TOP of the ground will not alleviate a problem of water seeping into a basement.  Generally, waterproofing and/or other repairs are needed to correct this type problem since water seeps down the side of your foundation toward the basement.  With no waterproofing material applied on the exterior and/or interior of your basement walls, water can pass through any type porous material, such as the grout in concrete block, and infiltrate into a basement.

You have asked for my opinion, and I’m going to be very straight-forward with you and not sugar coat it.  I’m not trying to come down on you, but simply give you my comments and best advice based on 24 years of experience.  I’m telling you not what you want to hear, but what I think you need to hear.

It sounds like you were aware this problem had been ongoing for quite a while, even prior to your purchase, and that you tried to correct – I am assuming, without the benefit of expert advice -- by bringing in fill dirt.  We all have 20/20 vision when it comes to hindsight, but I’m sure if you had this to do over again, you would disclose your water infiltration issue.  

A couple questions I would ask you to consider are:

When you purchased this home and were aware of the water infiltration, what were the circumstances at that time?  Did you ask for any correction; did you assume it was corrected; or did you just decide to accept the property in its current condition?

Second, on the former Seller’s disclosure with the repair comment of "Fill Dirt” as it related to the water problem, was this comment made by the former Seller or a water expert?  If it was the previous Seller, and he was NOT a water expert, I would have to fault you for taking the easy road and simply bringing in fill dirt and not disclosing the problem and your attempted correction.

The Purchaser is the victim here, not having any prior knowledge at all of the problem and the “what and why” of the fill dirt.  Had the Purchaser known these events, he at least would have had an opportunity to investigate the situation, so he was effectively denied this information and an opportunity to ask for correction or either a period to monitor the situation after closing.

You didn’t mention whether or not any home inspection was performed by the Purchaser, or whether there are any water marks in your basement/garage that an inspector could have noted.

Any disclosure form I have seen always has a place for both Purchaser and Seller signatures.  If you signed your INITIAL disclosure form, a MODIFICATION should have also been signed by you, and ultimately the Purchasers.

The one thing you have in your favor is the email you sent to your agent notifying him of the correction needed, along with his response that he ‘would handle it’ and never did.  I definitely think your agent was GROSSLY negligent and did not perform his agency duty to properly represent you by seeing to it that he obtained a SIGNED modification of the Seller Disclosure Form from you to be presented to any potential buyers.

Even though your agent was notified and you have documentation, if your situation were ever to go to Court, a good trial attorney would certainly point out the fact that you knew of a recent and previous problem that was never initially disclosed.  What I am suggesting below is that you try to go back to your agent’s BIC and have a discussion with him.

It certainly sounds like you tried to do the right thing (a bit late, however), but your agent failed you miserably.  May I suggest that before you spend money on an attorney, set up a meeting with your former agent’s Broker-in-Charge (BIC).  Take all your documentation with you, and give him a copy of the email to your agent, along with the agent’s response, regarding this issue.

Since his agent did not follow through after your notification to him of a problem that should have been disclosed to the Purchasers, I would inform the BIC that (1) His agent was negligent,  (2) his agent failed to properly protect and represent you, thereby breaching his Agency duty to you, (3) the BIC and agent should be held accountable for the agent’s negligence, and (4) the BIC and/or his agent should step up to the plate and pay for ALL the repairs.  

Let the BIC know that if he and/or his agent do the right thing and immediately pay for the repairs, you will “go away.”  If he does not agree to do this, let him know that you plan to file a formal complaint with the Real Estate Commission, along with seeking legal remedy for your situation.  It would be much better for the BIC to pay a few thousand dollars in repairs than to have to hire an attorney to defend and possibly end up paying the full amount anyway, PLUS attorney fees, PLUS any Court fees, plus having to endure bad publicity and having to defend what I perceive as a very legitimate complaint with your Real Estate Commission.

If you do not get the response you want from the BIC, I can only suggest that you then try to work out an agreement with the Purchaser to pay, say, one-half the repairs (and possibly the BIC will also contribute “something,” or … you should immediately seek legal advice.

I hope the above is helpful to you and might direct your thoughts in a direction you have not yet gone.  Please remember that when it comes to disclosure, you can never disclose too much.  Better too much than too little and be facing the worry I know you must be dealing with at this time.

Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth

---------- FOLLOW-UP ----------

QUESTION: Elizabeth,

Thank you very much for the response.  I completely agree with you on several points.  I do have a follow up point and question for you, though.  My follow up point is that the buyer did have an inspection performed, and the inspector said that a water expert should be consulted regarding past water seepage into the basement.  During our contract renegotiations about the inspection, this was not one of the items I was asked to repair/remedy.  Regarding that, everything the buyer asked me to repair I performed.     

My follow up question is regarding the BIC.  The BIC, was in-fact, my agent.  The individual runs, and I'm assuming owns, the real estate company that I selected.  He is the only broker for this company.  Given the fact that he already knows about this problem, and the amount of documentation I have, who else could I take this issue to, since in fact, he is the boss and there is no one "up the ladder"?  Is the next step the Real Estate Commission, or is that more of a "last resort" type of item?  

Thanks again for your response.  You confirmed with me exactly what I felt, that while I did not initially handle this item correctly and am willing to pay for some of the repairs, that the agent truly "dropped the ball", and the agent too, bears responsibility.

Thanks again,
Scott

Answer
Hi Scott,

Thanks for your follow-up comments and question.

The fact that the purchaser had a home inspection performed and for which the inspector said a water expert should be consulted regarding past water seepage into the basement is very interesting.  It’s hard to fathom this buyer NOT consulting a water expert and asking for more information on the comment regarding past water seepage into the basement.

Was there another agent involved in your transaction representing the Purchaser?  If so, the Purchaser’s agent should have advised the Purchaser to delve further at that time.  Even if your agent/BIC was the only agent involved, it’s hard to believe that he allowed that topic to manifest again (and in writing) and NOT advise you at that time to disclose the previous water seepage, even though it would have been a late disclosure – which is better than none at all.

Since your agent was also the BIC of the company, I would still suggest addressing your concerns with him before taking this matter further.  In my opinion, he royally dropped the ball – especially now that I am aware that he had to have seen the home inspection report you mentioned with the “consult a water expert” language in it.  That should have been a wakeup call that he never had you execute an Addendum/Modification to your initial disclosure.

If you go directly to an attorney about your agent/BIC and are asked whether you requested your agent/BIC to pay for the repairs, the attorney and/or any Court ultimately involved might ask why you did not try to work this matter out on a lower level.  My opinion is that it’s always best to go up the ladder, but don’t hesitate to go higher up when you don’t get results at a lower level.  

I used to be a Stenotype court reporter, and I learned quickly that Judges are very tuned in to complainants not trying to solve a problem before involving the Court system.  Should you end up in Court on this matter, it will look much better for you if you show that you attempted to resolve it before bringing legal action.

As additional information for you, Real Estate Commissions will not get into a monetary dispute between Buyers and Sellers.  They do, however, have the authority to “punish” an agent for license law violations and even suspend or revoke a real estate license.  The purpose of all real estate commissions is to protect the public – to make sure an uninformed Seller or Buyer is not taken advantage of by a licensed, trained agent.

I believe strongly that your agent/BIC breached his Agency duties of Care and Disclosure while representing you, duties which are covered by statute in all states...thus giving you grounds to file a formal complaint.  

A smart agent and/or BIC who realizes that he/she dropped the ball should be thankful for an opportunity to correct a situation without the Real Estate Commission being involved – or also to avoid litigation which would need to then be reported to his Errors & Omissions insurance company.

To sum up, the Real Estate Commission is not a last-resort type situation.  Even if you go to Court, or do not, you can always file a Complaint with the Real Estate Commission … but you will not receive any monetary award from them.  They reprimand agents and suspend/revoke agents’ licenses.

If your agent/BIC is a Realtor (as opposed to just being a licensed agent), you have the option of filing a Grievance against him with his local Realtor Board.  This Board, however, has no authority to award you money.  They can reprimand a Realtor-Member and impose other sanctions on him, but cannot suspend or revoke a Realtor’s real estate license.  A complaint to the Real Estate Commission will yield teeth that have the ability to bite.

Since you realize you “did not initially handle this item correctly,” you can always try to work out a best-case scenario with the Purchaser monetarily.  This is why I suggested contacting your agent/BIC first and explain the crack you’re in and see just what he’s willing to contribute.  

Start out asking him to pay all, and step down the amount depending on the amount of resistance you get.  It sounds to me like a 50/50 split would be a very fair way to handle the cost if you two could agree on that.  This way, you will avoid the hassle of attorneys, Courts, filing grievances and complaints, and so on.  

If you do work it out to pay the Purchaser, make sure you have an attorney draw up a FINAL agreement for everyone to sign stating that whatever payment is made to the Purchaser ends the matter permanently.  Any cost for the attorney to do this can also be split between you and your agent/BIC.

Good luck to you, and let me know if you still have questions.

Regards,
Elizabeth