Expert: liznarr - 4/15/2009

Question
In May of 2007 I purchased a house that it was disclosed it had had a cracked foundation but was fixed in 2001 with a lifetime warranty. The disclosure states the sellers knew nothing of anything else wrong with the house. When I moved in I found only one place on one wall that showed movement of the foundation.
After about one month in the house I noticed cracks showing up in every room in the house including the garage. On closer inspection I could see a difference in the color of paint in the corners of the walls and above the windows on the walls where the cracks are now.
The sellers are Realtors here in Texas.
I have talked to the renter who lived here before I moved in who stated (before I asked) "are there cracks in the walls by the fireplace?" "Are there cracks in the walls  upstairs near the front bedroom window?" She has given my Attorney a notarized statement that she complained to the sellers of all the cracks showing up.
I requested the sellers buy back the house and pay for my legal fees that at this time are over $5,000. After they came and looked at the damage to the house they stated they would offer $3,000 to be released from all responsibilities with the house and that is all. They have now come up to $10,000. My repair estimates are around $45,000.
My question is: Where do I go from here? I am contacting the Attorney General in Austin. My Attorney states it will be very expensive for me to file a suit against them even though I have a very good case.

Answer
Hi Charlie,

I’m sorry to hear that you are experiencing such an expensive problem.

My suggestion regarding your attorney’s statement that ‘a lawsuit will be very expensive for you’ would be to ask your attorney if you can request that the former Sellers/Realtors reimburse your legal fees if you prevail in any litigation … assuming, of course, that the type action he files would allow for this.  Only you can make the decision to go forward or not and take the chance of losing, essentially everything and advancing even more money to litigate.

I’m sure you have already done so, but make sure you do the following:

(1)  Review these former Sellers’ disclosure carefully and see if any (or how many) questions were unanswered, or were answered in a way that you believe to be a fraudulent manner.

(2)  Get copies of work orders from the company that did the foundation work.  Ask them about cracks in the walls in different rooms and whether or not they have any notations in their file about same.  It would not hurt to have this company come back out and personally show them the situation you are dealing with.  

Try to determine whether or not any of the cracks you have seen could have occurred AFTER the foundation repair.  (It is not uncommon after foundation work is done – depending on how extensive the repair was – for new damage to occur when a foundation is stabilized.)  Ask, too, if there has been any NEW movement in the foundation that could have caused more cracking and if their warranty covers this.  If you are not comfortable with any of their answers, get a second opinion from a different foundation repair specialist.  

(3)  Gather as much “evidence” as possible before you begin any litigation or pursue other avenues against these Sellers/Realtors.  Talk with anyone you can think of who might have any knowledge of this situation … neighbors, neighbors’ children if they were in the house often, friends of the Sellers, etc.

If you had a home inspection performed, did your inspector make any comments about any movement or cracks in walls and/or around doors?  Inspectors are trained to look for damage-related movement, including cracking in walls that might have been repaired and/or filled/calked or painted over.  Don’t forget to look for evidence of REPAIR of miter joints on all windows and doors (including closet and all interior doors) and at the tops of window framing.  When there is separation of the miter joint(s) on doors and windows (or dragging doors and hard to open windows), this can be a tell-tale sign of possible foundation problem(s) because of the shift in the foundation.  

With a signed, notarized statement from the previous renter who is familiar with all the different cracks in different rooms, if her statements are contrary to the previous Sellers/Realtors and are, in fact proven true, the former Sellers/Realtors could have committed fraud (INTENTIONAL misrepresentation).

Ask your attorney if you prove fraud, do you have a choice of asking for repairs (and attorney’s fees), or rather asking that your contract of sale be rescinded, effectively requiring the Sellers to buy back the house.

Real Estate Commissions do not look kindly on Realtors committing fraud.  The primary purpose of a real estate commission is to PROTECT THE PUBLIC … FROM UNSCRUPULOUS LICENSED AGENTS – and from your writing, it certainly appears as though they fit the bill.  An initial offering of $3,000, now increased to $10,000, reeks of a commission of fraud in my opinion (for whatever that is worth, which is nothing more than just another opinion).  If someone is not guilty of “something,” they certainly would not be offering $10,000.  With repair estimates of $45,000, they are a long way off.  I would hold their feet to the fire.

If you are able to prove fraud against them, they could stand to lose their real estate license and/or be heavily fined.  If they were to lose their real estate license, there goes their income.  By the way, have you contacted their Broker-in-Charge (BIC)?  If not, you need to make him/her aware of the situation, because a BIC can also have liability when his agents are sued because the BIC is responsible for the actions (or inaction) of all licensees working under his authority.

You can also make a call to the Texas Real Estate Commission and ask if these Realtors have any previous complaints, resolved and/or unresolved, against them.

A shortcut to expensive litigation could be mediation (versus arbitration, which IS binding).  Mediation is binding only if the two parties agree to accept any mediated decision.  The decision to be, or not be, binding, does NOT have to be made in advance of the mediation.  Mediation allows the different parties to express their views, feelings and evidence in an informal setting.

Trained mediators are supposed to be impartial and only try to bring the parties to an agreement.  A good mediator’s job would be to make sure that each side understands the pros and cons of litigation, and what could happen if a Court rules against one side or the other.  These Seller/Realtors need to understand the implication of their potential fraud.  If mediation fails, you can still pursue litigation.  

Talk to your attorney about mediation, and see what he suggests.  Just make sure you get a skilled mediator with a good background and experience, and ask in advance about mediation fees.

There really are no “teeth” to the following suggestions, but over and above everything else, you can file a Grievance with these Seller/Realtors’ local Realtor Association and also report them to the Better Business Bureau.

I hope some or all the above is helpful.  Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth