Expert: Lisa Webber - 8/21/2009

Question
QUESTION: I brought a home as in with a home inspection in Nov of 2006. The house appeared to be in great condition on the outside but turned out to be a lemon. The sellers signed a disclosure form stating there were no known issue; needless to say they lied.  I have had several leaks including one today. Today, I was shopping around for an Homeowners insurance policy because the one I have is too pricey. State Farm told me I had to be claim free for 3 years and my current rates were because of the number of claims against my home. I informed her I only had 1 claim which was 5 months after purchasing the home for a flooded basement due to a leak, and one I will put in today for a flooded dinning room due to a leak. This is when she informed me the previous owners also put in claims for the same thing as late as 4/21/06. I am noticing water damage in my bedroom as well. I have had to replace the roof due to a leak and the windows because they were problematic. I would not have paid the price I did for this house had I been told the issues it has. With all the issues I have already put 20,000 into fixing up the property for things not disclosed. BGE told me my budget billing rate was high because of the prior owner's usage in the last 24 months. So, I am paying high utility bills and insurance premiums due to the previous owners not disclosing these issues.

I feel stuck because I cannot sell the house for what I paid which was $214,000 because the townhomes are now going for $168,000. With all my time, stress, and money spent do I have any recourse? Can I pursue this matter legally with proof from the insurance company of past filings proving previous issues?

ANSWER: It sounds like you may have a case against the owners if you can prove that they did not disclose latent defects.  The difficulty with this is if there was a leak and they fixed it, it's no longer considered a defect that they have to disclose because it is repaired.

Do you have that plastic piping in the house?  Polybutylene and other types of plastic plumbing are prone to get leaks.  Here's a website about them: http://www.polybutylene.com/poly.html.

I highly recommend having someone come in and replace all of that piping with copper then you won't have to worry about leaks like that anymore.  If you continue to just repair it, you will continue to have random leaks. A plumber told me that with that type of piping, it's not a question of if it will leak or burst but a question of when.  Replacing it will cost several thousand dollars but in the long run it is money well spent to avoid all of these costly insurance claims.  If you have too many claims and decide to sell, a buyer may not be able to get insurance and if they cannot, you won't be able to sell.

I don't know what state you are in but in Maryland sellers are required to disclose if any "CLUE" reports, or insurance claims, that have been filed against the house.  This information is important because it can affect your future insurance rates and ability to get homeowners insurance.  Look through your contract and see if there is a disclosure where the seller says whether or not there have been any claims.  

As far as the roof goes, you would have to prove that the sellers were aware that there was a problem with it.  That will be the most difficult thing to prove; that the sellers were aware of the problems while they were living there and either did not disclose them or tried to hide them.

I recommend getting together all of your documentation including your sales contract and all addendums and consulting with a real estate attorney to see if they think you have a potential of recovering any money and whether it will be worth pursuing or not.

I hope this helps - good luck to you!

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

QUESTION: Hi Lisa, thanks for your prompt response. I am in Maryland. The 1st leak flood came when I turned on the outside water to establish a lawn.  The disclosure says there are no known defects. I have this feeling they took the insurance money and ran since the house was on the market at the time of the last claim. This should have been disclosed because I could have sought assistance from whatever company did the repairs. Why didn't the insurance company tell me at the time I got the policy the past claims and reason for my rates being high? As a 1st time buyer I did not know to ask those questions, thanks.

Answer
Hi Wanda,  I missed this follow up - sorry!  They should have disclosed that to you because insurance claims are very relevant to the sale of the house and your ability to be insured as well as your rates.  I'm surprised that the insurance company did not mention it to you either.  Some companies won't insure you if you have any claims within the last 3 years.  I would definitely consult with an attorney and see if you have a case.  Or you can try small claims court if your claim is for $5000 or less.  Let me know what ends up happening!