Expert: Karyn Foley - 3/2/2010

Question
Hello,
I recently bought a house in my neighborhood and rehabbed it and sold it.  In the seller's disclosure, I was completely honest in how long I owned the property (only a few months) and that I had never lived in the house.  The buyers signed the seller's disclosure before settlement.  A week after we setteled, the buyer's agent called to say that once the buyers moved in and started using the plumbing, there was a backup in the plumbing.  A plumber came out and ran the line and told the buyers they were going to have to "dig up" to fix the problem.  This is apparently a very costly repair.  They are saying we are responsible for the cost and they will sue us if we don't pay for it.  I say, they bought the house knowing that it had been vacant and that the seller was not aware of any problems, but some could have gone unnoticed until people were living in the house.  They had a home inspection as well, though this would not have brought to light the plumbing problem, since it was daily usage of the plumbing system.  Should I be concerned?  OR does the seller's disclosure protect me?  I feel bad that they have to deal with this, but still don't feel I am responsible (they did get a great deal on the house + $10,000 in seller's assist).
Thanks!
Maggie

Answer
Dear Maggie:  As a broker, I came upon this problem a short time ago when I represented a buyer who was not only a good friend, but a member of the district attorney office.  I was in a panic, until I checked over again the wording the the disclosure forms signed by the seller.  It stated that the seller was to make the disclosure statements based upon defects and problems et cetera about which he had knowledge.  The suspected problems about which the buyer was worried about were not known to the seller.  It should be noted that the seller had the home rented and then vacant the previous two years.  That let the seller off the hook, as far as the seller was concerned.  The buyer always did have the option of going to small claims court, but that disclosure caveat might not have given him any leverage and the buyer felt he would have little or no chance of success.  The story ended well, as a second opinion of the problem proved that everything was ok after all.  Now, this is California, and your state's disclosure laws and forms may differ.  But - please see what is stated on the forms and on your contract.  You might suggest that another, arms-length, objective plumber not known to or related to the buyer come out and given an opinion.  Could this not have also been a first time backup problem?  You might perhaps hire a plumber who may either refute the other plumber's allegation or it could indeed confirm it.  Why would the home inspector not have noticed it, or saw something amiss that he should have stated needed further looking into?  The good home inspectors have errors and omission insurance.  Also, did you or the buyer put on a home protection policy?  Some of them do not cover previous problems that were there before close of the transaction; some companies do not care; some have an option you can include that does cover previous problems.  I think you will have the answer in the print of the documents relating to the sale and accompanying paperwork such as the disclosure forms.  Now the solution may not be as easy.  If the buyer persists, then discuss with your own agent/broker as to what he/she would suggest.  Sometimes a compromise is helpful, but should carry wording to protect from being played again in the future.  Or, the buyer may go to small claims court or an attorney.  Again, check your contract because most contracts now contain automatic mediation, then if that does not work, there is usually an arbitration clause.  All of the aforementioned costs $$$, depending on who wins or loses, but it is usually cheaper than a law suit and sometimes much quicker.But just to make sure, I would suggest that you consider getting an attorney to write a letter if you feel you are definitely in the right.  Ten thousand dollars is a lot of money for some one to demand when you are not certain as to the extent of any damage or actual reasonable repair costs.  You were quite smart to state that you had only a short tenure and never even lived in the house.  You sound very honest, so I hope you prevail.  Pay heed to my suggestions, remain calm and helpful, and see what happens as it plays out.  Good luck, let me know what happens, and email back if you have additional questions.  Karyn Foley