Expert: Todd C. Menard - 11/17/2011

Question
My husband and I have a ratified contract on a house we are hoping to buy. Our home inspection revealed several plumbing and electrical problems, and also that the seller did not get permits for recent renovations and some of the work is not up to code. We asked the seller to fix the plumbing and electrical work in order to bring it up to "normal working order" as required by clause #7 "Equipment, Maintenance, and Condition" in our sales contract. We also asked that the seller get all of the required permits and inspections. Then we attached a list of repairs necessary to remove hazardous conditions, correct renovations done in an unworkmanlike fashion, and bring the house maintenance up to a normal standard of care. It is quite a bit of work, and we didn't bother with several minor repairs.

The property was not listed as an "As-Is" property. The MLS listing advertised the house as a 3 bedroom 2 1/2 bath house, with a fully finished basement. Now that we know about the lack of permits and shoddy work, the house should have been listed as a 3 bedroom, 1 bath with an unfinished basement.  Now that the home inspection has revealed all of these problems, it's clear that we settled on a sales price that was too high.

The seller replied to our repair request by saying, "I will not be doing any of the things on your lists, so if the buyers want out of the contract, just send me a release and I will sign
and send back to you.  When we settled on a sales price, it was because the buyers said they had work to do on the home." (Not true at all.)

The seller is an owner-agent.

Was it illegal to list unpermitted, uninspected renovations in the MLS listing? In other listings, an agent usually discloses such things, or refers to them as a "bonus" room.

Can the seller just back out now, even though she signed a standard sales contract that says she would deliver the house in normal working order?

Given that we have already lost lots of money on inspections and appraisals, I want to make sure that if the contract is voided that it is done with a Default by Seller so that we can get our earnest money back without a hassle. The way she phrases it above, it makes it sound like we are the ones backing out. She is the one who is refusing to meet the terms of the contract. How can we make sure it is clear that the Seller is in Default?

We still like the house, and although finding these problems was a bummer, things can certainly be fixed (for a price). But she seems unwilling to work with us, and now we have to figure out how to reply to her.

We feel that her MLS listing was a lie, she entered into a sales agreement in bad faith, and her latest move is a breach of contract. It's been an enormous waste of time and money for us and our agent, and we feel she should be held accountable. And we certainly don't want her to just put the house back on the market.

Oh, that's the other thing -even though we have a contract with her, she still has the listing as "Active" and the house is still being shown to other prospective buyers.

Any comments on the ethics of this situation would be appreciated.

We live in Virginia.

Answer
Hello E - Each state has different laws governing real estate, seller disclosure, property construction codes, requirements to use licensed and bonded contractors, and each states real estate residential purchase contracts contain different customary practices and due diligence requirements. That said, having purchased and sold real estate in a number of states, most contracts include due diligence (inspection periods) during which the buyer may conduct any desired investigations and inspections into the integrity of the property. These inspections provisions allow the buyer to identify possible latent defects and condition so that the buyer can make the decision to continue the sale or reject the premises, cancel the transaction and receive a refund of their earnest money. ALL heating, electrical, plumbing, HVAC and other repairs performed in a residence must be performed to the construction codes established by the local municipality or governing board of technical trade. Obviously there are repairs a homeowner is allowed to perform as DIY projects however it still must be done to code. The National Association of REALTORS Code of Ethics Article 12 "REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations..." The entire Code of Ethics can be read at http://www.realtor.org/mempolweb.nsf/pages/code . The local MLS Rules and Regulations can help you determine if there is a responsibility to change the listing status of a property from ACTIVE to SALE PENDING or other status based on contract acceptance, whether contingencies exist, and possible instructions from the seller. Your REALTOR should be able to assist you in holding the listing broker accountable to these Laws, Codes and Rules. If your agent is unable to provide this surety then contact your agents Designated Broker (Responsible Individual) whose responsibility is to monitor and supervise their agents and review the transactions. Usually the Broker at your agents office will contact the listing agents broker and discuss the  transaction attempting to resolve the matter. AS IS Addendums do not require the buyer to waive their due diligence period nor waive inspections. Typically this only means the seller is establishing up front that they will not make repairs to non-working warranted items however usually the seller is required to provide the property to you at the sooner of closing or occupancy a property in substantially the same condition as of the date of contract acceptance.  Usually the seller provides receipts for repairs done to the home negotiated as part of the transaction for a couple of reasons... contractor warranties on their services and products and to support the buyers requests when properly written... such as a repair that requests a licensed technician to perform the work and also to document the significance of the issue and or repair. You should first talk to your agent, then your agents office manager/Broker for assistance. Then if you dont get anyway quickly you might want to contact an attorney to learn your rights and options in your specific state. I hope this has satisfactorily answered your question and gives you some direction to pursue. If you need additional information or assistance please reply. Remember I am not a real estate attorney and this is not to be considered legal advice rather it is real estate information any experienced REALTOR should be able to provide. - Todd Menard