Expert: liznarr - 3/5/2011

Question
My wife and I are buying a home in Arizona to rent.  We are still in contract to buy.  The inspector found two issues.  One, the property had a serious water leak in 2009 which was not revealed in the SPDS.  We found out about it when we researched the original sale to the current owner who bought it in January.   He denies it and further we found out he was the one who did the actual repairs in 2009 which totaled almost $16,000.  The MLS said that the entire house was flooded.   He says that a company MBA Development is the one selling the house but we find out now from the title search that it is actually owned by the named person Garrett Hancock.  We believe the repair was fixed but we are now  doubting that he is hones with anything else.  What can we do or should do? In addition there was a drainage problem in the back yard that the inspector found and we discovered that he denied knowing about.  The whole deal is beginning to smell of a problem.

Answer
Hi Joe,

I think the handwriting is on the wall in big red letters for you.  Based on what you have written, I would run for the hills, literally.

If the current owner did not revealed a serious water leak in 2009, which he himself repaired, and to the tune of almost $16,000, he certainly is not going to disclose other defects that he knows of.  Plus, with your inspector having found a drainage problem in the back yard which the owner denies knowledge of, you are asking for problems if you close on this property.

The best thing you can do is terminate the Contract (assuming you have that option since you have not yet closed), and move on to something else.  Read your Contract carefully to determine what your options are to terminate.  Check for a default clause (on the part of the Seller), because you probably could claim default on Seller’s part for breach of Contract on the basis of fraud (the non-disclosure of items you mentioned in your writing).  Since I am not an attorney, this information is based on my experience with Contracts in my area; so be sure to verify anything I am writing above with an attorney in your area.

If you have an agent who is representing you, and you have out-of-pocket expenses you will be losing as a result of any termination, you should involve your agent and try to get reimbursement for your out-of-pocket expenses (on the basis of fraud/INTENTIONAL MISREPRESENTATION); but I would not hold my breath waiting for a check from this man.

If the Seller-Owner balks and will not immediately refund any earnest money you have advanced, and/or he will not give you a full release, you should seek competent legal advice.

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

Regards,
Elizabeth