Expert: liznarr - 8/31/2004

Question
Viewed a home at an open house.  Description of property stated "country home, water supplied by well etc".  At a later private showing, I discovered that the well was not in use, sellers had cisterns and were having water hauled to the home.  I only discovered this when a water company truck pulled into the drive while I was there viewing the home a second time.  When I asked the realtor why the well was not in use, he stated that the well had never been piped into the home, the sellers never used the well, nor had the original owners due to poor quality of water.  In negotiation to purchase the home, I requested that sellers place $5500 into escrow to cover the cost of a water treatment system (reverse osmosis) so that the well could be used (hauling water was out of the question for my family of 5 with three teenage daughters - cost prohibitive).  Sellers agreed.  On the day of our building inspection, a coworker whom lives in the area of the home in question alerted me that the well was bad.  I informed the realtor of what I had been told, he assured me that this was not true and stressed that he would double check the status of the well.  He reported back that the well was fine, the water simply needed an RO system to be useable.  A water treatment company employee met us at the house on a later date to test the water.  He informed us that the pump was not working, there was no pressure in the well pressure tank.  Again, we asked the realtor how this could be if the well was never used.  We did not get a firm answer, but the realtor reminded us that the sellers had never used the well and would not be responsible at this point if there were problems.  We were not allowed to do anything further regarding the pump until after closing.  The realtor, at closing, did pay for an addition to the home warranty purchased by the sellers that would cover the pump.  We had the pump inspected and were told that the pump was shot.  Home warranty paid for cost of new pump, we paid labor of $160.00.  After moving in, the water treatment company installed the RO system, discovered the RO would not work due to large quantity of sand/silt in water, and removed the system.  Further explanation revealed that the original pump's propellers were worn due to sand/silt.  We contacted a well driller who inspected a water sample, stated the sand/silt is likely due to poor construction of well, and advised that we would need a new well dug.  Cost has exceeded $16,500. Water tx company charged us &800 for installation and removal of RO system. Sellers released escrow of $5500, and, realtor paid $1,000 to us out of his pocket.  Sellers and realtor have refused to share remaining cost of $10,000.  We have filed a small claims suite against both realtor and sellers, asking for $5,000. Do you think we have a chance?  Please note that we have witnesses re conversation with realtor asking for assurance of well status.  In my view, the well was not checked for if it had been, the sellers/realtor would have discovered that the pump was bad and would have been obligated to inform us of such OR they did check the well status,discovered the bad pump, and failed to disclose this to us.  Thank you for any help you can provide.  Our hearing is in two weeks.  

Answer
Hi Nancy,

Wow!  I am so sorry to hear of your dilemma.

First of all, I would turn into a combination pit bull/rotweiller breed dog and sink my teeth in very deep.  If the house was represented to you as having a functioning well (or one that could easily be made functional), then you were most definitely misled.  What happened to you is simply wrong, and it never should have happened.

One key issue and question in my mind is WHEN you found out all the things you pointed out to me – BEFORE or AFTER you had entered into a legally-binding Contract of Sale?  If you knew all this BEFORE you entered into a Contract, an argument could be made that you negotiated for the purchase of the home with knowledge of the well problems.

If you found out about all these problems AFTER you had entered into a Contract (and especially in view of your statement that  “…We were not allowed to do anything further regarding the pump until after closing…”), it seems unconscionable that you could be denied an opportunity to perform further testing on the well and/or pump PRIOR to closing.

You made the following reference: “On the day of our building inspection…”   Who did the building inspection?  Who chose the inspector?  Did you receive a written report?  Was the well inspected at this time?  Was anyone present with the inspector?  On what facts or basis did the Realtor report back to you after the building inspection that ‘the well was fine?'

I'll go into explanations below, but absolutely yes, I think you have a chance.  However, be sure to present your case very methodically and point out all the MISrepresentations that were made to you.

In addition to Court action, may I suggest that you consider filing a formal complaint with the Real Estate Commission in your state against the agent and/or his Broker-in-Charge.  In addition, if this agent is actually a “Realtor,” you can also file a Grievance against him with the Realtor association he is a member of.

You say you are taking the Realtor and Seller to Small Claims Court.  Is this an action where you are representing yourself and do not necessarily need an attorney?  And is the maximum dollar amount of an action in Small Claims Court $5,000?  If so, are you automatically forfeiting the “other” $5,000?

Who was this “Realtor” representing?  And I use that term sparingly after his actions you have described.  If he was supposed to be representing you, I feel strongly that you might have an action against him for Breach of Agency… and possibly fraud … and also an action against the Seller for fraud, which is defined as INTENTIONAL misrepresentation.  Even if the “Realtor” was not representing you, he had an obligation to disclose any known material defects to you.  

You may want to get good legal advice at this point (if you have not already) to make sure that your Small Claims Court action would not preclude you from an additional action should you establish a basis therefor and decide to proceed.

In the meantime, I would be doing some homework and investigation into the well situation and any problems PRIOR to your purchase.  See if you can determine who installed the well, and if it EVER tested out properly.  Also, is there a County office that oversees the installation of wells?  Where I live, DHEC monitors wells and associated problems.  Call your County and or State administrative offices and find out what you can about the regulation of wells and what records are available to you.  If you can obtain proof that the seller and/or agent knew of these problems and did not disclose them to you, you might have a slam-dunk case.

Also, talk to neighbors and probe for information.  You said a coworker who lives in the area told you that the well was bad.  Where did he get his information?  If he knew, SURELY the Seller and others knew.

When was this home built?  If it was built within the last few years, see if you can get a copy of the building permit and all inspections during construction.  Unless this is very rural property in a very thinly-populated area, there could be County requirements regarding a Certificate of Occupancy (CO) before power could be turned on.  If there is a building inspector in this County, they will generally not issue a CO unless there is running water to a house.  So, using logic, “IF” a CO had been issued at some time; and IF the CO were subject to there being running water to the house, how could it be that the well was never piped to the house?  Somebody in connection with this transaction knows something that you don't.  People just don't build houses and drill wells and never hook them up to the house and never use them.

I'm also curious about the sequence of events regarding the pump.  If the Realtor/agent KNEW the pump was NOT working, paid for a warranty addendum to cover the pump, and then represented to the warranty company that the pump was operable; it certainly sounds like he performed another fraudulent action.  Warranty companies simply will not insure a system that is inoperable at the time coverage is applied for.  The warranty company probably would like to hear about this.

I could go on and on and on about your situation.  I think, however, I've given you enough information to point you in the right direction to search out some information that should yield some interesting answers for you.

If you have an opportunity, let me know your outcome.  Good luck to you, and write again if you have additional questions.

Regards,
Elizabeth Narr