Expert: Dick Dennis - 10/30/2004

Question
Dear Mr. Dennis,
I have a question about a home I signed a purchase agreement on. I live in the state of Michigan. I am using my sister as my realtor which has made my situation more complicated. She is new, selling for about a year and hasnt had much success. I did this as favor.

Im recently divorced and buying a new home. My ex and I have renovated 4 homes together, (major renovation) and we looked at the home and found it to be suitable with some small repairs.

I signed the purchase agreement and waived my right to an inspection (that I would have to pay for). During a visit to measure windows, I was showing my ex how great the water pressure was. After flushing the toliet we heard water rushing somewhere. We discovred the toliet may need a wax ring or major work cuz gallons of water flowed thru the first floor and into the basement. There is some odd patching done in the dining room ceiling below the upstairs bathroom where the toliet is. I was assured by my sister and the selling agent (her friend and co worker) that it was not water damage, just a bad stucco job. Well now that I know the toliet is bad, it is indeed water damage. At this point, my sister said she had forgotten about the bad toliet and thought the seller had fixed it. My sister and the selling agent both knew about the toliet but did not tell me. It is not on the seller disclosure.

The seller agreed to fix the toliet. Fine. I was already signed to the deal and my sister said because I wavied my right to a home inspection, Im stuck anyway. The house is older built in 1924. The garage needs some minor repair and the driveway is in bad shape. Things I would fix later. However, I had no idea that I would be refused a homeowners policy. I had 2 agents come out and I was told that my only option would be to go with limited coverage, a high risk policy that is double the regular amount. Also I would have to exclude coverage on the garage.

I want out of the deal. The seller has not fixed the toliet, nor maintained the property. The grass is knee high now. My sister is quite angry, telling me i will be sued if I back out and I will lose my deposit. I feel that I should get my money back because one I am paying market value for the home and the garage is a selling point. If I cant insure the garage, its basically worthless. My sister says if I saying the house is unsurable then I have to get 5 letters from different companies stating this. However it is insurable but I have to get a high risk policy with double cost and limited coverage. Can I get out of this without being sued and can I get my deposit back? Any info would be appreciated. Im totally stressed out.  

Answer
Not having seen the paperwork, Lori, my first impression is yes and yes. But you're going to have to work at it and/or get a real estate attorney. It is obvious that the selling agent was hiding something from you and your sister aided and abetted. Now you know why we Realtors ALWAYS recommend to NOT use family as agents.

In fact, you should definitely sue the selling agent, your sister, as an agent, the seller, the agents' offices. Chances there is a clause in your purchase agreement that the parties involved agree to an arbitation BEFORE you start suing anybody. Check it out. If there is such a clause, then activate that clause NOW. If you win your case you should be reimbursed any attorney costs.

I get the impression the house was to be an investment. You were going to fix it up and resell it. Why you agreed to pay market price for it puzzles me. If I were you, I would hire a contractor to assess the cost of the damage the toilet did and any complications that arose from it. Then go to the selling agent (I would go to the broker, the boss of the office)—it is obvious your sister is totally incompetent, all she wants is that commission—and demand that the selling price reflect downward the cost of the repairs as per the contractor.

Now you got a figure from which an attorney and/or the arbitator can work from, plus your deposit. You can hang this transaction up forever if you wanted to. That means the seller will never be able to sell it, the agents in the transaction will never get paid until you are satisfied.

As a side, what is the value of the house AFTER you fix it up? And what did you offer to pay? After answering those questions, maybe I have another idea.

I wish you well, Lori.

Dick Dennis, dixiedee13@aol.com