How to avoid buying, selling a bad house

When selling your home, before putting it on the market for sale, hire a professional inspector. As a home seller, I’ve done this many times and am always glad I did–even when my buyer hired his/her own professional inspector who “discovered” alleged defects. I recommend hiring an inspector who is a member of the American Society of Home Inspectors (ASHI).

The reason I like ASHI members is this organization requires its new members to pass an exam and have completed more than 200 inspections. The cost of a typical home inspection is around $300 and should take at least two hours. Whether you are the home seller or the buyer, please be sure to accompany your inspector to discuss any defects discovered.

Purchase Bob Bruss reports online.

DON’T RELY ON HOME SELLERS, OR THEIR REAL ESTATE AGENTS, TO REVEAL ALL HOME DEFECTS. California was the first state to require home sellers to provide written Transfer Disclosure Statements (TDS) to buyers before home purchase. Unfortunately, not all states require such disclosure forms. They should!

Even in California, the state-mandated TDS form is incomplete and superficial. But it’s better than nothing. Many real estate agents ask their home sellers to fill out a voluntary additional defect disclosure form. However, when I am a rental house seller who has not lived in the property, I am reluctant to fill out the additional voluntary disclosure form because I am not familiar with the house’s condition. In fact, although I’ve lived in my current residence for 24 years, I’ve never even been in the crawl space beneath it. Maybe the reason is when I purchased the house and hired a termite (pest control) inspector, after he crawled around beneath my house he reported there was a dead cat down there! No termites. Just a dead cat.

Proving the home seller knew of undisclosed defects is almost impossible. I often receive letters and e-mails for my “Real Estate Mailbag” newspaper column from home buyers who discover defects which their sellers didn’t reveal before the home purchases. The most common alleged undisclosed defect is a leaky roof. I guess it’s just human nature to look for someone to blame so home buyers look first to their sellers, second to their home inspectors, and third to their real estate agents when something goes wrong with their home purchases.

Of course, if that home buyer could prove the seller knew the roof was leaking but failed to disclose the problem, then the seller might be liable for breach of contract or fraud damages by providing an incorrect disclosure statement to the buyer. But proving the seller knew the roof leaked and failed to disclose it is almost impossible unless there is physical evidence, such as water stains on the attic rafters or the ceiling.

Probably the best way to learn if a seller knew about a home defect is to ask the neighbors. It’s amazing how much the neighbors know about the adjoining houses. To illustrate, when I bought my house, my new neighbor came over to get acquainted. Among the pleasantries, he said “I suppose the sellers told you about when that hill behind your house slid into the back wall and there was about three feet of mud.” When I replied the sellers didn’t make such a disclosure, he pointed out the drains they later installed to direct rainwater out to the street. That was 24 years ago and we’ve had lots of heavy rains since then with no evidence of any hill slippage. If my sellers had disclosed the hillside slide problem before I purchased, I probably would have had a soils engineer inspect the hill for possible future slippage.

How to handle an “as is” house sale. If I ever sell my house, it will be an “as is” sale. That means I must disclose all known home defects, but I will not pay for any repairs. Thousands of houses are sold this way. In fact, the printed forms of many realty associations provide for “as is” sales.

There are several legitimate reasons why home sellers and their realty agents recommend selling “as is.” The primary motivation is sellers and realty agents don’t want to become involved in buyer lawsuits over defects that became apparent after the sale closes. The example of a roof that starts leaking shortly after the sale is typical.

Another reason home sellers want to sell “as is” occurs when an older home needs updating but the seller either doesn’t have the money to do the work or feels a buyer might not like the improvements. To illustrate, my home’s kitchen could use some newer cabinets and recessed lighting. But the tile counter is perfectly good, the appliances work, and I enjoy it. But a buyer will probably want to “gut” the kitchen, install fancy and expensive granite counters, plus all the latest improvements.

Buying an “as is” house can be a smart purchase. However, sellers should be aware an “as is” home seller must still disclose all known home defects, even if the seller won’t pay for the repairs.

A HOME BUYER’S FIRST LINE OF DEFENSE AGAINST BUYING A “BAD HOUSE” IS A PROFESSIONAL HOME INSPECTION CONTINGENCY CLAUSE IN THE SALES CONTRACT. A home buyer’s best protection against buying a “bad house” is to include in the purchase contract a clause stating the offer is contingent on the buyer’s good faith approval of a professional inspection report on the house.

That means, after the seller accepts the purchase offer, the buyer can reject the house and obtain a full refund of the earnest money deposit if the inspection report is unsatisfactory. Or, the seller can then agree to pay for the discovered defect repairs. As stated earlier, it is ultra-important for the home buyer to accompany their ASHI professional inspector (the seller should also attend). What looks like a serious defect might not be so bad.