Purchasing Property: Discovering Defects and Damages

Defects discovered on resale properties after the transaction closes are the responsibility of the new homeowner unless there has been fraud or material misrepresentation by the seller and/or the sales agent. It is important that the buyer conduct inspections and do their due diligence prior to closing to determine the property condition. The buyer may choose to purchase a home warranty plan or ask the seller to purchase one on their behalf. Home warranty plans are limited in coverage to defects that are not considered pre-existing conditions and defects that are covered under the plan.  Insurance policies may also cover some defects.

Seller and Builder Liability for Property Defects

The seller and sales associate are required to disclose material defects or facts about the property that may not be observable to the buyer. This does not mean that the seller or sales agent are giving the buyer a warranty that the property is free from defects after the sale, or that the seller is obligated to fix the defects, unless agreed to in writing. Some transactions are exempt from disclosure laws such as bank foreclosures, trusts sales and estate sales.  

Defects or problems that are discovered on new construction purchased directly from the builder are generally covered under builder express and implied warranties.  Certain items may be excluded such as normal wear and tear. The builder may have the buyer sign a disclaimer. You should be aware of builder warranty time limits. Laws vary from state to state.

Why Defects May Not be Discovered Until Later?

Defects discovered by the new homeowner after closing occur frequently because a former owner or original builder may have fraudulently failed to disclose material defects about the property or misrepresented information about the property or an inspector may have made a negligent error on a report.  Some defects may result from construction and design defects including soil and geology, design errors on the home’s systems such as plumbing, electrical or mechanical systems, bad workmanship, or defective building materials. 

Homeowner Protection Laws, Claims and Damages

Certain defects may not be able to be corrected.  Homeowner protection laws vary depending on the type of defect, who the seller is, the nature of the lawsuit, and any injuries that may have occurred to the homeowner. Statutory time limits to pursue defect actions differ as well. The following type of claims may be filed by homeowners against former owners, builders, subcontractors, inspectors and material suppliers:

• Tort claims for negligent construction or accidental or fraudulent misrepresentation
• Misrepresentation and concealment claims may also be filed by secondary homeowners against previous homeowners and builders that they did not deal with directly
• Breach of contract claims or breach of warranty
• Statutory claims
• Equitable claims for rescission

If your property is governed by a homeowner association, then some defect claims may need to be filed by your homeowner association. Damages may be recovered for real or personal property, loss of use of the property, injury or wrongful death or threat to health and safety of the owners of the property.

How a Lawyer Can Help

A real estate lawyer can advise of your legal rights and remedies available under the law. The lawyer can prepare correspondence, documents and contracts, negotiate on your behalf, represent you in a lawsuit and research case laws and statutes. It is recommended that you hire an attorney to assist you with resolving real property defect matters.