Home Defects Discovered After the Sale
Buying a home is a long and complicated process. Most used homes have at least a few items that need to be replaced or upgraded, such as outdated wiring or rusted pipes. It's also helpful to know the age of certain features, including the roof and septic tank (if applicable), since they eventually will need to be replaced. Generally, though, the seller is responsible for disclosing any significant defects in the home.
Some defects are obvious and will be disclosed early. But what can you do if you discover a defect in the home after completing the transaction? Depending on a number of factors, including the seriousness of the defect, you may have some options.
Disclosing Home Defects: Sellers' Responsibilities
The laws regarding disclosure vary widely by state and change often, but state law often requires the seller to disclose all "material defects" in a property to the buyer for the sale to be valid. If a home buyer discovers a material defect that the seller failed to disclose before the close of the sale, the law may give them the right to cancel the transaction.
According to the International Association of Certified Home Inspectors, a material defect is "a specific issue with a system or component of a residential property that may have a significant, adverse impact on the value of the property, or that poses an unreasonable risk to people." This does not necessarily include systems or components that are at or beyond the end of their normal useful life. For instance, a furnace that works fine but was expected to break down years ago is not considered defective.
The inspector (whom the buyer selects) will generally only focus on irregularities considered material defects. So a scratch across the kitchen counter or a screen door with a few small rips likely would not make it onto this list.
See Required Real Estate Disclosures When Selling Property for more details.
When Home Defects are Discovered After the Sale
Depending on the law of the state at issue, after the escrow is closed—the deposited funds have been transmitted from the escrow account to the seller—a buyer might be limited to recovering money damages as compensation for any defects discovered. Alternatively, the applicable law may permit the homebuyer to rescind the transaction, usually in the case of particularly severe defects.
It may not always be the seller who is held responsible for undisclosed defects, with liability sometimes extending to either party's broker and/or the home inspector. Each case is different, so determining who may be liable is your first step.
In Illinois, for example, sellers are required to disclose defects from a set list (established by law) and explain each one. If a defect on the list of potential defects is not disclosed, and the buyer can prove the seller knew or should have known, then the seller may be found liable for the cost of the defect. However, when the inspector is found liable, he or she may only be on the hook for the cost of the inspection (as opposed to the cost of the defect).
Individuals with questions about disclosures or defects regarding their house may wish to contact a local real estate attorney in their area for more specific and detailed information.