Discovering Home Defects Post-Sale

The homebuying process offers several opportunities to uncover any defects. Sellers must disclose any known defects. Buyers can get an unbiased, licensed home inspector for an independent assessment. These are great options, but after a family moves into a new home, they may uncover undisclosed defects.

You have options if you discover problems after you finalize your home purchase agreement.

This article explores homeowners' options after they finalize a home sale.

Understanding the Homebuying Process

Although you may find your dream home early in the homebuying process, you almost certainly won't move in the next day. Buying a home is a significant financial and legal responsibility, and there are many steps to closing. Your home inspection and final walkthrough are critical, as they can alert you to possible defects.

Although the new homeowner has opportunities to inspect the house for any defects, it is the home seller's responsibility to disclose all known home defects. It doesn't matter if the defect is minor or material. The seller must disclose it to the homebuyer or their real estate agent.

The disclosure rule does not apply to known defects of which both parties are aware. That may include obvious issues such as a home needing general renovations.

Undisclosed Defects

Home defects can range from a broken window to a leaking roof. Here is a noninclusive list of possible home defects:

• Bad sewer lines or rusted pipes
• Hidden water damage
• Rotted wood or termites (learn more about termite letters)
• Huge cracks in driveways or house foundation
• Asbestos
• Inadequate or old ventilation or windows
• Septic system or water heater issues
• Radon leaks
• Outdated wiring
• Electrical, plumbing, or HVAC issues

Material Defects

According to the International Association of Certified Home Inspectors, a material defect includes these three factors:

• Deals with a fundamental system of a residential property
• May have an adverse impact on the property value
• May result in an unreasonable risk to human life

This does not necessarily include normal wear and tear, like an old furnace in need of repair.

Home inspectors focus on irregularities that amount to material defects. So a scratch on the kitchen counter or a screen door with a few small tears rarely amounts to a material defect.

Minor Repairs

For minor home repairs, buyers and sellers often negotiate the cost of repairs. Either the seller can deduct the cost of repairs from the purchase price and amend the purchase contract, or the seller may opt to fix the repair.

Buyer and Seller Responsibilities

In every home sale, all parties have responsibilities depending on their role. For example, the buyer must pay for the house in question. The current owner should work with the seller's real estate agent to ensure the house is in saleable condition.

A buyer's real estate agent may often advise the buyer to purchase a home warranty covering undisclosed defects. However, that's not a requirement.

Seller Disclosures

Some states have disclosure forms they require home sellers to complete and provide to potential buyers. State disclosure laws often require that sellers "disclose all material defects" in a property. This means they list them out and explain them to the buyer.

Another important seller's disclosure is the lead paint disclosure. Sellers must disclose the presence of lead-based paint or hazards in homes.

What To Do After Discovery of Home Defects

The timing of a defect discovery and state laws significantly impact your options for a remedy. The buyer has limited options after escrow closes. The first thing a homebuyer should do is determine the responsible parties.

Responsible Parties

The seller is not always responsible for undisclosed defects. Liability often extends to either party's real estate broker, real estate agent (Realtor), or home inspector. Every case is different.

If the homebuyer has evidence that the seller knew or should have known about the undisclosed defect, the buyer may have legal action for nondisclosures or negligent misrepresentation.

If the home inspector overlooked a material defect, they may have to refund the cost of the home inspection report.

Remedies

Depending on the statute of limitations and the circumstances, the buyer has several options, including the following:

• Recission of the contract if the homebuyer uncovers the defect before the home sales contract closes, in some states
• Filing a lawsuit in small claims court against the seller or seller's agent
• Filing a claim with their homeowner's insurance policy, if it covers undisclosed defects
• Filing a claim against the warranty if they purchased one

Get Help

If you discover material defects after the real estate transaction has closed, you may have an action for breach of contract. A qualified, local real estate attorney with experience in housing and construction defects can help you understand your rights and draft an appropriate demand letter. A demand letter can explain the defect and request a repair or remuneration.