Buyer Beware: Even When You Do Everything Right

By
Services for Real Estate Pros with Heffernan Law Firm

    KOMO News published yesterday a startling story about the homebuyers who did everything right in purchasing their home; only to end up living in a toxic, flooded, waste-ridden moneypit that drove them into bankruptcy. 

    The 1940s farmhouse in Edmonds seemed quiet, picturesque, and the perfect place for the Nealeys to raise their family.  Shortly after they moved in, however, the family members began to develop bloody noses, migraines, respiratory infections, and asthma. They soon discovered the cause: only weeks after the family moved in in 2001, heavy rains flooded the small stream running through the peaceful backyard, beginning a season of flooding in the yard and crawlspace of the home.  Neighbors reported that the stream has flooded for decades.  The floods brought years of industrial and other waste up from the ground, including oil drums and rusted car bodies from an old auto shop.  The family was forced to move out, but was still stuck with the mortgage.

    The Nealeys tried to protect themselves in the purchase of their home.  As reported, the Form 17 provided to them by the sellers disclosed that there were no drainage problems on the property and no flood damage to the home.  The Nealeys also included an inspection contingency in their purchase and sale agreement, and the inspection did not reveal these very significant problems. Additionally, the home was not identified with the Department of Ecology as a contaminated site until the Nealeys reported it themselves.  Settlements from the sellers, listing agent, and home inspector totaled less than $56,000.  This provides little relief from their continuing $2,600 monthly mortgage payments on their $360,000 home.  

    This story provides a painful example of the traditional rule in law of "buyer beware."  Despite modern development, this rule is still very much a part of present-day property law, particularly when it comes to the consumer-to-consumer purchase and sale of a home.  More information can be found in the full story at:  http://www.komotv.com/news/local/8394152.html.

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Rainmaker
1,248,360
Steven L. Smith
King of the House Home Inspection, Inc. - Bellingham, WA
Bellingham WA Home Inspector
Scary stuff. An inspector, we hope, would try to look for signs of past water damage or intrusion. We have had some really dry summers in the PNW so, if it was inspected in a June, July, August or a really hot dry summer month, the inspector might not see any water in the crawl space because there wasn't any. Then again, maybe it was just a lousy inspection.....hard to tell. As far as water intrusion, I sure prefer the inspections in the wet season -- much stronger chance of detecting a problem. Some homeowners are so unaware of what is happening at their property that the sellers maybe did not realize the flooding creek was filling the crawl space. I have seen some amazing problems -- like sewage leaks in the crawl-- the homeowners had no problem with because they did not know or guess. Just put in some more fans to keep the air moving inside.
Jul 10, 2007 05:07 AM #1
Rainer
10,292
Devon Thurtle
Heffernan Law Firm - Kirkland, WA
Steven - Great point regarding summer inspections.  Not surprisingly, we have had a few cases cross our doorsteps where the summertime inspection revealed no problems, only to later discover water intrusion or a failing drainfield.  In many cases, the sellers knew of the condition - e.g., water in the backyard - but did not know enough about their home to think that it may be a problem.  This can present a hurdle for purchasers who, after a recent Supreme Court decision regarding the Form 17, generally have to prove actual fraud on the part of the sellers.  As a result, it's possible that the skilled home inspector is now more valuable than ever.
Jul 10, 2007 05:17 AM #2
Rainer
70,376
Caleb Mardini
Bellevue, WA
I'm still not clear on why the sellers omission wasn't valid.  If neighbors knew, surely the seller would?
Jul 10, 2007 05:32 AM #3
Rainer
10,292
Devon Thurtle
Heffernan Law Firm - Kirkland, WA
Caleb - Not necessarily.  Sometime a seller will report no problem on the Form 17 because they think they've fixed something when really they haven't, as when a fix doesn't work; in that case, they don't know about the condition because they think they fixed it.  Other times, it's largely a problem of proof, as fraud is a difficult thing to prove.  Testimony of neighbors isn't always enough.  Or it could be a case of, "Yes, the stream floods every year, but it never comes near the house.  Of course the stream will rise some in the springtime."  As Steven pointed out above, this may be valid where there have been several dry years in a row with manageable spring melt and runoff each year.
Jul 10, 2007 05:48 AM #4
Rainer
70,376
Caleb Mardini
Bellevue, WA
Interesting, thanks, protecting buyers is getting more difficult it would appear.
Jul 10, 2007 06:44 AM #5
Rainer
6,023
Krissy Jones
Real Living Northwest Realtors - Renton, WA
What a great informative post Devon! Thank you! I had no idea, hopefully this gets featured. We need to make sure people in the industry and consumers are aware of this. How horrible for these buyers. I wonder if that home makeover show (with Ty whats-his-name) could do something for them? Thanks again for the information!
Jul 10, 2007 08:42 AM #6
Rainmaker
1,248,360
Steven L. Smith
King of the House Home Inspection, Inc. - Bellingham, WA
Bellingham WA Home Inspector

In a related matter, I know an interesting twist. I inspected a new home yesterday. It was built on a wetlands. The buyers really wanted it there, bought the lot and went through the permit process. The county approved it but would allow no foundation drains -- because it is on a wetlands. This is an expensive custom home, built on the wetlands, with no foundation drainage, that was reluctantly built by a leading builder and, reluctantly, approved by the county. The builder told me about this, as we were discussing the obvious seasonally wet site....it was dry yesterday by the way. He said that there was nothing more they could do about it and they expected it to be wet underneath. He said that the county inspector did not like the arrangement but the planners approved it and it was the only way the home could be built....so that was the architects design. The builder built what was on the plans and what the client wanted. They are allowed to, and plan to, put in a sump pump to dump the crawl water back into another part of the wetlands. Now, the interesting part of this is, how much of all this info will be disclosed to a future buyer some 10 or 20 years down the road. Or will that person get a wet house and have no clue that so much was involved in planning the home at that location.

 RE: Form 17. It is my experience that with many sellers, unless it is a smoking gun and can be proven later, possible negatives about the property on form 17 come back as "do not know."

Jul 10, 2007 09:01 AM #7
Rainmaker
1,248,360
Steven L. Smith
King of the House Home Inspection, Inc. - Bellingham, WA
Bellingham WA Home Inspector

Devon,

If you hear, or see, any additional information on this, please post it. I would like to see what finally happens here. I have to assume that this cannot go on like this forever -- paying for a home they cannot live in.

Jul 13, 2007 06:52 PM #8
Rainmaker
46,093
Sarah Nopp
South Sound, WA

Thank you Devon. The issue with industrial waste puts a really ominous spin on this story that is not that uncommon in wet Western Washington.

If you hear any updates, I would be very interested in reading about it.

Jul 14, 2007 05:17 PM #9
Rainer
10,292
Devon Thurtle
Heffernan Law Firm - Kirkland, WA
Steve and Sarah - I haven't heard anything yet, but I'll definitely keep my eyes out.  I expect that, if it goes on for too long, the county will condemn it and clean up the site.  The troubles don't generally end there, however, as the costs of the clean-up are billable to the homeowner; therefore, any sale of the underlying land would have to not only pay off the mortgage, but also cover all clean-up costs.  
Jul 16, 2007 04:01 AM #10
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