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Buyer Sues Seller Three Years After Close of Escrow

By
Real Estate Agent with Village Real Estate Services, Inc.

 

 

 

 

Today's California Association of Realtors® Newsletter included an interesting story about a seller who was sued by a buyer three years after the close of escrow.     Who was the winner?---You Be The Judge. 

 

 

 

 

Here are the pertinent facts:

  1. In 2002 a seller enters into a contract to sell his condo.
  2. The seller fills out a Transfer Disclosure Statement (TDS) stating "that he was aware of flooding, drainage or grading problems and added a notation about water intrusion during heavy rains."   In a subsequent conversation, the seller also described to the buyers the repairs made in 1998 to solve the water intrusion problem.
  3. The seller disclosed to the buyer in the Transfer Disclosure Statement prior to close of escrow that there had been a leak in the subject condo which had been repaired and waterproofed by a contractor and there had been no subsequent leaks.
  4. Nearly three years after the close of escrow the garage of subject condo flooded.
  5. The buyer sued the seller on the basis that full disclosure was not made at the time of the sale.
  6. The buyer learned that there had been intermittent problems with water intrusion in some of the condo complex.
  7. The buyer also learned that the HOA had sued not only the developer, but also the contractor hired by the association to affect the repairs and waterproof the affected areas.
  8. Fact -  both lawsuits eventually settled and yet another contractor was hired to make necessary repairs.
  9. The second contractor stated that he "specifically informed the seller, as the HOA Treasurer and ‘point man' for the repair work, that it could only solve a portion of the problem." 
  10. The buyers sued the seller and others for negligence and misrepresentation. 
  11. The sellers response to the buyer's lawsuit was that the reason he didn't mention the lawsuits on the TDS was because he thought he was only obligated to disclose pending actions.

 Do you think the court decided in favor of the buyer or the seller?

 If you think the buyer won their case, you're right.  The court decided that, "A condo seller who discloses a defect in the property may nevertheless be required to also disclose previous lawsuits regarding that defect."  That was the decision of the California apellate court on February 17, 2009 in the case of Calemine v. Samuelson (2009 WL 368648).  The court found that once "essential facts are disclosed a seller is not under a duty to provide details that would merely serve to elaborate on the disclosed facts and the evidence [in this case] revealed a triable issue of fact, as the existence of the two lawsuits was the very type of material information that a potential buyer could find seriously affected both the desirability and value of the property.  Moreover, Samuelson's disclosing the repairs made by the HOA in the absence of providing information about the context in which those repairs were made could be characterized as a partial disclosure, likewise creating a triable issue."

 

So, a word to the wise...when in doubt, disclose, disclose, disclose.

 

 

Comments (73)

Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
  • Hi Southeast - Interesting assumption.  It didn't occur to me that this could be a For Sale By Owner since a California Association of Realtors® Transfer Disclosure Statement Form was used.  But, that is not altogether unlikely as I'm certain that has happened more than once J. 
  • Hi Jim - I'm so glad to hear that you passed this along to your Broker.  I'm thrilled that you are choosing to use the information constructively.
  • Hi Rebecca - I agree that no one wants to be sued.  And, even more, it's so nice to sleep well each night knowing that we've done the right thing.
Feb 21, 2009 07:34 AM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate

Hi Zilkia - You get the gold star award for music originality! I love your suggestion to sing the new lyrics...disclose, disclose, disclose, disclose to the tune of Amazing Grace.  And, just in case anyone reading this doesn't know the tune, here's a link for you...http://ksolo.myspace.com/music/Elvis-Presley/Amazing-Grace

 

Feb 21, 2009 07:36 AM
Melina Tomson
Tomson Burnham, llc Licensed in the State of Oregon - Salem, OR
Principal Broker/Owner, M.S.

I had a similar situation a few years ago selling a condo. I required my seller to disclosure the pending filing of a lawsuit even though it had not occured. It was being discussed in HOA meetings.  Many other condos in the unit sold before hers because of the disclosure, but I know that I protected her from this exact situation.

I am sure there were disclosure lawsuits over the other units.  The owners were assessed $2,000 each for like 3 years to pay for the legal fees associated with the suit.

Feb 21, 2009 07:40 AM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
  • Hi Debbie - Glad to hear that Florida would have seen things the same way.  Full disclosure is the key.  People can forget things from time to time, but concealing material facts is simply lying by omission.
Feb 21, 2009 07:41 AM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
  • Hi Melina - Great example!  I hope your seller realized at some point that you saved them some future headaches.  But, sometimes doing the right thing for the right reasons just needs to be it's own reward.
Feb 21, 2009 07:47 AM
Anonymous
Carla Muss-Jacobs, Broker/Owner, EBA Portland, LLC

In this day and age, the real estate mantra has changed from:  Location, location, location.

It has now become: disclosure, disclosure, disclosure.

I'm the agent (on the other side of the coin) who sold Melina's condo!  This is how I met Melina.  I called her up on her one of her listings, on behalf of my clients.  She immediately told me about the condo issues, and this is what impressed me, not only with her as a real estate agent, but also as a ethical and honest person.  The information she supplied me was duly noted, and given to my clients.  They were able to make an INFORMED CONSENT on whether they wanted to proceed further or not.  They did, and we closed out.

Other condos were listed in the development at the same time, and my clients and I toured them as well.  They had the same conditions presenting.  Oddly, it was only Melina who brought forth the HOA's current issues within minutes of my first, initiated phone call.  Although I had known of the issues before Melina disclosed them to me . . . she didn't know that!  Nor, did she assume I did, or that it was my burden of due diligence.  She disclosed what she had knowledge of.  The other agents only made comments about the pending HOA issues (which included mold and siding issues) ONLY when I pressed them for more information.  Not upon first blush!

Feb 21, 2009 08:32 AM
#59
Christianne O'Malley
Dickson Realty - Reno, NV
Exceptional Service - Delivering Results in Reno!

Not only disclose, but as agents, the mantra should be - document, document, document. We should all keep copious notes when a deal like this crosses our path...it's never a question of IF something will come up later, but more a matter of WHEN...

Feb 21, 2009 08:53 AM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
  • Hi Carla - What a wonderful testimonial for Melina!  So good to hear that her efforts were appreciated by you and your clients.  Keep up the great work in Portland.
  • Hi Christianne - Oh you are so right, Christianne.  Thanks for the great reminder.  Going back to a file after a couple months would be difficult at best, but after three years...a nightmare.
Feb 21, 2009 12:47 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Marlene - yep, I read that story yesterday. Pretty interesting, but I was not surprised by the outcome. As our company attorney has always said - disclose, disclose, disclose. Better to be safe than sorry. Can you imagine having to try and remeber all that transpired 3 years ago? But there is not statute of llimitations on this sort of things, unlike ethics violations.

Jeff

Feb 21, 2009 02:33 PM
Brian Lee Burke
Kenna Real Estate - Lone Tree, CO
Broker & Advising Expert-Kenna Luxury Real Estate

Just chiming in about some of the same thoughts as above. If there was an agent/s involved surely they would have been included in the lawsuit. Did they do their job/due diligent. Quite frankly I am suprised that even with the info that was available the buyer still decided to go ahead with the purchase. Once we found out (buyers agent) that the seller forgot to mention an insurance claim in the disclosures. Come to find out there for was fire! :o). Seller didn't mention that either. Our buyers didn't feel comfortable purchasing the home after that. ~Rita

Feb 21, 2009 02:37 PM
Krista Fuchs
Prudential Fox & Roach - Exton, PA
Chester County Realtor - (484) 459-8025 - Home Buying and Selling

Very interesting!  I recently had a condo sale that didn't go through because the association was recently in the middle of a lawsuit and the seller didn't know.  It came out in the condo docs that we got 1 wk before settlement.  Well the bank didn't like the sound of that so no mortgage commitment and then bye bye Buyer! 

Here's a little twist.  This suit was by a buyer that had water damage.  My Seller has had no damage but should he disclose what this suit is about before offers are submitted?

 

Feb 21, 2009 02:45 PM
Nelya Calev
John L Scott - Bellevue, WA

Ok, I must admit that's scary. I agree with disclosing. On our disclosure form we have -Yes, -No, -I don't know. So here is my question if he came back and said I don't know about law suit would he have lost the case?

Feb 21, 2009 03:28 PM
Roland Woodworth
Blue Cord Realty - Clarksville, TN
Blue Cord Realty

Just goes to show that DISCLOSURE is a MUST... As a couple above stated.. when in doubt.. DISCLOSE...

Feb 21, 2009 03:28 PM
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

"Disclose Disclose Dislcose" ---- your summary was right on.  The great practice as indicated in your post and in some comments "When in doubt, disclose" !

Feb 22, 2009 12:24 AM
Elizabeth Cooper-Golden
Huntsville Alabama Real Estate, (@ Homes Realty Group) - Huntsville, AL
Huntsville AL MLS

Sounds to me as if the seller should have disclosed ALL the facts.  You know what is so scary? Alabama is a "Buyer Beware" state...Yikes, huh?  NO disclosure here.

Feb 22, 2009 01:22 AM
Jason Rose
123 ConEd LLC -- Michigan real estate continuing education - Farmington Hills, MI
www.123ConEd.com

Hi Marlele.  It is always good to read about recent court decisions that involve real estate transactions because such information helps remind everyone of things to watch out for.  Thank you!  The moral of the story is to disclose everything. 

Feb 22, 2009 01:26 AM
Richard Lecinski
Long Realty Company - Oro Valley, AZ

Sellers should disclose everything as honestlly as possible. Things do come back.

Feb 22, 2009 02:01 AM
Dawn Maloney
RE/MAX Trinity Northeast Ohio Real Estate Specialist - Hudson, OH
330-990-4236 Hudson & Northeastern Ohio

Sellers who do it right, do alright when it comes to unhappy buyers. Omission of important information will come out in the end.

Buyers need to realized that they are buying a house and there is responsibility. No house is perfect.

Feb 22, 2009 02:38 AM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
  • Hi Jeff - Yup, I agree.  I can't imagine trying to remember every detail three years after the fact.  Sure stresses why we need to keep notes.
  • Hi Rita - Like you, I wondered where the agents were in all this.  Unfortunately, the article didn't mention anything about the agent's responsibility. L
  • Hi Krista - Seems to me that a seller can only disclose what they know.  Often sellers are unaware that there is litigation.  That's where the HOA info becomes invaluable to buyers and their agents.
  • Hi Nelya - In this case if the seller had checked the "I don't know" box, he would have been lying.  He was fully aware of all that transpired as a member of the HOA Executive Board.
  • Hi Roland - Disclose, disclose, disclose seems to be a pretty common thread here.  It's been my experience that it's better to learn sooner rather than later in any transaction.
  • Hi Elizabeth - Wow! That is interesting.  I wasn't aware that Alabama has no disclosures.  That sure puts all the responsibility on the buyer and their agent doesn't it?
  • Hi Jason - I think these cases are fascinating, too.  And, you can't always guess exactly how they will turn out.
  • Hi Richard - You are soooooo right..."things do come back (to bite you in the keester).  Kind of reminds me of something my mom taught me years ago, "what goes around comes around."  Put another way, we reap what we sow.
  • Hi Dawn - You are absolutely right.  No house is perfect.  It is the seller's responsibility, however, to present a true and honest picture of what the buyer is purchasing and not cover up any material facts.  The information this seller did not disclose was more than a spot on a carpet or a hole in a wall covered by a picture...this was a contingent water problem.  As Realtors® it's our job to help people identify those things they can live with and when it is best to walk just away.

Feb 22, 2009 05:31 AM
Connie Hall
All Brokers Real Estate - Portland, OR

Simply put, when it doubt give more information than you think you have to so as to protect your you know what!

Apr 24, 2010 07:02 PM