WHAT ARE MY OPTIONS IF I DISCOVER AN UNDISCLOSED DEFECT IN MY HOUSE AFTER TAKING POSSESSION?

What if something was wrong with your newly bought house at the time of purchase, and someone — the seller, the seller’s agent, or the inspector — could or should have told you about it beforehand, but didn’t? Such problems may come to light days, weeks, or years later, leaving you wondering whether you should have to shoulder the entire financial burden. Indeed, in such cases, you may be able to ask the responsible person to pitch in. Ideally, you’ll be able to resolve matters without filing suit in court. But this article will start by analyzing whether a lawsuit is possible, so that you can work your way up to one, if need be.

Of course, you probably knew at the time of purchase that the house wasn’t in perfect condition. Some problems, such as a crack in the front walk, may have been obvious. Others, such as aging plumbing, the seller may have disclosed to you in the course of the sale. Your home inspector, assuming you hired one, probably told you about a few more problems. And even after the sale, your home probably continued its normal process of aging and decaying, leaving you to deal with the consequences — without any grounds to run back to the seller to complain.

Will your insurance company cover the damage? If so, there may be no need to take action on your own.
Who’s Responsible?

Even if you think you’ve been wronged, you can’t sue everyone involved in the sale of your home. The responsible parties might include one or more of the following

鈥 The seller. Nearly every U.S. state has laws requiring sellers to advise buyers of certain defects in the property, typically by filling out a standard disclosure form before the sale is completed. (This responsibility remains even if you bought the house “as is.”) The standard form usually asks the seller to state whether the property has certain features (like appliances, a roof, a foundation, systems for electricity, water, and heating, and more) and then rate or describe their condition. Some states’ disclosure laws are more comprehensive than others, and if a feature isn’t on the list, the seller may not be required to speak up. Also, the seller isn’t usually required to scout out problems. But if there’s clearly a place where the seller should have stated a problem but denied it, your job is to try to figure out whether the seller in fact knew about the problem. For example, if the seller patched over or hid problem areas, or if the neighbors have told you about the seller’s efforts to deal with a problem, the evidence is on your side.

鈥 The seller’s real estate agent. Some states’ laws make sellers’ agents liable for failing to disclose problems they observed or were told of by the sellers; though often their duties are fairly limited. Again, check your state’s disclosure laws and try to figure out whether the problem would have been apparent to the broker, but not to you, before the sale.

鈥 Your inspector. Hopefully, you got a home inspection before buying. In theory, the inspector should have spotted problems that the seller wasn’t even aware of. If the inspector missed problems that an expert (a professional peer) should have noticed, the inspector may be liable. Read over your inspection report to see what it said about the area in question. Some buyers are embarrassed to find that the problem is spelled out right in the report, or that the problem falls within an area that the inspector rightfully excluded from the report.

Do You Have a Case?

Once you’ve figured out the possible responsible parties, you’ll want to know whether their action — or inaction — entitles you to compensation. If your situation meets the criteria below, you may have a case. We’ve collapsed a few legal principles into this list, but it will apply to most situations in most U.S. states.

鈥 The defect was there before you bought the home. Problems that started since you bought or are a natural result of your home’s aging or your lapses in maintenance are yours to deal with. Of course, determining when a problem started can get complicated. For example, a blockage in your sewer line may be a new problem, or it may be a recurrence of a long-time issue with roots growing into the pipes. You may need a professional’s analysis. But if the problem could have started before you bought the house, keep reading.

鈥 It’s not an obvious defect that you could have seen yourself before buying. If there was a huge crack running across the living room ceiling at the open house and you’ve only now decided to bring it up, no dice. But if it was hidden by a false ceiling, the matter may be worth pursuing. Don’t worry if your inspector should have seen the problem. That just means you’ve got a potential claim against the inspector, too.

鈥 No one told you about the defect before the sale, or someone actually lied to you about it.The responsible party may have been the seller, the seller’s agent, or the inspector, as explained above.

鈥 You relied on the lies or nondisclosures. This one’s probably easy. If, for example, you took the seller’s word that a remodel job was up to code in deciding to buy or in setting your price, you acted in reliance.

鈥 You’ve incurred monetary damage as a result. Your costs of repairs or related damages (such as destruction of your personal property due to a flooded basement, or a decrease in your property value due to an undisclosed environmental hazard) will become legally speaking, the “damages” that you may collect — even if you haven’t paid any out-of-pocket costs yet (for example, you need a new foundation but haven’t actually hired a contractor to build it). But don’t expect to collect any damages that go beyond the house itself, such as for your pain and suffering.
If, after reading the information above, you think you have a good legal claim against your home seller, selling agent, or inspector, don’t rush to court quite yet. You may be able to recover what you’re owed more cheaply and with less stress by using one or both of the following option

鈥 Demand letter. Send a demand letter to the responsible party asking for the costs to repair the defect.
鈥 Mediation. Tell the responsible party about the problem and — assuming they don’t agree to compensate you or fix the problem right away.
Last Resort: Filing a Lawsuit
If you aren’t able to resolve your dispute with one of the methods above, you’ll have to decide whether to file a lawsuit. If the problem will cost less to repair yourself than to pursue in court, you might as well chalk this one up to experience. If not, however, you shouldn’t have to pay for someone’s outright lies or shoddy work.
In legalese, you could potentially sue someone based on any of the following, or some combination of them:
鈥 failure to disclose (according to your state’s statute)
鈥 negligence
鈥 fraud
鈥 breach of contract
鈥 breach of warranty, or
鈥 negligent misrepresentation.

Here’s how to take the first steps to filing a lawsuit:

鈥 Make sure you’re within any appropriate deadlines (“statutes of limitation”). Every state puts limits on how long you have, from the date you discover a problem or reasonably should have discovered it, to sue someone. They don’t want you dragging the seller into court 20 years after the sale, when no one recalls what happened. Most statutes of limitations are somewhere between two and ten years, but it will depend on where you are and what type of claim you have. Find your state’s laws on this with either an online search, by contacting your state’s housing regulatory agency, or by consulting an attorney.

鈥 Consider small claims court. Filing in small claims court allows you to proceed with your case without a lot of the expensive administrative hassles of a “regular” lawsuit. You can represent yourself (in some states, attorneys are actually forbidden), the rules are not usually as rigid, and your case should be resolved relatively quickly. However, every state places a dollar limit on the amount of damages you can sue for — usually somewhere between $1,500 and $15,000. Even if your damages are over the limit — for example, if the repairs cost $8,000 and the limit is $5,000 — bringing a suit for $5,000 and forgetting about the rest might make economic sense because you will save time and attorney’s fees.

鈥 Decide whether to bring suit in state court. If the amount of money damages you’re asking for exceeds the small claims court limit, your next option is filing suit in state court, most likely with the help of an attorney. Some attorneys will take this type of case on a contingency basis, meaning you don’t pay a fee upfront but pay a large percentage (30-40%) of the damage award. You may still be responsible for paying court costs and other fees, plus expenses such as the attorney’s phone calls and postage. Or, the court may award reimbursement of attorney’s fees as part of your damages.