::Don't fall victim to a lying home seller::

Don't fall victim to a lying home seller


Be a smart homebuyer and don’t take sellers at their word. If they're holding something back, it could cost you.

By Amy Hoak of MarketWatch
Buyers beware: In a tough real-estate market, it's tempting for sellers to stretch the truth or lie by omission on their disclosures, and cover up minor — but material — problems with a home in order to close the deal. That makes it even more essential for buyers to do their due diligence before closing, including having a professional home inspection and even chatting up the neighbors to make sure they discover all essential facts about a place before buying it.

"When times are tough, people get tougher," said Mike Crowley, broker of Spokane Home Buyers in Spokane, Wash. "Verify that they're telling the truth."

Seller disclosures vary from state to state, but generally require documentation of material problems with the home, such as leaks in the roof, past or present flooding issues, pest problems, presence of structural issues, lead paint, mold problems, electrical problems and water or sewer issues.

"Each state has its own disclosure requirements, and municipalities within the state have specific requirements," said Edward A. Mermelstein, a real estate attorney with Edward A. Mermelstein & Associates in New York.

"Then there's a slew of disclosures that are not required by the state that an experienced broker or attorney would know about and ask about," he said. For example, in some areas, including Florida, there recently has been a high incidence of faulty drywall used in home construction, he said. If it's possible that defective materials were used in the home a buyer is considering, they should demand that be disclosed.



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Sellers are expected to fill out disclosure documents honestly, answering questions about the property to the best of their knowledge. They also aren't supposed to conceal any defects of the home, said Neil B. Garfinkel, a real-estate attorney with Abrams Garfinkel Margolis Bergson, in New York.


But as a buyer, don't take sellers at their word. If they're holding something back, it could cost you.

Burden of proof

Sure, if sellers do fib — and it can be proved that they knowingly weren't upfront about something — a wronged buyer could sue for damages.

"If a purchaser who has children is buying a home and the seller knows there has been lead (paint) discovered in the home, God forbid a child gets sick, and you're going to have a serious lawsuit on your hands," Mermelstein said.

The tricky part is coming up with proof the seller had knowledge of the problem and opted to lie. Proving this kind of fraud can be tough, said Benjamin D. Clark, president of the National Association of Exclusive Buyer Agents. And sometimes the legal costs aren't worth pursuing the case.

That's why you're better off catching discrepancies before closing, when a seller is still willing to negotiate in order to finalize the deal, he said.

Still, sometimes, a buyer can be successful in proving a defect was omitted from disclosures or covered up, and receive compensation to fix the problem after closing — without having to go to court, Crowley said.

As an example, he referenced a case in Colorado. At an open house the buyers attended — and at the walk-through before closing — candles and cookies scented the home. But when the buyers moved in, there was a strong smell of cat urine throughout the house. They called their attorney, a strongly worded letter was written, and the sellers provided money to replace padding and carpeting, Crowley said.

Crowley suspects the buyer could have easily proved a cover-up in court. "The people weren't willing to gamble. They did pay for it."

Michelle McLean also discovered an issue after purchasing a home in Vernal, Utah. It had a septic tank, but she found out only after closing she was required to hook it up to the city's sewer line. Clark said the fact could have been specified within Utah's standard seller disclosures.


McLean contacted her real-estate agent, and the seller ended up paying for the hook-up.

Catch before closing

You'll have a much easier time getting problems taken care of prior to the completion of the sale. Get a professional home inspection to reveal issues, but don't stop there.


The more information you can request, the better off you are, Garfinkel said. "It puts you in a better position to avoid those kinds of problems," he said.


Before closing, Clark and a client of his discovered there was a history of sewer problems at one particular home, which the seller didn't disclose. The seller was confronted about it, and he spent between $5,000 and $7,000 to get it repaired.


"We talked to the neighbors," Clark said, and one of them indicated that a tenant moved out of the home due to plumbing issues. "We hired a plumber because of that tip, to snake the sewer line with a camera. A lot of connections were broken, parts had cracked and fallen in," he said. Roots interfered with the line as well.


Talking with neighbors that surround the property will often help turn up any big problems with a home or uncover property boundary disputes, Clark said.


All of this isn't to say that most — or even many — sellers lie on their forms, or that the disclosures aren't useful to buyers.


"In my mind, the two benefits of those forms are that a buyer gets information from sellers, but also buyers are reminded of the things that might be on a property," said Ralph Holmen, the National Association of Realtors' legal counsel. "It's like a checklist of things to investigate."

Remember, too, that when you're buying an existing home it's important to have realistic expectations, Crowley said. Know what you're getting into, but understand that sellers might not know about a particular problem in the home. And there's nothing to say that things won't pop up right after you close.

"If you have unreasonable expectations, you will always find something to be disappointed with," Crowley said. "There's always going to be a surprise with a used home. My water heater went out the first week."