Featuring America's Home Inspector: Nationally Syndicated Columnist, Barry Stone

Agent Withheld Disclosure of Damage

The House Detective:  by Barry Stone, Certified Home Inspector

Dear Barry: I am a Realtor and recently closed escrow on a bank-owned property. The bank insisted on an “as is” sale, which is customary with foreclosed homes. My buyers hired a home inspector but decided to forego a termite inspection. After moving in, they found termite damage in the kitchen and dining room. We’ve also learned that the listing agent knew about this damage but withheld disclosure because it was an “as-is” deal and because the seller (the bank) was not required to disclose defects. Do you think my buyers have recourse?  Karen

Dear Karen: People often misconstrue the term “as is” to mean a release from the requirements of real estate disclosure laws. In the case of lenders who foreclose on delinquent mortgages, there is, in fact, an exclusion from the requirement to disclose. But this exclusion does not excuse Realtors who withhold disclosure of known defects. The requirement to disclose all known defects is an ethical and legal imperative for all real estate agents. Withholding knowledge of a defect, such as termite damage, is not acceptable for an agent, even when the seller of the property is a bank.

In the situation at hand, the listing agent should pay to repair the undisclosed damages. If the agent does not accept that responsibility, the matter should be reported to the state agency that licenses real estate professionals. The complaint, however, should be filed by the buyers, not by another agent.

Sellers Lied About Buried Fuel Tank

The House Detective:  by Barry Stone, Certified Home Inspector

Dear Barry: The home I am buying has a buried fuel tank. This was disclosed by the sellers and their agent weeks after we entered the transaction. At first, they said the tank is made of fiberglass and is only five years old. When my agent and my attorney asked for documentation, the sellers offered to provide it on the day the transaction closes. We asked that it be provided on the day of the final walk-through, but they did not have the papers on that day. Instead, they admitted that the tank is actually 38 years old and is made of steel. If I cancel the deal now, I could lose my deposit. What can I do? Maryann

Dear Maryann: The sellers and their agent have been less than forthright in their disclosures about the fuel tank. First they said that the tank is fiberglass and only five years old, while attempting to withhold documentation till the last day of the transaction. By then, the time for consideration would have passed. On the day of the final walk-through, they reneged on the documents and admitted that their original tank disclosures were false.

In view of their misleading disclosures, you should be able to cancel the transaction without losing your deposit. Check with your attorney to see if this is correct.

If you wish to proceed with the purchase, the closing date should be extended until the true age and condition of the tank can be substantiated. The seller and agent should not complain about an extension because it was their lack of transparency that created this problem.

A critical consideration is the potential for soil contamination and a costly environmental clean-up. A steel fuel tank that has been buried for decades is likely to have rust damage. Fuel seepage into the ground involves serious financial liability. Therefore, an environmental assessment of the tank should be conducted by a qualified, licensed professional, and your purchase of the property should be contingent on the outcome of that evaluation

Proceed with caution if you remain in this transaction. Besides the risk of a costly environmental clean-up, you are dealing with sellers whose credibility can no longer be trusted. Therefore, you should insist upon full and accurate disclosures regarding the fuel tank. At this point, that is essential and should not be subject to debate.

If for any reason you have not already hire a qualified home inspector, now is the time to do so. Who knows what other defects have also been concealed?