real estate

Seller was deceptive about triplex defects

Steve McLindenDear Real Estate Adviser,
We placed a bid on a triplex that was accepted, then we ordered a home inspection. It revealed rotted support beams, an undisclosed well, asbestos, chimney damage, no attic venting, major electrical problems through all three units and much more. The inspector said a licensed electrician was needed at once because there was reversed polarity, open junction boxes, etc. The seller didn't disclose these problems and won't do anything about them. Our agent says she'll probably just find a less-discriminating buyer. Is this legal? What are our options? Should I report the seller?
-- Annie O.

Dear Annie,
Surely you can overlook a few rough spots. I am joking of course, but in a sober, whistling-past-the-graveyard sense. These aren't your garden-variety flaws, after all. Some even sound potentially deadly. And yes, the seller has a legal obligation to disclose such glaring defects to potential buyers in practically all instances -- even if she is selling "as is" -- and this lady is really rolling the dice by ignoring such potential hazards. Her apparent philosophy of saying little in hopes of gaining a lot is not unique, unfortunately.

Let me applaud your thorough inspector. Some shy away from environmental problems and some electrical issues, and yours didn't. He may have saved you a lot of angst.

Now let's explore your options. These are:

  1. Exit stage left, or
  2. exit stage right.

You really don't want that triplex building unless it has been priced way, way down to a sum that would cover the countless thousands of dollars in needed remedial work and your sweat equity. But I'm not so sure that even a steep markdown is a justification to proceed here because there could be other hidden defects.

Withdraw that offer

By the way, I can't imagine a scenario where that seller would have contractual leverage over you, given the home's condition and all those serious flaws she somehow happened to not mention. While each state (and city) can have different disclosure requirements, you are surely off the hook and I hope you have rescinded your offer by now and retained your escrow deposit.

Sellers such as this who don't disclose defects, I might add, can be sued by a buyer after a sale and held responsible for repairs. A judge can sock a deceptive owner for punitive damages and legal fees as well or even nix a sale.

What about reporting unsafe conditions?

What to do about the dangerous conditions, if anything? That's a tough one. While most people will opt not to get involved because it's the path of least resistance, you could always report the place to city code-enforcement department if it's really as dangerous as it sounds and you are concerned for the safety of future occupants. I'm sure you wouldn't sleep so well if news of a blaze at that address appeared on your TV screen one night. However, neither private home inspectors nor real estate agents are legally obligated to report such conditions to authorities.

Or you could send a registered letter to the owner mentioning your inspector's alarming findings and the imminent danger to future occupants. Depending on which municipality the house is located, it may be subject to a "change of ownership" city inspection anyway after it sells because it's a multifamily property. Such an inspection would reveal some of those glaring flaws and give added ammunition to a new owner for a nondisclosure lawsuit, you could mention. Sadly, I suspect the owner won't flinch.

But kudos on your conscientiousness and due diligence. I wager there are plenty of other triplexes and other modest residential investment properties worth pursuing out there that are on much less shaky ground. Good luck in your search!

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