Here is the situation.

Home purchased for a flip, remodeled and on the market since June 2007.

A potential home inspection client calls to schedule an inspection. She states that AFTER they went under contract to purchase the house, her husband found out that someone he works with tried the buy the same house 2 months earlier and walked away because of structural issues with the foundation, electrical problems and water in the basement.

The sellers inquired to their buyer's agent (dual agency, not dual agent, same office, different agents) and was told that she knows nothing about that and that an inspection report is confidenctial between the buyer and inspector (agree,but hold that thought)therefore they don't know anything.

The buyer tells her agent that if she had known about these problems she would not have placed a bid on that house. There is no mention about any problems at all in the disclosure statement that is dated June 2007.

I start the inspection today and the home initially appears to be in good shape until I go into the basement and I am able confirm everything that they already knew about the house. The buyer's problem was that they found this out after they were under contract and then had to spend money on an inspection.

The old stone foundation is collapsing inward and it terrible shape. This is not a normal settling issue, this is a major problem. There is evidence of flooding in the basement and a sump pump (improperly installed) is in place.

The disclosure was checked No when asked if there is a sump pump or water problems.

Here is the issue. Since they know someone else attempted to buy the same house when listed with the same agency and they backed out because of major structural problems,......why wasn't any of this disclosed by the seller or listing agent?

I don't think you let buyer's walk away and give them the deposit back without knowing why. In addition, there was a price reduction after the last inspection which everyone is in denial about.

This is PA with a PAR sales agreement through an MLS office.

Sometimes it helps to re-familiarize agents with the COE:

Duties to Clients and Customers

Article 1
When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01)

• Standard of Practice 1-9
... Information concerning latent material defects is not considered confidential information under this Code of Ethics. (Adopted 1/93, Amended 1/01)

Article 2
REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law. (Amended 1/00)
• Standard of Practice 2-1
REALTORS® shall only be obligated to discover and disclose adverse factors reasonably apparent to someone with expertise in those areas required by their real estate licensing authority. Article 2 does not impose upon the REALTOR® the obligation of expertise in other professional or technical disciplines. (Amended 1/96)

• Standard of Practice 2-5
Factors defined as “non-material” by law or regulation or which are expressly referenced in law or regulation as not being subject to disclosure are considered not “pertinent” for purposes of Article 2. (Adopted 1/93)

If I were the listing agent and a home inspection revealed significant defects (that were not part of the original seller's property condition disclosure), I would insist that the seller update the property condition disclosure. If they declined I would terminate the listing rather than being a party to misrepresentation.

At this point, since both agents are working under the same broker, it would be highly recommended that the broker become involved and protect the interest of his company by not allowing an agent to be a party to any misrepresentation from a seller not including known problems in the disclosure.

Thank you for your response Mr Forclosure. Honesty is the best policy.

::sniff, sniff:: You guys smell something here? I'm thinking it is BS.

How can both agents in the same brokerage not know why the buyer backed out? I understand the report is between the client(buyer) and the inspector, but c'mon. I don't think they would have been let out so easily to not even have to give their reason. Also, I would think that the buyer would be going in guns blazing in a sense. "I want out, the foundation is collapsing!" The price reduction is a red flag.

I would be very interested in asking the co-worker what was said. If this was said to either of them or the information was provided for them in writting, I would be making a report to the licensing board, as well as giving the broker a call.

It MAYBE possible that they do not know but I feel that is VERY unlikely. Agents ask the seller to fill out the disclosure forms, or should, in order to not accept liability for what is on the disclosure form. No matter though, I would think they need to read the form, and if they were in the basement, they could see very reasonably that the sump pump is there. If they were honest, this would bring up a flag.

The seller can also be commiting fraud since the sump pump is installed (incorrectly which means they might have done it themselves) and they said there isn't one. Since there is one, obviously there are water problems. AHHHHHH. I just don't know how some people sleep at night. "Yea I made $5,000 today. No big deal that my client's house will crumble on them while they are sleeping!"

I would think that just a concern for human life, people would warn others of the danger so at minimal they can get it fixed before their world falls down.

That's why every buyer needs to have an inspection, regardless of disclosure requirements. People forget, deceive and lie.
Also, although an inspection might reflect a condition that was previously identified, it might have gotten worse, or better if fixed.
Let buyers make up their own minds when receiving a current inspection report, some might still want to buy, some negotiate repairs or funds to fix before/after closing.

Oh yes, it is a must. I understand the "appearance" factor in making the seller fill out the disclosure statement, but in reality it is worthless. I would guess that the bigger problems are the most covered up too.



Very good point.



I agree 100%. Although I feel it is always a requirement and duty to give our opinion, we need to lay out all the facts and options and let our client decide. It will be their home.

With that said if I had a buyer as a client and they were interested in a house with a crumbling foundation, I would yell RUN!

Let the buyer decide, not based on your opinion, unless you are a licensed structural PE, but on the recommendation by someone who is qualified.
I've seen sellers pay to raise the house, pour a new foundation, sale closed.

[quote=pikes peak]

I've heard in most cases it doesn't make financial sense to do. I am not experienced at all, and I'm not even licensed. I'm just goin on what I have heard from others.

It depends on the house, on the area, on the cost to repair. I saw a very nice house a few years ago with a very bad foundation. Cinder blocks worn totally through, and gaping holes to the outside. Not only that, but there were asbestos-wrapped heat ducts, and the furnace had been converted from coal to gas. Upstairs the hardwood floors had water damage from burst radiators. The house itself was charming, and in a very nice area. Eventually it sold for 1/3 the original asking price. Someone needed to spend a ton of money on it, but as the defects were so glaringly obvious, I'm sure the buyer knew what they were getting into before they made their purchase.

The broker should be involve in this situation or the broker and the sellers can be sue later.

All reports should be given to buyers.

Disclose fully.

As they say "disclose early and disclose often". The agent and broker are just looking for a law suit for non-disclosure.