I bought a house back in December that was ‘bank owned’. The disclosure form was marked out, as they said that they didn’t know the condition of the property. We’re first time buyers and I went with a VA loan…I had a VA home inspection, but now I understand that this inspection is different than a home inspection, which we didn’t have.

Our basement is unusable, due to water invading after any rain we have. I’ve done some things outside the house to maybe help a little. We are livid, because the basement was very clean, new paint on walls and floor and no evidence of a wet basement or that wet smell.

Our neighbor introduced himself to us and told us that we’ll have water problems as the pervious owners did. I didn’t think much of it and thought the basement was in good condition. We got a huge rain this past Sunday and he saw me out and came over. He asked if I had water in my basement and I said I did. I told him about the disclosure form and how we feel we’ve been duped. My neighbor then told me that he had past conversations with the listing agent about the water problems with the house, before we bought it and that he knew about the water problems.

We contacted our Realtor and she told us that the bank is already in litigation for this same thing…it seems this bank is buying property, not disclosing anything and turning around the property for a quick sell and profit.

I contacted a home inspector and he told me that if they covered the evidence of water with paint and such, he wouldn’t have caught it anyway during an inspection.

Do we have a case of fraud here? Shouldn’t the listing agent inform the sellers that there have been reported water problems from the neighbor? Also, as much water as we have in our basement, someone had to have known about it and then covered it up.

I am seeking local legal advice and getting my neighbor to sign an affidavit, but I’d like to know the board’s thoughts on the matter.

Thanks

Banks sell foreclosed property As-Is. They have never lived in a property and have no information as to the condition. That is usually why the disclosure section of the form is crossed out.

Most banks give 5 days to have any inspections completed by the buyer. You probably had a VA appraiser look at the home to make sure the value was in line with the loan amount. Failing to have the home inspected by a professional inspector working for you was a mistake, your agent should have advised you not to omit this.

If you relied on the sellers (listing) agent to advise you then you may well be out of luck. They are under no obligation to disclose information of which they have no direct knowledge. Rumors from a neighbor are just that.

If you could prove (in a court of law) that the listing agent knew of the problem and had the basement repainted then you might have a case.

Thanks for the reply bristowVA...our property wasn't a forclosure, although if it were, it was never communicated to myself or my agent as being a forclosure...we specifically asked. With this I'll file a Discovery in court to review the contract when the bank purchased the home...also we're still not sure if this is an actuall "bank" per say or an investment company...the "sellers" were 'Liberty Assets'. I really didn't investigate which. So maybe using the term "bank owned" is poor choice of words on my part...

Also, our Realtor told us that 'Liberty Assests' are currently in litigation for the same thing that's happening to us. Also, our realtor belives the code of ethics were violated by the listing agent when told of the water problems by the neighbor (our neighbor has signed an affidavit) and not reporting it to the sellers...i now have 180 days to file a complaint with the board which includes court.

Our Realtor said to seek legal advice, but she recommended going after both parties involved.

The info from the neighbot to me is not a reliable source of info. I have a bank owned property listed and a neighor wants to buy the property CHEAP. I presented his offers to the seller and they get rejected to the point the seller requested I don't submit his offers unless its a minimum of XX.

He's got a whole list of items thats wrong with the house. He knows this because his son was friends with the former owner and was in the house a couple times. Thats not reliable info.

The neighbor shows up at the showings (he's a retired gentleman that rarly leaves his house)and strikes up conversations with the showing agent and the potential buyers. I don't believe the info is true. I did pass on the info to the seller as an FYI. We are not investigating it, it's as is. I think the neighbor is looking to buy the property for really cheap.

You are on the right track though in seeking legal advise if you feel that a wrong has been commited.

REODayton hit it on the head as far as I can see. If you're concerned about fraud, that would be a question for an attorney rather than a real estate agent.

Best of luck, and please keep us informed as to how it goes for you!

I would say you probably have grounds for legal action against the seller and the seller's agent/broker. the seller sounds like an unethical investment company, with an equally unethical listing broker. the listing broker typically has a duty to inform the buyer of any material defects that the broker knows, or should know from a reasonably diligent inspection of the property. this is an affirmative duty of disclosure, meaning that the broker cannot claim ignorance or withhold information if he is not asked about it. if the broker was informed of a defect by a neighbor, it is incumbent upon the broker to disclose that information and at least suggest that the buyer obtain more extensive inspections. in this case the seller (may) be exempt from a disclosure statement, but the broker still has a duty of disclosure.

ask your Realtor to give you an MLS printout of all of the seller's broker's transactions in that general area over the past few years. I would find it hard to believe that if the broker has previously listed or sold any properties in that area, that he would NOT be aware of this type of problem, since this is usually common knowledge.

this information is easily found via the tax records, which your Realtor should have access to online. you can also visit the county recorder's office and view/print the recorded trustee's deed or warranty deed.

The buyer has the duty to inspect, and the buyers agent has a duty to advise their client of their right to do so, and the difference between the VA inspection and a property inspection. You might want to include your Realtor as a defendant in your litigation. It sounds to me like she is passing the buck and trying to distract you from the fact that she may not have represented you in the best way possible.

In my state, any seller who has never lived in the property is not required to complete the disclosure fully. That would include investment property owners, asset management companies, banks, people who bought it to live in and never moved in, etc. It really wouldn't matter how 'Liberty Assets' acquired the property - just the fact that they never lived in the property and don't have first-hand knowledge of its conditions and prior damage. I truly don't believe anything they or their agent did is actionable. Your Realtor, on the other hand....

Well, I am not a lawyer, but I disagree with TB in TX. I don't think the buyer's agent is liable. If the water problem in the basement was not something she reasonably could have known about, she did nothing wrong.

But the listing agent was told by the neighbor that there was a problem. I'm not sure about the legal status of that, but in this case the neighbor wouldn't have any reason to lie; he wasn't trying to purchase the house. Plus, if the neighbor said he had been in the basement and actually seen the flooding, how can the listing agent ethically keep mum about that? He should at least have mentioned it. He didn't have to say "there's a water problem in the basement" but I think he should have said "the neighbor claims there's a water problem in the basement."

In Texas, we have a form that buyers sign declining a property inspection if they choose to do so. I didn't say that the buyers agent should have known about the water damage, but she failed to look out for the best interests of her clients by advising them of the difference in the inspections and recommending that they have a property inspection.

The day I fail to recommend a property inspection is the day that I should just quit real estate.

Right, we have such a form as well. The original post was not clear about why a property inspection was not done, so we don't know if the agent advised them to get one or not. If she didn't, then she could be partially to blame, although the original post noted that this kind of damage may not have been detected by a professional home inspector either.

I still think if the listing agent had credible information from the neighbor about water in the basement, he should have disclosed it. (Just finished my continuing ed "Disclosure" class, can ya tell?)

I guess Mayot could use the basement to store boating equipment. He may have a hard time finding an attorney to take the case, because the potential or actual damages might be too low.

A basement with new paint on the walls and floors should have been a tip off to both the buyer's and seller's agent that there might be a water problem in the basement.
Generally, people don't paint concrete walls and floors unless they are trying to hide old stains.
And while disclosure laws vary by state, an owner still has to disclose conditions, repairs and problems that occur during their ownership, even if they never lived there.

Your seller could pursue this neighbor with legal action for interfering with a business transaction. I have had the same situation recently when a "well meaning neighbor" showed up at one of my listings and told the showing agents and their buyers an amazing tale of home invasions and break ins. He said he was held at gunpoint TWICE. Naturally the buyers said "let's get the heck out of Dodge."

The agents passed this on to me along with a description of the guy - the sellers have no idea who he was or where he came from as they know all of the neighbors nearby. If we knew who he was we would have an attorney send him a letter asking him to cease and desist or face a lawsuit.

(I had called the state police, barracks is actually less than ten minutes away from this location, and they told me there was no truth at all to the neighbor's story.)

I don't know about that. Some people don't like the looks of naked concrete and/or cinder block...painting the walls would give it a more finished look and be a lot less expensive than sheetrocking.

I wouldn't automatically assume there were problems just because it was painted.

The buyers should have had a thorough home inspection. I will toss my hat into the "Contact an attorney" ring.