Saturday, April 23, 2016

Clean Your Room - A Suggested Additional Provision For Your Offer

When disappointed buyers come into my office, I often hear different versions of the same story:

I looked at the home and noticed nothing wrong with the basement walls.  The sellers had shelving, boxes, their Christmas tree, RUBBERMAID containers, crock pots, coolers, books, bulk food, camping supplies, and luggage against the walls.  Those things were still in along the basement walls at the time of the home inspection, and my home inspector did not note any problems with the basement walls.  I walked through the home just before closing and discovered huge cracks in the basement walls.  When I frantically called my agent, she told me that I could not bring back my home inspector or bring in a structural engineer.  She told me that I had to close on Friday and that I could be sued by the sellers if I failed to close.  I closed that Friday morning and have since learned that two of my basement walls need to be excavated and reinforced at an estimated cost of $25,000. 

This is not an easy case.

The standard WB-11 Residential Offer To Purchase contains a inspection contingency (lines 410-26).  This contingency gives a buyer a certain amount of time to have a Wisconsin registered home inspector inspect the property and write a report.  Within the offer's deadline, the buyer must deliver a copy of the home inspection report to the sellers along with a written notice listing the objectionable defects identified in that report.  If the buyer does not deliver a Notice of Defects to the sellers within the offer's deadline, the inspection contingency is deemed satisfied and no longer provides an "out" for the buyer.  

The standard offer also allows for a pre-closing walk-through (lines 202-15).  The purpose of that walk-through is to make sure that there has been no significant change to the the property since acceptance.  If the property has been damaged between acceptance and closing, the buyer might be able to cancel the offer and refuse to close.  Under our scenario, however, it seems likely the basement wall cracks existed prior to acceptance even if they were not visible to the buyer or his home inspector.  If the buyer refuses to close, the seller could sue the buyer for damages under the standard offer's default provisions (lines 281-84).

The buyer goes through with the closing, hoping that the basement walls do not require expensive repairs.  When he learns otherwise, he wants to sue everybody - his buyers' agent, his home inspector, the sellers, the appraiser, the municipal building inspector.   

The buyer likely does not have a negligence claim against his home inspector.  Wis. Stat. s. 440.975(2) sets forth the statutory standard of practice for home inspectors:

A home inspector shall perform a reasonably competent and diligent inspection to detect observable conditions of an improvement to residential real property. Except for removing an access panel that is normally removed by an occupant of residential real property, this subsection does not require a home inspector to disassemble any component of an improvement to residential real property. A reasonably competent and diligent inspection under this subsection is not required to be technically exhaustive.

If that isn't clear enough, Wis. Stat. s. 440.975(6)(f) explains that this statute does not require home inspector to "[d]isturb insulation or move personal items, furniture, equipment, vegetation, soil, snow, ice or debris that obstructs access to or visibility of an improvement to residential real property or a component of an improvement to residential real property." 

The buyer might have a misrepresentation claim against the sellers based on their failure to disclose the basement defects in their Real Estate Condition Report.  The sellers will argue that the buyer was not deceived by their representations because he learned the truth before closing.  The buyer will argue that his pre-closing discovery of basement wall cracks is irrelevant because he was legally obligated to close by that time.  Who knows what a judge or a jury will decide?

This dispute could have been avoided.  The buyer (or his agent) could have written an additional provision in the space provided in lines 165-172 or lines 435-42 requiring the sellers to move all of their personal items, shelving, furniture, and debris away from the walls within 10 days of acceptance (or at least 24 hours before the home inspection).  Alternatively, the buyer could have included an additional provision allowing him to cancel his offer in the event that a Wisconsin registered home inspector reports that the sellers' personal items, shelving, furniture, or debris obstructed his access to or the visibility of any component of the property. 

I try to help disappointed buyers achieve justice in court, but I can also help people who are looking to purchase a home.  You can reach me at rudolphkuss@stevensandkuss.com