Can I Sue the Seller if My New Home Has a Hidden Septic Tank?
Your new home has a septic tank instead of being connected to the sewer. Or, something ominous is lurking underneath your floorboards, like termites, rodents or mold.
Your second thought might be: “I bought a house with an abandoned septic tank. Can I sue the seller after the closing for tricking me into buying a house that I would never have bought if I had more information?”
Yes, say many experts. But solving homebuyer’s remorse isn’t easy.
Yes, You Can Sue
All states handle these lawsuits differently, but generally, you can sue a seller after closing for not disclosing problems with your house.
If you think you need an attorney, you should get one in your state who specializes in real estate issues, says Ben Fisher, a real estate agent in Park City, Utah, and co-owner of The Fisher Group, which specializes in luxury homes.
Ideally, Fisher says, “the attorney will reach out to the responsible parties for not disclosing the problems, to settle things out of court.”
What To Consider Before Suing a Home Seller
Your house is an asset that will probably grow in value over time, but parts of the home will also lose value. Think of the roof. If you buy a house that’s been around for a while, there’s heavy rain soon after you move in and the roof starts leaking, that may simply suggest that you have old shingles and not that you were dealing with dishonest sellers.
On the other hand, if your seller didn’t disclose a septic tank, it’s now leaking sewage everywhere and you’re already contacting your homeowners insurance company to check your policy, nobody can fault you for wondering if you should turn to an attorney.
“In some states, nondisclosure of property damage is considered fraud,” says Joel Efosa, the CEO of Fire Cash Buyers. (Efosa specializes in buying fire-damaged houses. There’s actually an entire industry surrounding that concept.)
But while your sellers may have defrauded you, you still have to substantiate that.
“You will have to get an attorney to prove they knew about the flaws in court,” Efosa says.
You May Not Want to Sue the Seller
Kelly McCann is a lawyer with his own practice, Burnside Law Firm, in Portland, Oregon. He says that the seller typically isn’t the best person to sue.
“Generally, the home sellers’ insurance policies won’t cover a lawsuit for failure to disclose flaws in the home,” McCann says. “This is a problem for you, as the homebuyer. It means you may win the lawsuit but be unable to collect any money.”
McCann recommends that most people steer a lawsuit to the home inspector or possibly a contractor who worked on the home. On that note, your home inspection plays a critical role in helping you avoid unexpected surprises.
“Home inspectors have insurance coverage for their negligence. This means that if you win, you are far more likely to be able to collect money from the judgment,” McCann says.
It also may be fairer. The seller isn’t a real estate professional and may be as clueless with real estate as you are (no offense).
McCann also suggests training your legal sights on your real estate agent. For instance, if your sellers didn’t tell you about the septic tank, is that really their fault? Maybe the agent should have said something.
Or, sue the broker and the homeowner, McCann suggests: “There’s no need to choose between two liable parties.”
There Are Other Alternatives Beyond Suing
Fisher points out that when a major system in your home malfunctions, it can still be covered by a manufacturer's warranty or a home warranty that the seller purchased previously.
There are other avenues you may want to try, especially if you haven’t moved in yet and you’ve just put down your earnest money, which is the fund that shows the seller you’re serious about buying the home.
“You might be able to rescind the purchase agreement and get your earnest money back,” says Jennifer Spinelli, founder and CEO of Watson Buys, a cash home-buying company based out of Denver.
If you want to cancel a contract with a seller, and you don’t have a truly good reason for doing so, such as somebody selling their house with unknown (to you) septic tank problems, keep in mind that we live in a very litigious society. If you whip out your lawyer and threaten to not follow through with a purchase agreement, you could find that you’re the one being sued.
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