You Bought a Home and the Basement Flooded. Now What?

Well-informed buyers may spend six months looking at properties, learning the neighborhoods, and gaining deep market knowledge. Once they identify a winner, they may spend weeks getting to know more about the property. They make several visits to the home, read through the seller’s disclosures, read the entire home inspection report — and even accompany the inspector as he investigates the property.

All’s well, escrow closes, and the home is theirs. And then, within a few months, something unexpected happens. A window leaks, the furnace goes out, or there is an electrical problem. Now what? Does the buyer have to cough up yet more money to fix the issue, or is it the seller’s responsibility?

It depends.

In most states, the seller is responsible and liable for disclosing to the buyer any defects or issues that would have a negative effect on the property. Additionally, the property inspections give the buyer the opportunity to identify and address any issues the seller didn’t disclose.

As thorough as both processes can be, problems may arise after escrow closes that the seller didn’t know about and the property inspection couldn’t uncover. In this situation, it’s the responsibility of the current owner to finance any necessary repairs. That’s just part of life as a homeowner.

But what about a problem that could not be discovered during inspections — and it’s something the seller may have known about but didn’t disclose?

The Case of the Flooded Basement in Boston

There’s a story out of the Boston suburbs in which a new home buyer took ownership and, after the first big rain, the basement flooded. The problem wasn’t something that could be easily discovered during a two-hour inspection on a sunny day.

The water seepage eventually led to mold problems. After contacting a vendor to fix the problem, the new owner learned that the former owner had previously hired the same vendor to fix the same problem. Clearly, the seller knew about the problem and failed to disclose it.

The options available to the buyer in this situation depend a lot on the state in which they live in and the type of real estate contract they signed, with regard to dispute resolution. In the case of the flooded basement in suburban Boston, the buyer had proof that this problem existed previously. The seller had little choice but to come to a quick and easy settlement, reimbursing the buyer for all the repair costs.

Advice for Buyers

Always read thoroughly the complete inspection report and all disclosures. If you’re unsure of anything, don’t hesitate to ask questions of the seller, your real estate agent and the home inspector. The goal is to isolate as many issues as possible before the close of escrow, so that you know what you’re getting and there aren’t likely to be unpleasant surprises once you move in.

Should something issue arise after you own the home, the best plan of action is usually to ask your real estate agent to go back to the seller. Present the issue to the seller to determine if they had knowledge. Don’t assume guilt; in some cases, the issue at hand never happened to the previous owner and may simply be bad luck.

Sometimes, this situation leads to one person’s word against another’s. For the most part, smaller issues can be settled between both parties without incident. But for a more serious problem, like a major health or safety issue, buyers may need to consult an attorney for the best course of action.

Advice for Sellers

Consider getting an inspection done right before you put the home on the market. This should reveal any potential problems you might not know about, giving you time to have them fixed before listing. When your home goes on the market, you can present potential buyers with a copy of the inspection. This often gives buyers a sense of confidence about the seller’s property. And in a difficult real estate market, that can help sell a property.

> Read why you should “Get a Property Inspection Before You List.”

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