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What happens when you buy a home and find a problem?

Introduction: Real Estate problems are a huge problem with the recent downturn in the economy. Homes that used to worth good money are now worth half of that, or less. What happens when you buy a home and find a problem? Today, I give some suggestions to a reader for a home purchase.

Question: Dear Mr. Cheng – I just arrived from China. I am scared to buy any home because I heard that the law here is against Buyers. If something goes wrong with the house Sellers are not responsible. What suggestions do you have? Xiao Hong, Rosemead

The Law of the Past: In the past that was true. In the past, the Latin term Caveat Emptor was the controlling law. Caveat Emptor meant “Buyer Beware.” Essentially, pretty much anything the Seller did was irrelevant in a claim of fraud by Buyer. If the Buyer suddenly found defects on the property after purchase it did not matter because the burden fell on the Buyer to do a reasonable inspection of the property prior to buying.

Summary of Present Law: Now the laws have changed. It is much more protective of Buyers. The law can be summarized in the following manner:

• A. If BUYER has prior notice of a problem and accepted the problem it is presumed that the Seller is not responsible

• B. If BUYER did have prior notice but depended on Seller in going through with the transaction then Seller is sometimes responsible

• C. If you did not have prior notice and Seller knew about the problem and it impacts your property value, resulting in damages, then the Seller is responsible

Latent vs. Patent Defects: One issue that frequently comes up in lawsuits is whether a defect or problem with a home is latent or patent. A latent defect is considered hidden. What that means is that it is not easily seen by the average buyer. If that is true then one can argue that if the defect is latent then the Seller should be responsible. However, how hidden is the defect? That is a crucial point. If the defect should be so latent that even the Seller would have not known upon reasonable inspection, then the Seller is not responsible.

The opposite of a latent defect is a patent defect. A patent defect is very obvious. For instance a patent defect might be a hole in the roof of a home. Anyone that comes in to see it will see the hole in the roof. If a defect is so obvious that it is patent then the Seller is usually not responsible.

Pictures: They say that pictures say a 1000 words. That is absolutely true in defect/fraud lawsuits. When you are considering buying or selling any type of real estate make sure you take pictures. Pictures convey to the jury/judge what each party was entering into at the time of acquisition. For instance, a person alleges that they were not told of the weak walls in the home. Shortly after purchase of the property the wall fell down. If you have pictures that show that the walls were intact and stable, it might help the judge to find in your favor.

Oral Promises: In California you can prove promises made orally. However, the standard is very high and difficult to prove. Therefore, any promise that is made should be in writing. It does not matter how close you are to the person. Should that person make you a promise and subsequently break that promise, one will regret not taking the time to put the promise into the contract.

Removal of Contingencies: As the transaction opens up, everyone is eager to get the transaction complete. Without the completed transaction no one can get paid without dispute. The escrow does not get paid. Both agents do not get paid. The Seller does not get paid. Many times during the Due Diligence period that is given to the Buyer to inspect the property, issues do arise. Something does not look right. The Seller says something that is not true. What a Buyer must do is remain strong. Everyone will tell you that all problems will work out. Do not fall for this trap. Do not complete the sale until you are comfortable in doing so.

Alerting Seller of Potential Problems: One way that Sellers get out of responsibility is by saying that Seller had no idea there was a problem on the property. This is a legitimate excuse. Therefore, as a Buyer if you have a question or problem you must immediately write to the following: 1) Seller; 2) Agent for Seller; 3) Agent for Buyer; 4) Escrow; and 5) Attorney (if there is one). This must be done by certified mail. The amount you spend in postage (approximately $100.00) will save you the heartache in proving your case in litigation.