07/14/08: Will Seller Make the Necessary Repairs?
By Benny L. Kass
Q. My wife and I have placed an offer on a property that is currently owned by a Relocation company. The property is a 1990 row-house that has been vacant for several months. At the time of the offer, we received several documents from the company, including a previous home inspection report. That report noted some water damage from "flashing damage,." but stated that repairs were made and there have been no subsequent leakage problems. However, there is a stain on the ceiling in the basement that looks fairly new.
We now have a signed contract, and had our own home inspection conducted on the property. Our home inspector has determined that the cause of the leak was due to improper drainage at the rear of the house, at the base of the chimney. This has caused the chimney to settle improperly, with the base leaning slightly away from the home, while the upper portion has rather dramatically tilted towards the roof. Our inspector recommended we have an engineer determine if the chimney is structurally sound, and what steps need to be made to repair/replace the chimney.
Our question is two-fold. First, is the relocation company required to make the repairs to the chimney, as it may be hazardous and could potentially topple? If so, to what extent do we get involved in the repair process? Secondly, if they do fix the chimney, but do not address other related problems what recourse do we have if we purchase the home and discover additional problems?
A: Working with a relocation company can be difficult. These companies are usually hired by large corporations to assist in selling the homes of employees who are being transferred to another location. Typically, the relocation company may actually take title to the property, give the employee the sales proceeds and then market the house to third parties.
Because the company has not lived in the house, and has no real knowledge of its condition, quite often those houses will be sold in their “as is” condition. This means that you buy the house in its present condition and the relocation company will not agree to fix anything or to give you any cash credits should you find problems.
However, from the facts that you have described, it really makes no difference if the seller is a “relo company” or a homeowner who has lived in the house for many years.
You had the home inspected and a couple of major problems were discovered. Does your contract contain a home inspection contingency? The standard home inspection contingency used in the Washington Metropolitan area gives purchasers two options. If they are dissatisfied for any reason with the inspectors report and timely advise the seller of their concerns, they can cancel the contract and get their earnest money deposit returned.
Alternatively, they can present a list of defects to the seller, who has three days to advise the purchasers that (1) all of the work will be done, (2) only some of the listed items will be corrected, or (3) that none of the work will be corrected. Unless the seller agrees to do all of the work, the purchaser than has an additional three days in which to accept the seller's proposal or cancel the contract.
You must read your contract very carefully. Most inspection contingencies have time limits which must be strictly followed. If the purchaser is to notify the seller within three business days, and misses that deadline, this contingency is considered to have been waived and the purchasers remain bound by the terms of the contract.
In your situation, if your sales contract only requires the seller to convey title to you “as is”, then the seller will most likely not agree to correct the condition of the fireplace. In that case, and assuming that you do have an inspection contingency, unless you are prepared to spend your own money fixing the situation, one of your options is to cancel the contract.
You do have other options, however. If you can get a licensed contractor – or better yet a city housing inspector – to give you a statement that the fireplace condition is a housing code violation, that will give you a lot of leverage. In some jurisdictions, the existence of such violations is grounds for cancelling your sales contract. You should discuss this with an attorney licensed to practice in the jurisdiction where your house is located.
There is one other option that may be available. The seller gave you an earlier inspection report that represented all the leaks have been corrected. While the relocation company did not specifically misrepresent anything to you, they gave you an inspection report on which you relied. If you do not have an inspection contingency in your contract – and only had the house inspected for your own curiosity – then a legal argument can be made that there was misrepresentation, which could be yet another reason for terminating the contract. However, if there is an inspection contingency in your contract, you cannot use this argument and your only remedy is to cancel the contract within the time limits.
Here's a suggestion should the seller be willing to make the necessary repairs. Get a couple of bids from independent contractors and tell the seller that you would prefer a cash credit at settlement instead of having the seller do the work. All too often, the seller may not hire a licensed contractor, and you may have problems in the future.