Rescinding a real estate purchase due to sellers disclosure issues

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Hayduke
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Rescinding a real estate purchase due to sellers disclosure issues

Post by Hayduke »

Would appreciate some insights from the community on a real estate conundrum we've found ourselves in.

We purchased a home in late 2022 and have discovered significant unpermitted work that the sellers did not disclose. Think unpermitted bathrooms, water/gas/sewer lines, HVAC and electrical systems. Aspects of this work impact our neighbors property and they are asking us to correct it, and we are also interested in a safe and legally above board house. We've gotten quotes to correct some of the issues and it appears to be on the order of 15% of the purchase price, but depending on the city inspector's reaction it could be more expensive and/or force us to remove things that would reduce the value of the property.

We're working with a lawyer and have gone back and forth with the sellers making demands for them to pay us damages to correct everything with the possibility of going to arbitration if the issue is not resolved. Their latest offer on the table covers only about a third of our known costs but does not address the potential uncertainty of the city's response or discovering additional unpermitted work.

The sellers have recently floated the idea of rescission where we would effectively unwind the purchase and restore both parties to where they were prior to entering the purchase contract. There are a lot of small details that are open to negotiation (closing costs, legal fees, etc) but avoiding the hassle and uncertain costs of major repairs is appealing. We would not have purchased the house had we known what we know now so this is in one respect a "free" do-over. At the same time, interest rates are higher now, moving is a hassle, and the house has maybe (?) appreciated in the last 18 months. This property is unique with some strong positives and strong negatives but likely a small future buyer pool. We do worry about being able to sell the property in the future given those characteristics plus whatever unresolved issues from this fiasco that we would have to disclose.

Does anyone have experience with rescinding a real estate transaction or resolving sellers disclosure issues? If so, how were various costs handled in rescission? What other considerations might you think about when deciding to pursue this path or not? Thanks!
neko06
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by neko06 »

Did your home inspector catch any of this when you were under contract for the house?
Bobby206
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Bobby206 »

That's an interesting dilema.

I generally despise moving and litigation so if I were in your shoes I'd find a way to settle and move on... but that's a quick answer without knowing all the details.

To me life is too short for litigation unless it can not avoided. There are too many unknowns in litigation and it's rarely a slam dunk for either side. Weird stuff happens, attorney fees happen, stress happens no matter what!

As for moving well that's obvious. Other than another excuse to get rid of crap (which I love doing) I hate moving.

Good luck!
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TomatoTomahto
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by TomatoTomahto »

Bobby206 wrote: Tue May 14, 2024 11:36 am That's an interesting dilema.

I generally despise moving and litigation so if I were in your shoes I'd find a way to settle and move on... but that's a quick answer without knowing all the details.

To me life is too short for litigation unless it can not avoided. There are too many unknowns in litigation and it's rarely a slam dunk for either side. Weird stuff happens, attorney fees happen, stress happens no matter what!

As for moving well that's obvious. Other than another excuse to get rid of crap (which I love doing) I hate moving.

Good luck!
+1

The extent of the lies we discovered is mind boggling. Apparently, the previous owners felt that “code is for other people.” We have made our peace with it and bit the bullet. I would take whatever they offer and call it a day.
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Stinky
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Stinky »

You mention that the known issues would cost roughly 15% of the purchase price to remediate. There might be additional costs, if there are other issues discovered or if the inspectors require more.

How expensive was the property?

--- If it was $500k, then 15% is $75k of issues to fix, and you might be able to get the seller to pony up half of that or more after more negotiation and/or threats. For that price, you might be willing to suck it up to avoid moving, etc.

---But if it was $5 million, then 15% is $750k of issues to fix, plus more unknowns. At that price, I'd be inclined to "rescind" the transaction and move.
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celia
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by celia »

Hayduke wrote: Tue May 14, 2024 11:01 am Think unpermitted bathrooms, water/gas/sewer lines, HVAC and electrical systems. Aspects of this work impact our neighbors property and they are asking us to correct it . . .
When I read this, it sounded like you have two different issues. One with meeting building code. One with impinging on neighbor's property. Would the neighbors have the same complaints had the sellers not sold?

Besides the possible change in property value over time, consider if the realtors' commission can be refunded or not. (That was likely the seller's cost anyway.) It seems that even if the sale is rescinded, someone somewhere is losing money. And there are now legal fees.

With such a complex problem, I would be happy just walking away with all the money I've spent on this house.


I'm sorry to hear of this "learning experience" you have gone through. But, to put a positive spin on it, a house problem is better than a health problem, in my opinion.
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by mrmass »

neko06 wrote: Tue May 14, 2024 11:30 am Did your home inspector catch any of this when you were under contract for the house?
This. I think the inspector has some blame here. I'd try to grind the sellers to 50% and call it a day. it's hard to imagine that the sellers would agree to undo everything, that sounds terrible for everyone except the lawyers.
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Cobra Commander
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Cobra Commander »

Rather than rescind the sale wouldn't it be easier to just sell the property back to the original buyers for the original purchase price along with a waiver of any and all claims against you as the seller for known or unknown issues with the house?
Northern Flicker
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Northern Flicker »

Is there such a thing as a recision of a transaction 2 years after closing? I doubt it. You would be entering into a new transaction, and you could end up having liability to the new owners who happen to have been former owners.

Has the property appreciated in value in the last 2 years? How much would you net selling it as-is, disclosing what you have learned after taking possession?
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by drk »

What state are you in? All the issues listed are easily discoverable, so your remedy would have been to not complete the sale.

FWIW, you may be able to recover from title insurance for work to resolve encroachments and the city inspector's complaints.
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celia
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by celia »

Cobra Commander wrote: Tue May 14, 2024 12:06 pm Rather than rescind the sale wouldn't it be easier to just sell the property back to the original buyers for the original purchase price along with a waiver of any and all claims against you as the seller for known or unknown issues with the house?
This is what I expect the "rescind" is, except the OP needs to be shown as having nothing to do with this house, which will likely have future lawsuits. Who knows what else these sellers did that hasn't yet been found.

If the property is in California, it is also in the seller's best interest to have their old property tax instead of the current tax.
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Cobra Commander
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Cobra Commander »

celia wrote: Tue May 14, 2024 12:26 pm
Cobra Commander wrote: Tue May 14, 2024 12:06 pm Rather than rescind the sale wouldn't it be easier to just sell the property back to the original buyers for the original purchase price along with a waiver of any and all claims against you as the seller for known or unknown issues with the house?
This is what I expect the "rescind" is, except the OP needs to be shown as having nothing to do with this house, which will likely have future lawsuits. Who knows what else these sellers did that hasn't yet been found.

If the property is in California, it is also in the seller's best interest to have their old property tax instead of the current tax.
I had assumed that if the seller sold to OP they would intend to sell the house again after whatever happens here so the tax rate may not matter, at least not for long enough to justify the legal fees involved in a true rescission. If OP gets an effective waiver from the seller I would be surprised if the next buyer could have an action against OP but OP should definitely run all this by their lawyer.

A true rescission sounds really complicated esp if there was a mortgage. I question whether you even could unwind all that 2 years later and, even if so, the massive legal fees involved in making it happen.

OTOH some of this is a math equation. Cost of repairs +20% for uncertainty should be equal or less than: home appreciation since purchase + moving costs + increased cost of interest payments over the expected life of a loan for the purchase of another property + whatever you can get from seller as compensation.
popoki
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by popoki »

mrmass wrote: Tue May 14, 2024 11:59 am
neko06 wrote: Tue May 14, 2024 11:30 am Did your home inspector catch any of this when you were under contract for the house?
This. I think the inspector has some blame here. I'd try to grind the sellers to 50% and call it a day. it's hard to imagine that the sellers would agree to undo everything, that sounds terrible for everyone except the lawyers.
Home inspections are for the purpose of evaluating the condition and function of systems and appurtenances which are readily accessible. Home inspections are not for ensuring that existing construction conforms to current/historic building codes or that previous work was properly permitted or in conformance with zoning, setbacks, HOA restrictions, etc. The last inspection I had performed stated this in the disclaimer.
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Big Dog »

celia wrote: Tue May 14, 2024 12:26 pm
Cobra Commander wrote: Tue May 14, 2024 12:06 pm Rather than rescind the sale wouldn't it be easier to just sell the property back to the original buyers for the original purchase price along with a waiver of any and all claims against you as the seller for known or unknown issues with the house?
This is what I expect the "rescind" is, except the OP needs to be shown as having nothing to do with this house, which will likely have future lawsuits. Who knows what else these sellers did that hasn't yet been found.

If the property is in California, it is also in the seller's best interest to have their old property tax instead of the current tax.
as an aside, I hope the attorney has also threatened the broker for damages. (In CA, real estate agents are on the hook for obvious defects.)

OP; how old is the home? It's possible that a major renovation (to get up to code on the known items) could trigger new code laws which were grandfathered in, so other items need to be upgraded as well.

They changed/moved gas lines without a permit? Yikes. I'd get the gas company to check out the safety of it all.
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by rogue_economist »

I think the answer here greatly depends on the nature of what wasn't "permitted work."

Building codes are far from gospel, and range from absolutely key for safety of the structure and its occupants to quixotic and even counterproductive requirements that have nothing to do with the safety or livability of the property. This is evident by the fact that what is code compliant differs considerably across jurisdictions often for no reason and across time to boot. There are tens of millions of homes people are living in that don't meet modern code in some way. Many of those homes are actually superior to modern construction in several respects.

Just because something wasn't permitted doesn't mean it wouldn't meet code and just because it wouldn't meet code doesn't make it inherently bad.

If the unpermitted work is largely quality work, I would just explore modifying what actually needs changing. If you intend to stay there forever I'm not sure how much its worth putting in today to make changes simply for the purpose of meeting code. If on the other hand you expect to move out at some point relatively soon I'd explore getting the work approved, possibly by a retroactive inspection and possibly a special waiver. Also square things up with the insurance company. In this case just negotiate the largest cash payment from the seller, and move on.

However if the work is poor quality I'd demand full payment or a recind where they pay your costs. The threat of litigation may help them pony up.
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barnaclebob
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by barnaclebob »

How much has your house increaed in value in the last 2 years? Unwinding the purchase may be a bad idea if they aren't paying market value.
delamer
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by delamer »

I am very suspicious about the sellers floating rescinding the deal. Why would the sellers even suggest it?

I realize that isn’t very helpful . . .
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by TomatoTomahto »

delamer wrote: Tue May 14, 2024 1:38 pm I am very suspicious about the sellers floating rescinding the deal. Why would the sellers even suggest it?

I realize that isn’t very helpful . . .
Also suspicious. Based on their other behaviors, I wouldn’t think the sellers have experienced remorse and are looking to make amends. They probably have more information than the buyers have.

There was something that made OP want the house. I still think they should get whatever money back that they can and then move forward.
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by stan1 »

Seller is planning to resell the house at a higher price to a buyer who is easier to work with (from their perspective). Likely would not even do any work on it.

Actually seems like a good idea from the seller's perspective and maybe buyer's perspective too if they want out of the house.
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by tesuzuki2002 »

do you know if the seller was directly involved with these issues? Or was this something done before them and they were unware.

If they knew the details and did not disclose them, this fundamentally changes the property. I think the sellers should be buying the house back at the current market rate and you walk way and give them back the problems the sold you.
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celia
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by celia »

delamer wrote: Tue May 14, 2024 1:38 pm I am very suspicious about the sellers floating rescinding the deal. Why would the sellers even suggest it?
I guess that the sellers think they can re-sell it to another party, maybe at an even higher price. They may even know who the next buyer is right now.


We had a house on our street that had been torn down and completely rebuilt by a builder who lived in it and took shortcuts. It went up for sale a year later. It was a U-shaped house that wrapped around an old tree. The foundation was starting to crack up already and the realtors disclosed it. The price kept going down until it was bought by a retired contractor who knew the right person who could resolve the problem easily. The sale just needed to wait until the unique buyer who knows how to solve the problems shows up.
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Hayduke
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Hayduke »

I appreciate everyone's responses thus far. It's a complicated situation and people have asked a lot of good questions so I'll do my best to respond to them.
neko06 wrote: Tue May 14, 2024 11:30 am Did your home inspector catch any of this when you were under contract for the house?
Inspector did not catch any of these but to be fair most of them are not realistically things I would have expected them to be able to find. Also I think the inspector's liability is limited to the cost of the inspection?
Stinky wrote: Tue May 14, 2024 11:57 am You mention that the known issues would cost roughly 15% of the purchase price to remediate. There might be additional costs, if there are other issues discovered or if the inspectors require more.

How expensive was the property?

--- If it was $500k, then 15% is $75k of issues to fix, and you might be able to get the seller to pony up half of that or more after more negotiation and/or threats. For that price, you might be willing to suck it up to avoid moving, etc.

---But if it was $5 million, then 15% is $750k of issues to fix, plus more unknowns. At that price, I'd be inclined to "rescind" the transaction and move.
The purchase was in the high 6 figures. 15% is an estimate given that we haven't confessed to the city yet. The uncertainty as well as the disruptions we anticipate during the repairs are both weighing on us.
celia wrote: Tue May 14, 2024 11:58 am When I read this, it sounded like you have two different issues. One with meeting building code. One with impinging on neighbor's property. Would the neighbors have the same complaints had the sellers not sold?

Besides the possible change in property value over time, consider if the realtors' commission can be refunded or not. (That was likely the seller's cost anyway.) It seems that even if the sale is rescinded, someone somewhere is losing money. And there are now legal fees.

With such a complex problem, I would be happy just walking away with all the money I've spent on this house.
That is true, the relationship between the prior owner and neighbor seems quite odd and I'm frustrated the neighbor waited until now to address the issues. We were initially alerted to issues by the immediate neighbor but then discovered many other deficiencies that don't affect him. Even if the neighbor wasn't objecting we would still want everything corrected. I don't know if the realtors commissions can be refunded but the rescission terms we would ask for would be to get our money back and let the prior owners deal with the realtor fees. Agreed that walking away with our original monies seems like it would be a good outcome.
Northern Flicker wrote: Tue May 14, 2024 12:08 pm Is there such a thing as a recision of a transaction 2 years after closing? I doubt it. You would be entering into a new transaction, and you could end up having liability to the new owners who happen to have been former owners.

Has the property appreciated in value in the last 2 years? How much would you net selling it as-is, disclosing what you have learned after taking possession?
Our state allows us to bring claims for up to 2 years after a sale, so we have ~6 months left. Liability to the new/former owners is a concern and we would likely ask for some sort of waiver as another poster mentioned. Zillow says the property has appreciated a few percent, redfin says it has depreciated a few percent. Selling it as is and disclosing the issues I assume we would get less than our purchase price in addition to paying realtor fees and closing costs.
rogue_economist wrote: Tue May 14, 2024 12:56 pm I think the answer here greatly depends on the nature of what wasn't "permitted work."

Building codes are far from gospel, and range from absolutely key for safety of the structure and its occupants to quixotic and even counterproductive requirements that have nothing to do with the safety or livability of the property. This is evident by the fact that what is code compliant differs considerably across jurisdictions often for no reason and across time to boot. There are tens of millions of homes people are living in that don't meet modern code in some way. Many of those homes are actually superior to modern construction in several respects.

Just because something wasn't permitted doesn't mean it wouldn't meet code and just because it wouldn't meet code doesn't make it inherently bad.

If the unpermitted work is largely quality work, I would just explore modifying what actually needs changing. If you intend to stay there forever I'm not sure how much its worth putting in today to make changes simply for the purpose of meeting code. If on the other hand you expect to move out at some point relatively soon I'd explore getting the work approved, possibly by a retroactive inspection and possibly a special waiver. Also square things up with the insurance company. In this case just negotiate the largest cash payment from the seller, and move on.

However if the work is poor quality I'd demand full payment or a recind where they pay your costs. The threat of litigation may help them pony up.
I am not sure how specific I should be on a public forum for the sake of argument assume there are egregious health and safety issues regarding gas lines and sewer lines that violate building codes and common sense.
delamer wrote: Tue May 14, 2024 1:38 pm I am very suspicious about the sellers floating rescinding the deal. Why would the sellers even suggest it?
We wondered this too. Some theories we had: they miss certain unique aspects of the property that they have not been able to find elsewhere, they think they can make more money by attempting to sell it again, or there's potentially more deficiencies we might discover that increase their liability.
stan1 wrote: Tue May 14, 2024 2:09 pm Seller is planning to resell the house at a higher price to a buyer who is easier to work with (from their perspective). Likely would not even do any work on it.

Actually seems like a good idea from the seller's perspective and maybe buyer's perspective too if they want out of the house.
Seems entirely possible, and frankly ok with us.
tesuzuki2002 wrote: Tue May 14, 2024 2:17 pm do you know if the seller was directly involved with these issues? Or was this something done before them and they were unware.

If they knew the details and did not disclose them, this fundamentally changes the property. I think the sellers should be buying the house back at the current market rate and you walk way and give them back the problems the sold you.
Sellers personally performed the work in question and have admitted as such during our lawyer back and forths.
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Watty
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Watty »

You have a lawyer and this is a complex situation which is beyond what is reasonable for a message board to give good suggestions for suggestions here may get you even more confused.

One thing to keep in mind is that if you have a mortgage at a very low interest rate then if you sell the house back to them then you might need to get a much higher interest rate mortgage on your nexts house.
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by KneePartsPro »

TomatoTomahto wrote: Tue May 14, 2024 11:48 am
Bobby206 wrote: Tue May 14, 2024 11:36 am That's an interesting dilema.

I generally despise moving and litigation so if I were in your shoes I'd find a way to settle and move on... but that's a quick answer without knowing all the details.

To me life is too short for litigation unless it can not avoided. There are too many unknowns in litigation and it's rarely a slam dunk for either side. Weird stuff happens, attorney fees happen, stress happens no matter what!

As for moving well that's obvious. Other than another excuse to get rid of crap (which I love doing) I hate moving.

Good luck!
+1

The extent of the lies we discovered is mind boggling. Apparently, the previous owners felt that “code is for other people.” We have made our peace with it and bit the bullet. I would take whatever they offer and call it a day.
I opened this thread as we are in the midst of negotiating the purchase of another home. Renting an apartment instead is looking better by the minute.
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Northern Flicker »

popoki wrote: Tue May 14, 2024 12:45 pm
mrmass wrote: Tue May 14, 2024 11:59 am
neko06 wrote: Tue May 14, 2024 11:30 am Did your home inspector catch any of this when you were under contract for the house?
This. I think the inspector has some blame here. I'd try to grind the sellers to 50% and call it a day. it's hard to imagine that the sellers would agree to undo everything, that sounds terrible for everyone except the lawyers.
Home inspections are for the purpose of evaluating the condition and function of systems and appurtenances which are readily accessible. Home inspections are not for ensuring that existing construction conforms to current/historic building codes or that previous work was properly permitted or in conformance with zoning, setbacks, HOA restrictions, etc. The last inspection I had performed stated this in the disclaimer.
We had an inspector check polarity of electrical plugs, and inform us that some were mismatched, and thus not conforming to code, but did not notice that the electric panel lacked a master shutoff switch.
Amien
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Amien »

Did prior owner self-perform home remodeling work, or were contractors hired?

Did buyer do home inspection, and if so, did inspector miss code violations?

We made an offer on house, noted absence of sill-plates on top of all foundation walls, were told seller’s dad, a local home builder-carpenter-contractor constructed house. Otherwise, house was in apparent excellent condition, of Fine Homebuilding magazine caliber. Missing sill plates are required by current standard building codes. Home was located in rural township, probably with lax building code enforcement. Confirmed code with nearby city building department. Then terminated contract, to great upset of seller. Did get earnest money refund. Seller sold house at higher price. House still standing. But a tornado, not unusual here, could have blown house off foundation.

That said, we’ve also lived in a major Midwest city where building code enforcement in single family houses is lax. Home remodeling is rarely permitted, not inspected, unless high-end big money project with demanding owners. We did a three-story porch, and all the porch contractors interviewed offered us two prices: “permit” price, and without. No buyers would ask for permit verifications. Nor would their realtors prompt them to ask.

Question is, is house “safe”?
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by LotsaGray »

Northern Flicker wrote: Tue May 14, 2024 6:06 pm
popoki wrote: Tue May 14, 2024 12:45 pm
mrmass wrote: Tue May 14, 2024 11:59 am
neko06 wrote: Tue May 14, 2024 11:30 am Did your home inspector catch any of this when you were under contract for the house?
This. I think the inspector has some blame here. I'd try to grind the sellers to 50% and call it a day. it's hard to imagine that the sellers would agree to undo everything, that sounds terrible for everyone except the lawyers.
Home inspections are for the purpose of evaluating the condition and function of systems and appurtenances which are readily accessible. Home inspections are not for ensuring that existing construction conforms to current/historic building codes or that previous work was properly permitted or in conformance with zoning, setbacks, HOA restrictions, etc. The last inspection I had performed stated this in the disclaimer.
We had an inspector check polarity of electrical plugs, and inform us that some were mismatched, and thus not conforming to code, but did not notice that the electric panel lacked a master shutoff switch.
Why would he. You don’t need to access the panel to check outlet polarity.
Fungible
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Fungible »

Uugghh. This thread reminds us Average Joe's who don't know anything about building and codes and can't count on building inspectors beyond the easy stuff.... it's rough out there.

I'm looking at a home purchase in a year.

How does one navigate these sorts of things?
rule of law guy
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by rule of law guy »

every RE transaction I have been involved in was done on an "as is" basis, no survival of any reps/warranties. was this not your case?
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by leeks »

If you want to keep living in that house, take whatever you can get the sellers to settle on without actually going to court.

If you don't want to keep living in that house, take the offer to exit the property.
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by simas »

rogue_economist wrote: Tue May 14, 2024 12:56 pm I think the answer here greatly depends on the nature of what wasn't "permitted work."

Building codes are far from gospel and range from absolutely key for safety of the structure and its occupants to quixotic and even counterproductive requirements that have nothing to do with the safety or livability of the property. This is evident by the fact that what is code compliant differs considerably across jurisdictions often for no reason and across time to boot. There are tens of millions of homes people are living in that don't meet modern code in some way. Many of those homes are actually superior to modern construction in several respects.
and to add to it codes change over time, sometimes quickly. I remember that because I had a coworker friend who had a house build for him (by his FIL company so think all possible things done right as this was for owner's daughter and grandchildren). It was built to code all right but code changed between when construction started and when it finished and suddenly village did not like it anymore and it took time to straighten that.

separate issue he had is that construction crew in clearing the site accidentally removed bushes that were bordering the construction site and belong to the neighbor. neighbor went ballistic, rejected any attempt to find any settlement (including re-planting replacements of choice , full payment for services ,etc) and of cause their ulta special unicorn producing hand carried on back of ants from China are totally and completely unreplaceable (at least in this universe!). and nothing , even offer of first born , would ever satisfy their anger. well, village got involved, listend politely and ultimately said '*shrug* what exactly do you want for us to do?' and told neighbor to accept the offer and move on.

to the OP, if you can unwind the transaction - unwind it and move on. forget everything else (interest rates, moving costs, etc) irrelevant . breath out with relief, turn the page, and go on with your life. for every 'complaint' that you may come up with (see above), there is also the fact that you lived in it rent free this time and other side would have plenty of counter arguments. if you do not want to fix the house and live in it, unwind and move on.
Normchad
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Normchad »

rule of law guy wrote: Tue May 14, 2024 7:22 pm every RE transaction I have been involved in was done on an "as is" basis, no survival of any reps/warranties. was this not your case?
It may depend in the state you live in. I live in “buyer beware” states, which is what you describe. The onus is on the buyer to determine how much the house is worth to them.

The sellers aren’t required to disclose much; they just can’t lie or actively conceal defects.

When I bought this house, I had an inspection. And separate camera sewer inspection since this neighborhood is old and collapsed sewer lines are a known issue.
rogue_economist
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by rogue_economist »

Fungible wrote: Tue May 14, 2024 7:21 pm Uugghh. This thread reminds us Average Joe's who don't know anything about building and codes and can't count on building inspectors beyond the easy stuff.... it's rough out there.
The same way that you, as a Boglehead, navigate investing, with knowledge!
You cannot be a successful investor if you have zero clue about money, finance, accounting, etc.
I argue you cannot be a successful homeowner without knowing about carpentry, masonry, plumbing, electrical work,etc.
That doesn't mean you have to do it for a living, you don't have to work on wall street to be a Boglehead, and you don't have build houses to be a homeowner.
But you do have to take an active role, learn some things, and decide when you handle something yourself versus when you seek help from someone else.

Consider this...

Us Average Joe's who don't know anything about building investing and codes taxes and can't count on building inspectors financial managers beyond the easy stuff.... it's rough out there.
Fungible wrote: Tue May 14, 2024 7:21 pm I'm looking at a home purchase in a year.

How does one navigate these sorts of things?
I would recommend starting with a one volume book on home DIY to just get a basic overview. You can pickup Reader's Digest Complete Do It Yourself Manual or the like at a thrift store almost any day of the week for a couple bucks. Read it cover to cover. Its not going to teach you how to inspect a home, but you will learn enough to know what else you need to research. Follow up with some titles in specific areas or dedicated to inspection.

If you want some live fire practice, go to a few estate sales. While you shop, look at the house through the eyes of an inspector.
Society grows great when old men plant trees whose shade they shall never sit in
popoki
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by popoki »

A lot of people incorrectly think that a home inspection is based on building codes. Here is part of the disclaimer from a recent inspection report:

<<NAME REDACTED>> PERFORMS A COMPREHENSIVE VISUAL INSPECTION OF THE PROPERTY AND PROVIDES IN THIS REPORT AN ITEMIZED LISTING OF THOSE ITEMS INSPECTED. ANY AREA THAT IS NOT READILY ACCESSIBLE OR VISIBLE TO THE INSPECTOR IS NOT INCLUDED IN THIS INSPECTION. THE INSPECTOR IS NOT REQUIRED TO MOVE FURNITURE, CARPETING, INSULATION, OR OTHER MATERIALS OR BELONGINGS IN ORDER TO PERFORM THE INSPECTION. NOTE: THIS INSPECTION DOES NOT COVER ITEMS OR CONDITIONS THAT MAY BE DISCOVERED ONLY BY INVASIVE METHODS. NO REMOVAL OF MATERIALS OR DISMANTLING OF SYSTEMS SHALL BE PERFORMED UNDER THIS INSPECTION.
THE FOLLOWING IS NOT WITHIN THE SCOPE OF THIS INSPECTION:
1. BUILDING CODE OR ZONING ORDINANCE VIOLATIONS.
2. STRUCTURAL INTEGRITY.
3. GEOLOGICAL STABILITY OR GROUND CONDITION OF SITE.
4. TERMITES OR WOOD DESTROYING INSECTS.
5. ASBESTOS, RADON OR OTHER ENVIRONMENTAL HAZARDS.
6. VALUE OR ESTIMATES OF PROPERTY OR REPAIRS.
7. HOME WARRANTEES, SYSTEM WARRANTEES, COMPONENT WARRANTEES.
8. PRESENCE OF MOLD

INSPECTION STANDARDS
THIS INSPECTION REPORT EXPRESSES THE PERSONAL OPINION OF THE INSPECTOR WHO PREPARED THIS REPORT AND IS BASED ON THE STANDARDS OF THE AMERICAN SOCIETY OF HOME INSPECTORS, INC., (ASHI). A COPY OF THE ASHI STANDARDS MAY BE OBTAINED FROM <<NAME REDACTED>>.
Gray doesn't matter.
FoolMeOnce
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by FoolMeOnce »

rule of law guy wrote: Tue May 14, 2024 7:22 pm every RE transaction I have been involved in was done on an "as is" basis, no survival of any reps/warranties. was this not your case?
It's possible that there can be a path for recourse even in "as is" transactions if the sellers lie on disclosures.
Dottie57
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Dottie57 »

Fungible wrote: Tue May 14, 2024 7:21 pm Uugghh. This thread reminds us Average Joe's who don't know anything about building and codes and can't count on building inspectors beyond the easy stuff.... it's rough out there.

I'm looking at a home purchase in a year.

How does one navigate these sorts of things?
And they don’t always catch easy stuff.
FeralCat
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by FeralCat »

It sounds to me like OP doesn't have great confidence in their attorney, because OP is not explaining things like local disclosure requirements, and whether non-permitted work is actually a required disclosure. It isn't a required disclosure where I live, though sellers are required to disclose stop-work orders if they did substantial renovations.

If it was me, I'd probably be filing a lawsuit already, if I thought I had a case. Particularly if I decided to keep the house, and therefore thought that I was owed damages.

OP, if the sellers did the work, were they at least licensed contractors? Did they hire licensed contractors?

I think that the buyer's real estate agent is the person who should have checked for permits. They are not required to do so, but a good agent should have done this for you. If you do buy another house, find another agent. Don't reward them again.
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Hayduke
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Hayduke »

FeralCat wrote: Tue May 14, 2024 10:13 pm It sounds to me like OP doesn't have great confidence in their attorney, because OP is not explaining things like local disclosure requirements, and whether non-permitted work is actually a required disclosure. It isn't a required disclosure where I live, though sellers are required to disclose stop-work orders if they did substantial renovations.

If it was me, I'd probably be filing a lawsuit already, if I thought I had a case. Particularly if I decided to keep the house, and therefore thought that I was owed damages.

OP, if the sellers did the work, were they at least licensed contractors? Did they hire licensed contractors?

I think that the buyer's real estate agent is the person who should have checked for permits. They are not required to do so, but a good agent should have done this for you. If you do buy another house, find another agent. Don't reward them again.
The sellers disclosure form had a section that asked about any unpermitted work and they claimed that there was none. Since then we've discovered that's not true, that there was actually a great deal of work done by the previous owner personally, and he was not a licensed contractor. This personal involvement was observed by neighbors and confirmed by the seller's attorney in response to our demand letter. We were on the path to a lawsuit if they did not offer a satisfactory amount in response to our demand letter before the rescission possibility came about. We don't lack confidence in our attorney but as the responses here show, it's a complicated situation and intelligent people can come to different conclusions so I think there's value in hearing a wide range of opinions. Certainly no intentions to work with the same realtor again.
Northern Flicker
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Northern Flicker »

LotsaGray wrote: Tue May 14, 2024 6:53 pm
Northern Flicker wrote: Tue May 14, 2024 6:06 pm
popoki wrote: Tue May 14, 2024 12:45 pm
mrmass wrote: Tue May 14, 2024 11:59 am
neko06 wrote: Tue May 14, 2024 11:30 am Did your home inspector catch any of this when you were under contract for the house?
This. I think the inspector has some blame here. I'd try to grind the sellers to 50% and call it a day. it's hard to imagine that the sellers would agree to undo everything, that sounds terrible for everyone except the lawyers.
Home inspections are for the purpose of evaluating the condition and function of systems and appurtenances which are readily accessible. Home inspections are not for ensuring that existing construction conforms to current/historic building codes or that previous work was properly permitted or in conformance with zoning, setbacks, HOA restrictions, etc. The last inspection I had performed stated this in the disclaimer.
We had an inspector check polarity of electrical plugs, and inform us that some were mismatched, and thus not conforming to code, but did not notice that the electric panel lacked a master shutoff switch.
Why would he. You don’t need to access the panel to check outlet polarity.
The panel was inspected.
Big Dog
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Big Dog »

Normchad wrote: Tue May 14, 2024 8:16 pm
rule of law guy wrote: Tue May 14, 2024 7:22 pm every RE transaction I have been involved in was done on an "as is" basis, no survival of any reps/warranties. was this not your case?
It may depend in the state you live in. I live in “buyer beware” states, which is what you describe. The onus is on the buyer to determine how much the house is worth to them.

The sellers aren’t required to disclose much; they just can’t lie or actively conceal defects.

When I bought this house, I had an inspection. And separate camera sewer inspection since this neighborhood is old and collapsed sewer lines are a known issue.
Even in a state like CA which has a long list of required disclosures, a house can still be bought 'as-is' with no reps or warranties or contingencies.
gch
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by gch »

Seems to me there are only two real paths based on how much you like the house if the seller is already willing to rescind the deal:

Option 1- You would love to stay in the house if the house was safe and up to code. If so then get quotes for the work and sue the sellers. This will almost assuredly cost more money than you’ll be able to get from the seller, but I’d imagine when factoring in rising interest rates and rising housing costs and moving costs and the time value of taking time going house shopping/renting while looking that you’ll come out ok.

Option 2 - You don’t really want to stay in the house even if there were no safety/code issues. If so then take the seller up on the offer of rescinding. Just keep in mind this will cost you significant sums of money in terms of moving costs, (possible) short term rent costs, interest rate differences, and the risk of housing market increases.
FeralCat
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by FeralCat »

If major work was done by an unlicensed contractor, I wouldn't want the house. Especially if the work was done very recently in order to prepare the home for sale. That may just be me though.

I'd want moving costs (the costs to leave the house), the closing costs that you originally paid, and they pay all costs to transfer the property back to them. If the interest that you paid on the mortgage over the time you lived there was less than what it would have cost to rent a similar house, then in that respect, you may have come out a bit ahead. Lost home appreciation/higher current mortgage rates may be tough to prove. They could make the argument that you wouldn't have been able to buy and close on another home in that time period. Especially if the market is in low supply of homes for sale.
Northern Flicker
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Northern Flicker »

rule of law guy wrote: Tue May 14, 2024 7:22 pm every RE transaction I have been involved in was done on an "as is" basis, no survival of any reps/warranties. was this not your case?
Does your state have disclosure rules?
Last edited by Northern Flicker on Wed May 15, 2024 11:59 am, edited 1 time in total.
Parkinglotracer
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Parkinglotracer »

Fungible wrote: Tue May 14, 2024 7:21 pm Uugghh. This thread reminds us Average Joe's who don't know anything about building and codes and can't count on building inspectors beyond the easy stuff.... it's rough out there.

I'm looking at a home purchase in a year.

How does one navigate these sorts of things?
Find or hire someone with construction experience to go look at the property with you

Who built the property? What is their reputation?
Look at current condition of roof, foundation, hvac, windows, plumbing, electrical system, septic if applicable
Look if area around house appears to have any water drainage problems
Look if basement has any water problems.
Do shower pans leak if tiled?
Be skeptical of newly painted areas in basement on wall or near windows covering damage
Climb up into attic to look for mold and roof damage
Don’t fall in love with a problem house because you are getting tired of looking or in a rush


I bought my first house at age 23 and was as green as can be … get advice that fills in where you are inexperienced


Lots of checklists out there
https://www.mrrooter.com/greater-syracu ... -for-when/
Circe
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Circe »

OP, unless this property is special to you, I'd take the money and run if you can be made whole (or close). You haven't described exactly how it affects the neighbor, but in general, I wouldn't want to have to deal with neighbor issues, especially if you didn't cause them. I know of one buyer where the neighbor had encroached on the property and another where a neighbor complained about water drainage problems; in both cases, the buyer won but the neighbor will be forever angry.

I would assume that the rescission agreement would absolve you of any future liability to the seller and future owners as part of the agreement.

It seems that you have incomplete information as to the total costs to be made whole if you were to stay and fix the problems. If it's worth it to you to continue to investigate, find out exactly what un-permitted work was done and get a worst-case estimate from a licensed contractor to bring it up to code.

Each property is unique, as is each owner. It's a very tight market generally right now; are there other properties that would make you happy?
Mr. Rumples
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Mr. Rumples »

In VA, the penalty for not getting a permit is $1,000 per violation and the locality may on its own remove/repair &c. if the owner doesn't do so. What does the locality know and when might they move on enforcement? If the locality has not been informed, what is the liability to the current owner for not informing them?

By way of example, the VA Code: https://law.lis.virginia.gov/vacode/tit ... n15.2-906/

We're working with a lawyer and have gone back and forth with the sellers making demands for them to pay us damages to correct everything with the possibility of going to arbitration if the issue is not resolved. Their latest offer on the table covers only about a third of our known costs but does not address the potential uncertainty of the city's response or discovering additional unpermitted work.

They should make you whole and accept the penalty from the locality. I'd give a deadline; if they don't agree, it's court. The last thing that is needed is the locality taking action and they may already know inasmuch as the neighbor's know.

Having un-permitted work may invalidate a homeowner's claim if there is one; there is some urgency to this.
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LiveSimple
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by LiveSimple »

Resolve things and move on, else you may not be a fit for a home owner... is this your first Home or owned homes before and you got into this issue...

if you are first time home owner, see how to resolve and live... you may live in the homer next 15+ years and these issues may be minor... work with the city than the lawyer...
Invest when you have the money, sell when you need the money, for real life expenses...
TN_Boy
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by TN_Boy »

LiveSimple wrote: Wed May 15, 2024 6:37 am Resolve things and move on, else you may not be a fit for a home owner... is this your first Home or owned homes before and you got into this issue...

if you are first time home owner, see how to resolve and live... you may live in the homer next 15+ years and these issues may be minor... work with the city than the lawyer...
It's hard to know without another level of detail on the problems; even then opinions might differ. I'm a long time homeowner/multiple times buyer and seller and from what I've read here, as painful as moving (and finding another house, etc) would be, I'd take the offer and get out of there. I want to spend my time enjoying my house, not fixing it.

It sounds like there are issues that are beyond "typical" homeowner problems. I could not tell from the posts thus far if the OP has had a licensed contractor in to evaluate exactly what needs to be done and how expensive it will be; i.e. is that where the 15% estimate came from? Also, how long will the repairs take? It sounds like there are safety issue as well, so you wonder where the OP is living now/until repairs. Unlicensed gas line work would make me pretty nervous.

Obviously in this situation, you get concerned about "we found these X problems, wonder how many more will pop up in a couple of years?"
dknightd
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by dknightd »

If the prior owner did not know about the defects (which is possible) you have no case.
If they knew about them, and did not disclose, then you do.

I'm not a lawyer. But that is my understanding of the law.

I'm pretty sure that the house I live in has defects, It is 90 years old. I do not know what those defects are. I would probably sell as is. Let the buyer decide.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
Tundrama
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Re: Rescinding a real estate purchase due to sellers disclosure issues

Post by Tundrama »

delamer wrote: Tue May 14, 2024 1:38 pm I am very suspicious about the sellers floating rescinding the deal. Why would the sellers even suggest it?

I realize that isn’t very helpful . . .
+1

Yup, I think the math on the good side would work out for the original sellers.

And, here is the gas in the room, the majority of homes bought that have for example…unfinished basements, get plenty of un-permitted work done.

…and that’s a fact.

If the work was/is done right, why would an permitting entity require tear out? And if they wouldn’t require tear out, then……….

The lawyers would love this problem to go on, and on, and on.

Settle or sell it back to them. But don’t languish in this mess.
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