Seller May be Liable for Repairs After Closing

  Occasionally I hear from buyers after they have closed on their home and moved in, that something isn’t working properly, and they want to know if the seller will pay to fix it.  When I get these calls, I refer to the Seller’s Property Disclosure Statement and the Buyer’s Inspection Report, to see if there were any comments about the issue prior to closing.

  I hear different types of complaints, from the air-conditioner isn’t working (usually from winter sales when the AC can’t be tested), to water in the basement, and most recently that there was hail damage to a roof 2 weeks before closing that no one knew about as the home was vacant.

  Once we determine the defect wasn’t disclosed, I contact the seller’s agent and ask for the seller to repair or replace the defect. In many cases the seller writes a check and we are done. If the seller declines the buyer may opt for Arbitration, Conciliation Court, Mediation, or District Court. Personally, in 30 years, I have never had a buyer sue a seller or request Arbitration or Mediation.

  Some buyers elect to purchase a one-year home warranty or ask the seller to provide one. One of my clients recently got a new dishwasher and central air-conditioner a few months after closing. I hear from many clients, that they have used the home warranty for miscellaneous repairs.

  Minnesota Statutes require that sellers disclose to prospective buyers all material facts that the sellers are aware of that could adversely and significantly affect an ordinary buyer’s use and enjoyment of the property. Buyers need to be aware that there may be problems that the seller is not aware of and therefore they are not disclosed.

  There is a 12-page Seller’s Property Disclosure Statement form approved by the Minnesota Association of Realtors, that the sellers complete at the time of listing the property. If there are any changes that occur prior to closing the seller is obligated to update the disclosure. 

  In some cases, there is a Seller’s Disclosure Alternative form, where the seller does not answer the disclosure questions. This typically occurs in foreclosure properties, investment properties, or estates where there is a Power of Attorney or the seller has not lived in the home for some time.

  The disclosure form is not a warranty, and buyers are encouraged to have an independent home inspector inspect the property. Most purchase agreements are contingent on a buyer’s inspection. During this contingency, the buyer has the option to ask the seller to make repairs, provide compensation in lieu of repairs, or cancel the purchase agreement because of the condition.

  It is also recommended that buyers walk through the home again before closing to ensure it is in the same condition as when they purchased the property and that agreed upon repairs were made.

  Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Protect Yourself Against Mechanic’s Liens

  If you are thinking about hiring a contractor to build or remodel your home, you need to be aware of the risk of mechanic’s liens. Normally home owners or buyers hire a general contractor, and the general contractor will order materials and hire subcontractors, like electricians, carpenters, lumber, etc. If you pay your general contractor, and he/she does not pay all the labor or material suppliers, they may be able file a lien against your property and try to take possession of your home if they are not paid.

  There are ways to avoid liens or determine if a lien is valid and enforceable. If you are building a new house on a new lot that will be closing at the same time, you can purchase Title Insurance to provide mechanic’s lien coverage for work done prior to closing. The title company will work with the builder and collect lien waivers as payments are made.

  Minnesota Law states: Within 10 days of starting work, the contractor to give you a lien notice. The notice must explain that subcontractors and suppliers may also have a lien on your property if they are not paid, even though they do not have a contract directly with you. The notice must state that Minnesota law allows you to either: pay any subcontractor directly and deduct that amount from the contract price; or withhold from the contractor for 120 days after all work is completed as much of the contract price as is necessary to pay those subcontractors directly unless the contractor has given you lien waivers signed by the subcontractors. A lien waiver is a written statement signed by a subcontractor giving up the subcontractor’s right to file a lien against your property.

  Subcontractors, including materials suppliers, must also give you a specific notice in order to protect their right to file a lien if they are not paid by the contractor. The notice must give the name and address of the subcontractor, the name of the contractor who hired the subcontractor, and the type of service or material provided and its estimated value. The subcontractor’s notice must be given to you within 45 days of the time the subcontractor first furnishes labor or materials, or it is not enforceable.

  To protect yourself from having liens filed against your property, you should have the contractor list in the contract the names of all anticipated subcontractors and material suppliers. In addition, keep track of any subcontractor notices you may receive before your final payment, since some subcontractors may not be listed in the contract. Then, before making final payment, be certain you receive lien waivers signed by each of the subcontractors.

  It is wise to consult with an attorney if you are concerned about a mechanic’s lien on your property.

   Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Sellers Are Required to Disclose Material Facts

  Minnesota Statutes require that sellers disclose to prospective buyers all material facts that the sellers are aware of that could adversely and significantly affect an ordinary buyer’s use and enjoyment of the property.

  There is a 12-page Seller’s Property Disclosure Statement form approved by the Minnesota Association of Realtors, that the sellers complete at the time of listing the property. If there are any changes that occur prior to closing the seller is obligated to update the disclosure. 

  In some cases, there is a Seller’s Disclosure Alternative form, where the seller does not answer the disclosure questions. This typically occurs in foreclosure properties, investment properties, or estates where the seller did not live in the home.

  The disclosure form is not a warranty, and buyers are encouraged to have an independent home inspector inspect the property. Many sellers are not aware of problems with their home. I have seen homes with mold, water, or fire damage in attics, and the sellers had never looked in the attic or had an inspection when they purchased the home. I have seen furnaces emitting carbon monoxide and the sellers had no idea the furnace was bad.  

  Frequently there are homes with branches from nearby trees rubbing on the roof, and the sellers never noticed or thought it was a big deal.

  Encroachments; like a neighbor’s shed partially on the property or an easement, like sharing a driveway need to be disclosed. Flood zones are a disclosure requirement. Problems with water intrusion, or foundation problems need to be disclosed. 

  Many home owners work on their own homes making mechanical or structural changes. If the homeowner did not pull the required permits and have the work inspected, the seller must disclose that as well. I have seen cases where a basement was finished without permits and city officials made the sellers open the walls to inspect the framing, insulation, electrical, plumbing, and heating.

  Insurance claims need to be disclosed, as a seller may have filed a claim, received compensation, and not repaired the damage. Insurance companies track claims and new buyer may not be able to file a future claim, if repairs were not made on an old one.

  There are additional disclosures for lead based paint, wells, septic systems, radon, mold, meth amphetamine production, etc.

  An experienced agent can explain the required disclosures to you before selling your home.

 Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Water Leaks Create Mold

  Many of the homes on the market this year have experienced water infiltration due to higher than normal water tables from several days in row with rain or heavy water runoff from neighboring properties. It has impacted lake homes, farm homes, newer developments and old downtown homes.

  Most homes look great when you walk through the main floor or upper levels but you can’t miss the damp smell when you open the basement door. Unless the seller has recently painted the basement walls and floor you can usually see black mold where the water is coming in.

  One of the main causes of water intrusion is improper grading or lack of gutters and downspouts.  If the water is running towards the house, it usually finds it way in. 

  After inspecting one of my seller’s homes, we noted that the neighboring properties, on all 3 sides, sloped into his yard and directly towards the house. He had a 4-level home with drain tile and a sump pump on the lowest floor, but not on the floor at grade level. Water was coming up through the floor, so he had his yard regraded, and created a rain garden for the water to pool away from the house, and added gutters. When he pulled back the carpet to dry it out, he saw mold, so he removed the carpet and pad, used bleach to kill the mold, dried it thoroughly, and installed new flooring.

  Another client had water coming into her basement this summer, and had drain tile installed outside and inside her home along with a sump pump. She removed the flooring, and dried out the basement, but water had gotten behind the walls where mold grew, so the basement had to be gutted to the studs, and rebuilt.

  Neither of these clients lived in a flood zone or had flood insurance, so the cost of mitigation was their own at $5000 in the first case, and $30,000 in the second. 

  Leaving mold in your house can cause significant health issues, and many people have mold allergies. Mold should be mitigated and water intrusion should be corrected as soon as it is detected. If you want to sell your home and leave it for the next owner, your home may take longer to sell and the price may be drastically discounted for the new owner to take care of the problem.

  An experienced real estate agent can direct you to professionals that can mitigate mold and correct water problems.

   Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Seller Has Liability for Not Getting a Building Permit

  Last fall, one of my clients purchased an historic home that had been completely renovated, in a great neighborhood, on a fabulous lot with a new garage and bonus room. The buyers paid $50,000 over the asking price as they were four other offers, and they really wanted the house.

  They had a thorough inspection, verified the city permit records, the home appraised for the purchase price, and they purchased a home warranty.

  Soon after they moved in, they could smell gas in the new laundry room. They contacted the home warranty representative, and a contractor came out and determined there was a gas leak behind a wall on the 2nd floor where the sellers installed a new washer and gas dryer. This appeared to be a workmanship problem, so it wasn’t covered by the home warranty.

  We checked the Seller’s Property Disclosure and the sellers stated that there were permits pulled, if required, for all work done. Then we checked the building permit records and found a contractor that pulled a permit for heating and plumbing earlier in the year. The buyers contacted the contractor, but they told that the contractor didn’t install the new laundry room.

  The buyers had to have the gas line disconnected as the location of the gas leak couldn’t be determined without removing the sheetrock, run electric for a new dryer, and purchase a new electric dryer. The total cost to repair the problem was about $6,000.

  Once the buyers new the extent of their damages, they planned to hire an attorney to get reimbursed by the sellers. I recommended that we reach out to the sellers through their agent before taking legal action. The buyers draft a demand letter for $6,000, outlining the problem, lack of disclosure, and associated repair costs.

  The sellers quickly agreed to reimburse the buyers for $6,000, to avoid litigation, without admitting fault, and the buyers signed a release for any future claims. 

  It is important to pull a building permit, when required, in order to avoid future liability, after you sell your home. If you know work was done without a permit, you must disclose the information to the seller, so they can decide whether to move forward, have further inspections, or renegotiate the purchase agreement prior to closing.

  An experienced real estate agent or attorney can answer disclosure questions, prior to putting your home on the market, to help avoid claims after closing.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.

Buyer Wasn’t Satisfied with Seller’s Repairs

  One of my clients was helping his mom sell her home as she was in a nursing home. The house had been in the family for over 40 years and hadn’t been updated for over 30 years. The house was vacant and in need of repair, but they wanted to sell it as is. 

  The sellers priced the house aggressively as it was the largest home in the area and they wanted to get top dollar. They turned down two offers, then started a series of price reductions. Eventually they accepted an offer that was lower than the two they turned down.

  All the buyers that made offers deducted their estimate for the cost of repairs from the list price when they made their offer; as the list price dropped, so did the offer price.

  When the seller accepted the low offer, it was under the condition that the house was being sold “as is” and there would be no repairs made by the seller. The buyers and seller agreed that the buyers could have an inspection to ensure they wanted to move forward, and they could cancel the purchase agreement if there were new found concerns.

  After the inspection the buyers had a long list of repairs that they asked the seller to take care of prior to closing or they wanted a $20,000 reduction. The seller thought that was an unreasonable request and at first wanted to cancel the purchase agreement, but after sleeping on it, he agreed to make the repairs as he felt he could get the work done for $5,000.

  The seller had the work completed and when the buyers did their walk through, they weren’t satisfied. They asked for more work to be done or they wanted a $5,000 price reduction.

  The seller was furious, and said no. The house appraised for more than the sale price, and with the work completed, we knew we could sell it for more. This was conveyed to buyer and ultimately, they decided to move forward and accept the house as it was.

  My recommendation is almost always to offer a credit in lieu of repairs to avoid this situation. In this case the buyer and seller were $15,000 apart with their estimates, and the seller made the decision to do the work. In hindsight, the seller said it wasn’t worth the time, effort, and stress of trying to make the buyer happy. The sellers were grateful that the sale stayed together and closed.

  Closing a home can be an emotional roller coaster for buyers and sellers. It is important to work with an experienced agent to ensure a successful closing, even when problems arise.

Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.