Home inspection: Should seller disclose the flaws?
You put your home up for sale. A buyer puts in an offer, which you accept, conditional upon a satisfactory home inspection. The report reveals problems that cause the buyer to back out of the deal.
You put your home up for sale again, knowing these defects still exist. Should you disclose them to the next buyer? Here’s why you should:
Wendy Gunderson and Levi Gravelle bought a home from Wilfred and Mary Savoy in Elko, British Columbia in January 2006, for $178,000. Richard Lightburn, the real estate agent was a friend of Gunderson.
The home had been for sale on and off for three years with Lightburn as the agent throughout. An offer to buy the house in 2005 fell apart after the inspection. The inspection found mildew in the basement crawl space, which suggested a high moisture level and that repairs would be necessary. The report also found that the furnace wasn’t adequate for the renovated home. The buyer walked away.
At the time this deal was negotiated, Lightburn was on vacation, so another agent in his office handled the negotiation. The agent then advised Lightburn about the problems in the report. Wilfred Savoy followed some of the recommendations of the home inspector in trying to fix the problem. Lightburn, the agent, was aware of these repairs and that the furnace was not large enough to suit this home.
When Gunderson was looking at buying the home a year later, she asked Lightburn about having a home inspection done and he told her that it wasn’t necessary and that everything was fine in the home except the furnace which was too small.
At trial, Lightburn said he told the buyers about the mould. The buyers said the opposite. The judge chose to believe the buyers on this point.
Shortly after moving in, there were serious problems with the home. Upon taking a shower, it was discovered that the water improperly drained into the crawl space and black mold was discovered. The mold later began to affect the health of the buyer’s daughter. They moved out of the home and started the lawsuit.
Estimates were brought at trial to show the cost to remedy the mold problem and restore the home would be over $70,000.
At trial, on July 16, 2012, Judge Thomas Melnick found that Wilfred Savoy did try to fix the problem indicated in the inspection report to the best of his ability, following the instructions from the home inspector. He did not try to conceal anything in the home as he thought that he had fixed the problem. As such, the judge found that the sellers, the Savoys, were not responsible for the buyer’s damages.
However, the judge accepted the buyers’ evidence that they were not told anything about the mold in the inspection report from Lightburn. He found that given Lightburn’s knowledge of the history of mildew in the home, he should have advised the buyers to check further into this. As such, he found Lightburn and the Real Estate Brokerage company responsible to pay damages to the buyer.
Judge Melnick determined that had the buyers known about all of the problems when they bought the home, they would have offered about $38,160 less, being the approximate cost to fix the problem at the time. He also awarded them additional damages for $10,000 as a result of the inconvenience to their lives and the health challenges that were caused as a result of this purchase, and legal costs.
If you learn about a problem as a result of a home inspection, get your own expert in to give a second opinion. Do the correct due diligence and fix the problem. Do not conceal this from a future buyer. Let the buyer know and have them check it out with their own home inspector. For real estate agents, whenever you act for both the seller and the buyer, make the deal conditional upon both sides getting separate legal advice before the deal is firm.
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To Your Wealth
Gord
