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You Bought a Home and the Basement Flooded. Now What?

Posted: 11 Jan 2012 06:34 AM PST

Well-informed buyers may spend six months looking at properties, learning the neighborhoods, and gaining deep market knowledge. Once they identify a winner, they may spend weeks getting to know more about the property. They make several visits to the home, read through the seller’s disclosures, read the entire home inspection report — and even accompany the inspector as he investigates the property.

All’s well, escrow closes, and the home is theirs. And then, within a few months, something unexpected happens. A window leaks, the furnace goes out, or there is an electrical problem. Now what? Does the buyer have to cough up yet more money to fix the issue, or is it the seller’s responsibility?

It depends.

In most states, the seller is responsible and liable for disclosing to the buyer any defects or issues that would have a negative effect on the property. Additionally, the property inspections give the buyer the opportunity to identify and address any issues the seller didn’t disclose.

As thorough as both processes can be, problems may arise after escrow closes that the seller didn’t know about and the property inspection couldn’t uncover. In this situation, it’s the responsibility of the current owner to finance any necessary repairs. That’s just part of life as a homeowner.

But what about a problem that could not be discovered during inspections — and it’s something the seller may have known about but didn’t disclose?

The Case of the Flooded Basement in Boston

There’s a story out of the Boston suburbs in which a new home buyer took ownership and, after the first big rain, the basement flooded. The problem wasn’t something that could be easily discovered during a two-hour inspection on a sunny day.

The water seepage eventually led to mold problems. After contacting a vendor to fix the problem, the new owner learned that the former owner had previously hired the same vendor to fix the same problem. Clearly, the seller knew about the problem and failed to disclose it.

The options available to the buyer in this situation depend a lot on the state in which they live in and the type of real estate contract they signed, with regard to dispute resolution. In the case of the flooded basement in suburban Boston, the buyer had proof that this problem existed previously. The seller had little choice but to come to a quick and easy settlement, reimbursing the buyer for all the repair costs.

Advice for Buyers

Always read thoroughly the complete inspection report and all disclosures. If you’re unsure of anything, don’t hesitate to ask questions of the seller, your real estate agent and the home inspector. The goal is to isolate as many issues as possible before the close of escrow, so that you know what you’re getting and there aren’t likely to be unpleasant surprises once you move in.

Should something issue arise after you own the home, the best plan of action is usually to ask your real estate agent to go back to the seller. Present the issue to the seller to determine if they had knowledge. Don’t assume guilt; in some cases, the issue at hand never happened to the previous owner and may simply be bad luck.

Sometimes, this situation leads to one person’s word against another’s. For the most part, smaller issues can be settled between both parties without incident. But for a more serious problem, like a major health or safety issue, buyers may need to consult an attorney for the best course of action.

Advice for Sellers

Consider getting an inspection done right before you put the home on the market. This should reveal any potential problems you might not know about, giving you time to have them fixed before listing. When your home goes on the market, you can present potential buyers with a copy of the inspection. This often gives buyers a sense of confidence about the seller’s property. And in a difficult real estate market, that can help sell a property.

> Read why you should “Get a Property Inspection Before You List.”

Brendon DeSimone is a Realtor® and real estate expert based in San Francisco and New York. He is a contributor to Zillow Blog, has collaborated on multiple real estate books and is often quoted by major media outlets. Follow Brendon on Twitter.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

  

Home Inspection

Buying a home may well be the largest financial investment you will ever make. Naturally you will want to know as much as possible about the property before you finalize the purchase at closing.  The following is an explanation of the inspection contingency in the standard residential sales contract.

©ST. LOUIS ASSOCIATION OF REALTORS® Approved by Counsel for the St. Louis Association of REALTORS® Form #2060 10/07 To be used exclusively by REALTORS® 

Page 1 of 2

“INSPECTIONS” Contingency

 Please be advised that this brochure is not a contract, does not replace the contractual provisions and is not a legal interpretation of the contractual provisions. No representations are made by this brochure as to the legal or practical effect of any contractual provision. If you have questions about your legal rights and liabilities under this or any other provision of the contract, you should consult your own attorney.

This brochure is a brief explanation of the Inspection Contingency, Paragraph 10 of the joint St. Louis Association of REALTORS® and Bar Association of Metropolitan St. Louis approved Residential Sale Contract dated 8/07. It will remain applicable to subsequent versions of the contract until a revision of the contract mandates its change.

WHY DO I NEED INSPECTIONS?

The “Inspections” contingency offers the Buyer the opportunity to discover information about the property beyond the Buyer’s visual observations, the “Sellers Disclosure Statement” and any marketing materials that may be available. Further investigations may expose one or more “unacceptable conditions.”  Some unacceptable conditions may be learned through an “independent qualified inspector”, however, some conditions may be discovered by the Buyer’s further investigation of a wide variety of issues which may be important to the Buyer. An “independent qualified inspector” commonly examines household systems such as the roof, electrical, plumbing, heating, cooling, structure and foundation of the property. The Buyer should utilize local law enforcement resources if crime statistics or the proximity of sexual offenders to the home would be an unacceptable condition. A Buyer may wish to verify the school district where the property is located, the subdivision restrictions and covenants of a subdivision, a proposed road improvement in the area, code compliance for prior improvements or other factors that might affect the property.  Additional inspections may be obtained for specialized systems or conditions such as: pools, hot tubs, saunas, alarms, sprinklers, drain lines, septic systems, and wells. Inspections for wood destroying insects, testing for lead based paint, asbestos, radon, mold, the presence of methamphetamine and other environmental pollutants usually require a qualified specialist to inspect the property.  The inspections suggested above are not intended to be an exclusive list of the type or kind of inspections a Buyer may wish to perform or purchase.  They are examples that demonstrate the Buyer’s options under this contingency.

THE CONTINGENCY PROCESS

The process begins by allowing the Buyer a specific period of time to obtain written property inspection reports from any independent qualified inspector. If the Buyer is satisfied with the inspection results, he so notifies the Seller and the contingency is resolved.  If the Buyer is not satisfied with the inspection results or is simply not satisfied for any reason regardless of the inspection results, he must furnish a written Inspection Notice and all written inspection reports to the Seller or listing broker within the time specified in the contract. The Notice can either inform the Seller that the contract is terminated or it can identify certain requirements that, if agreed to by the Seller, would satisfy the Buyer.  These requirements could be that the Seller corrects certain unacceptable conditions or provide a monetary adjustment at closing.  If the Buyer has an inspection, the buyer has the unilateral right to terminate the contract unless he submits a request for remedy. If he elects not to terminate but instead, chooses to request that the Seller satisfy his identified requirements or conditions, he should proceed in good faith in attempting to accomplish a resolution of the contingency.  If the Buyer provides a timely Inspection Notice, the process then provides the parties with a specified period of time in which to reach an agreement (the resolution period) or the contract terminates. During this resolution period, a written commitment by the Seller to meet the requirements originally submitted by the Buyer in the Inspection Notice or a written commitment by the Buyer to accept the property without satisfaction of such requirements, shall constitute an agreement for the purpose of this contingency.

2 of 2

 The calendar shown here is provided to help understand the inspection time frames. It assumes a 10 day inspection period which is the contract time period unless otherwise specified. If the “Acceptance Deadline” date is the 5th of the month, day one is the 6th and the Inspection Notice must be in the hands of the Seller or listing broker by 11:59 p.m. on the 15th of the month. The resolution period works the same way. Day one is the day after the Inspection Notice, accompanied by a complete copy of written inspection reports, is received by the Seller or listing broker.

IT IS VERY IMPORTANT TO REMEMBER THAT ALL REQUESTS AND NOTICES DESCRIBED ABOVE MUST BE TIMELY AND MUST BE IN WRITING.

THE INSPECTION REPORT

The Buyer may have the property inspected by any independent qualified inspector. It is recommended that the inspector be a member of a professional association. If the Buyer chooses to use a member of the American Society of Home Inspectors (ASHI), the Buyer may expect an inspection and report as indicated below. When reading an inspection report, it is important to understand that most home inspectors include suggestions for future improvements and general maintenance. This really isn’t the intended purpose of the contingency but it is typically very useful information for the new homeowner to understand how to maintain his investment.

BUILDING INSPECTIONS BY ASHI MEMBERS

The building inspection is a VISUAL inspection of the major structural and mechanical components of the dwelling unit. The inspection is performed in accordance with the standards of practice established by the American Society of Home Inspectors (ASHI) and is not meant to be a code compliance inspection. All utilities should be turned on for a complete inspection to be performed.

A.

Note that the inspector can only inspect exposed and accessible systems and their components. Any wiring/ plumbing lines/ vents/ structural components, etc. that are concealed behind walls or are underground cannot be inspected. The following general areas are inspected.Electrical System – Identify the type/ manufacturer of the main panel and sub-panel(s) and the existence of ground cable; compatibility of overload protection with conductor size; spot check electrical switches and receptacles and look for exposed wiring.

B.

Interior Plumbing - Water supply; hot water source; interior plumbing lines; existence of vent pipe system; water pressure (functional flow);  fixtures and faucets; proper drainage and piping.

C.

Roofing – Type and condition of roofing; guttering; venting; attic insulation.

D.

Walls, ceilings, floors, stairs and railings are inspected for major structural problems. Doors and windows are tested for proper operation.

E.

Exterior – Exterior wall coverings; flashing; trim; attached decks; balconies; stoops; steps; retaining walls and grading/surface drainage as they apply to the structure.

F.

Foundations – Basements; type of structure; materials; exposed areas of foundation (footings and piers cannot be inspected); evidence of water penetration. Note that an inspector cannot predict future settlement of a structure.

G.

Central Heating System (space heating not included) – Energy source; heating equipment; heating distribution; presence of heating source in each habitable room. The inspector will operate the system using normal manual controls. The inspector will not light the pilot.

H.

Cooling System (window units not included) – Energy source; cooling equipment; cooling distribution; presence of central cooling source in each habitable room. The inspector will operate the system using normal manual controls.  ASHI does not require individual inspectors to predict life expectancies of components such as roofs, air conditioners, heating systems, water heaters or appliances. Buyers should be aware that mechanical components can randomly or unexpectedly fail and that the inspector cannot predict such phenomenon. The inspection and written report present the inspector’s opinion of the conditions visible at the time of the inspection and is not a warranty or guarantee of the continued future performance of the home’s components. Note that home warranties can be purchased by home buyers which insure future performance/repair of many components of a home.

Private or specialized systems are excluded from ASHI inspections: examples include pools, hot tubs, saunas, alarm, sprinkler, septic systems, wells, etc. Inspections for wood destroying insects, and testing for lead paint, asbestos, radon, mold and other environmental pollutants are excluded from ASHI standard inspections. Private inspections from qualified or licensed specialists should be obtained for these specialty items. 

As members of the National Association of REALTORS®, REALTORS® are actively engaged in the real estate business; bound by a Code of Ethics to provide good advice and honest treatment; and are committed to continuing education for updating their knowledge and skills.

It's important to hire a knowledgeable, independent home inspector for advise on the overall condition of the property. The purchase contract usually requires specific time periods for each inspection, and it's critical that these time frames be met. Usually the cost for any and all inspections and re-inspections are paid by the Buyer. Prices can range from $350 to $500 for whole-house inspections.

Some examples of common inspections are:

  • Structural - Defects caused by poor construction, soil movement, water or drainage conditions, settlement, fire, etc.
  • Environmental Hazards - Including asbestos, lead-based paint, radon gas or any other toxic material.
  • Roof - Can include framing members, decking and shingle condition.
  • EMP - Electrical, Mechanical and Plumbing - Should include electrical and plumbing systems, built-in appliances, heating and cooling systems, swimming pool/spas, sprinkler systems and security systems.
  • Termite - Report would show any visible infestation or visible damage caused by and wood destroying organism (termites, water damage, wood rot).

Many companies specialize in only one area of inspection, and others will group several together and offer a package price. Whichever route you go, assure yourself your getting the inspections you need. Many can be found in the yellow pages or your Broker can provide a list of several of each to choose from.

Hire an ASHI inspector
evaluate:
   1  What services are provided?
     2   Can the inspector schedule the service promptly with 24 or 48 hours?
    3   Inspector and Buyer should be going through the house at the same time in order to get the verbal assessment of what is seen.
    4   Ask for computer printout on line or emailed with pictures and detailed recommendations.
    5   Is there a rapport and good communication?
    6   Was the inspector recommended?
    7    Ask price and shop if need be
Maintenance Checklist

Prevention Is The Best Approach
Although we’ve heard it many times, nothing could be more true than the old cliché “an ounce of prevention is worth a pound of cure.” Preventative maintenance is the best way to protect your comfort level and resale value. Maintenance reduces the risk and occurrence of unexpected repairs.

Upon Taking Ownership
After taking possession of a new home, there are some maintenance and safety issues that should be addressed immediately. The following checklist should help you undertake these improvements:

  1. Change the locks on all exterior entrances, for improved security.
  2. Check that all windows and doors are secure. Improve window hardware as necessary. Security rods can be added to sliding windows and doors. Consideration could also be given to a security system.
  3. Install smoke detectors on each level of the home. Ensure that there is a smoke detector outside all sleeping areas. Replace batteries on any existing smoke detectors and test them. Make a note to replace batteries again in one year.
  4. Create a plan of action in the event of a fire in your home. Ensure that there is an operable window or door in every room of the house. Consult with your local fire department regarding fire safety issues and what to do in the event of fire.
  5. Examine driveways and walkways for trip hazards. Undertake repairs where necessary.
  6. Examine the interior of the home for trip hazards. Loose or torn carpeting and flooring should be repaired.
  7. Undertake improvements to all stairways, decks, porches and landings where there is a risk of falling or stumbling.
  8. Review your home inspection report for any items that require immediate improvement or further investigation. Address these areas as required.
  9. Install rain caps and vermin screens on all chimney flues, as necessary.
  10. Investigate the location of the main shut-offs for the plumbing, heating and electrical systems. If you attended the home inspection, these items would have been pointed out to you.

Regular Maintenance
Every Month

  1. Check that fire extinguisher(s) are fully charged. Re-charge if necessary.
  2. Examine heating/cooling air filters and replace or clean as necessary.
  3. Inspect and clean humidifiers and electronic air cleaners.
  4. If the house has hot water heating, bleed radiator valves.
  5. Clean gutters and downspouts. Ensure that downspouts are secure, and that the discharge of the downspouts is appropriate. Remove debris from window wells.
  6. Carefully inspect the condition of shower enclosures. Repair or replace deteriorated grout and caulk. Ensure that water is not escaping the enclosure during showering. Check below all plumbing fixtures for evidence of leakage.
  7. Repair or replace leaking faucets or shower heads.
  8. Secure loose toilets, or repair flush mechanisms that become troublesome.

Regular Maintenance
Spring and Fall

  1. Examine the roof for evidence of damage to roof coverings, flashings and chimneys.
  2. Look in the attic (if accessible) to ensure that roof vents are not obstructed. Check for evidence of leakage, condensation or vermin activity. Level out insulation if needed.
  3. Trim back tree branches and shrubs to ensure that they are not in contact with the house.
  4. Inspect the exterior walls and foundation for evidence of damage, cracking or movement. Watch for bird nests or other vermin or insect activity.
  5. Survey the basement and/or crawl space walls for evidence of moisture seepage.
  6. Look at overhead wires coming to the house. They should be secure and clear of trees or other obstructions.
  7. Ensure that the grade of the land around the house encourages water to flow away from the foundation.
  8. Inspect all driveways, walkways, decks, porches, and landscape components for evidence of deterioration, movement or safety hazards.
  9. Clean windows and test their operation. Improve caulking and weather-stripping as necessary. Watch for evidence of rot in wood window frames. Paint and repair window sills and frames as necessary.
  10. Test all ground fault circuit interrupter (GFCI) devices, as identified in the inspection report.
  11. Shut off isolating valves for exterior hose bibs in the fall, if below freezing temperatures are anticipated.
  12. Inspect for evidence of wood boring insect activity. Eliminate any wood/soil contact around the perimeter of the home.
  13. Test the overhead garage door opener, to ensure that the auto-reverse mechanism is responding properly. Clean and lubricate hinges, rollers and tracks on overhead doors.
  14. Replace or clean exhaust hood filters.
  15. Clean, inspect and/or service all appliances as per the manufacturer’s recommendations.

Regular Maintenance
Annually

  1. Replace smoke detector batteries.
  2. Have the heating, cooling and water heater systems cleaned and serviced.
  3. Have chimneys inspected and cleaned. Ensure that rain caps and vermin screens are secure.
  4. Examine the electrical panels, wiring and electrical components for evidence of overheating. Ensure that all components are secure. Flip the breakers on and off to ensure that they are not sticky.
  5. If the house utilizes a well, check and service the pump and holding tank. Have the water quality tested. If the property has a septic system, have the tank inspected (and pumped as needed).
  6. If your home is in an area prone to wood destroying insects (termites, carpenter ants, etc.), have the home inspected by a licensed specialist. Preventative treatments may be recommended in some cases.