Home Defects Discovered After the Sale

Buying a home is a long and complicated process. Most non-new homes have at least a few items that need to be replaced or upgraded. 

Some home defects are obvious and will be disclosed early. It's also helpful to know the age of certain features, including the roof and septic tank (if applicable), since they eventually will need to be replaced. Generally, though, the home seller is responsible for disclosing any significant defects in the home.

But what can you do if you discover a defect in the home after completing the transaction? This article focuses on the options for homebuyers who discover home defects after the sale. For related information, see Questions to Ask When Buying a Home and Types of Construction Defects. 

Problems With House After Purchase: Undisclosed Defects

Common home defects that sellers fail to disclose include:

• Bad sewer lines or rusted pipes
• Hidden water damage
• Rotted wood or termites (learn more about termite letters)
• Huge cracks in driveways or house foundation
• Bad or old ventilation or windows
• Septic system or heater issues
• Radon leaks
• Outdated wiring
• Bad roofing
• Electrical, plumbing and HVAC issues

This does not apply to known defects, such as buying a defective home in foreclosure for a low price. 

Disclosing Home Defects: Sellers' Responsibilities

The laws regarding disclosure forms or disclosure statements vary widely by state and change often. Usually, state disclosure laws require sellers to "disclose all material defects" in a property. This means they list them out and explain them to the buyer. If they forget or refuse, the sale is not valid.

If a new home buyer discovers a material defect that the seller failed to disclose before the close of the sale, the law may give them the right to cancel the transaction.

Overview of Material Defects

According to the International Association of Certified Home Inspectors, a material defect is anything that:

• Has a specific issue with a system or component of a residential property
• May have a significant, adverse impact on the property value
• Poses an unreasonable risk to people

This does not necessarily include systems or components that are at or beyond the end of their normal useful life. For instance, a furnace that works fine but was expected to break down years ago is not considered defective.

The inspector (whom the buyer selects) will generally only focus on irregularities considered material defects. So a scratch across the kitchen counter or a screen door with a few small rips likely would not make it onto this list.

See Required Real Estate Disclosures When Selling Property for more details.

When Home Defects are Discovered After the Sale

The laws always depend on the state you live in. Usually, after the escrow is closed, a buyer might be limited to recovering money for any defects discovered. 

Escrow is your deposited funds promising you will buy the home. These funds will be transmitted from the escrow account to the seller. The day the money is transmitted is often the "cut off" date for getting money back from the seller for any defects.

Alternatively, a state's law may permit the homebuyer to rescind (cancel) the transaction, usually in the case of particularly severe defects.

Home Inspector Responsibilities

It may not always be the seller who is held responsible for undisclosed defects. Liability sometimes extends to either party's real estate broker, real estate agent (realtor), and/or the home inspector. Each case is different, so determining who may be liable is your first step.

In Illinois, for example, sellers are required to disclose defects from a set list (established by law) and explain each one.

The seller may be found liable for the cost of the defect if:

• A defect on the list of potential defects is not disclosed
• The buyer can prove the seller knew or should have known about the defect

However, when the inspector is found liable, they might only be on the hook for the cost of the home inspection report (as opposed to the cost of the defect).

Let an Attorney Help You Resolve Concerns Over Home Defects

No one wants to discover that their dream home has nightmarish defects, especially after the real estate transaction has already gone down. This is considered a breach of contract, and you have legal rights. A demand letter can explain what you need to be fixed or the money you want to be returned to you.

If you are dealing with a home defect matter, don't delay in getting answers to your legal questions. Individuals with questions regarding their house may want to contact a real estate attorney for more specific and detailed information.