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Seller Disclosure Disputes

3105615966_ed5131d750_bEvery month over 2,000 homes are sold in the Kansas City Metro area. The vast majority of these sales go off without a hitch, but for a small percentage the closing of the sale is just the beginning. Days, months, or sometimes years after the sale, the buyer discovers issues with the home that were not disclosed on the Seller Disclosure form. The issues might be small — like a small leak in the basement — or large — like a major foundation issue. The buyer is mad and feels like someone should be responsible for not telling him or her about this issue and maybe contacts a lawyer.

Many attorneys who practice real estate law have very limited experience with seller disclosure disputes and general litigation attorneys likely have no experience in the are.  Seller Disclosure disputes are complicated and often involve many parties, such as the buyer, seller, real estate agent and inspector.  The rules for liability are different than most consumer transactions, and therefore, having an attorney experienced in handling these types of matters can help buyers from making costly mistakes in bringing litigation where there is a limited chance of recovery.  Moreover, for the defendants in these type actions, hiring an attorney who is experienced in handling seller disclosure disputes can help ensure that all available defenses are being explored and you have the greatest chance of success at trial.

When are sellers liable for undisclosed defects?

This is a difficult question to answer without the specific facts in a situation.  The general rule in both Kansas and Missouri is “buyer beware” or that the burden is on the buyer to conduct inspections or identify problems prior to closing.  With that being said, courts in both states recognize that the unique nature of a home renders some defects undiscoverable during the buying process (for example, mold inside walls can not be discovered without cutting into the walls).  For a seller to be liable, the seller must have known about the issue and not disclosed it.  Moreover, the issue must not have been discoverable during a reasonable inspection.  If a seller disclosed part of an issue, but not the entire extent of it, he or she may not be liable if the information that was disclosed was enough to “put the buyer on notice” of the potential issue.  For these reasons, it is important that buyers consult with an attorney who has experience dealing with these type issues prior to proceeding to litigation.  Seller disclosure cases can be won, but it is important to fully understand the strength of the case before spending money on litigation.

What about the real estate agent or inspector?

Establishing liability for real estate agents and inspectors is even more difficult than against sellers because it is the seller that should have the most knowledge regarding the condition of the house.  Real estate agents are generally not liable for undisclosed issues unless they had specific knowledge of an issue and make affirmative statements to the contrary.  Inspectors are not liable for issues that are concealed, such as within walls, and otherwise not discoverable through a reasonable inspection.  Even when an inspector misses an item that was easily discoverable, it is common for inspectors to include terms in their contracts to limit their liability for errors.  These contractual terms do not 100% shield an inspector from liability, but it does make a case against an inspector more difficult.  Finally, it should be noted that inspectors hired by the bank and/or the bank issuing you a mortgage are not liable for failing to discover issues with the property.  The duty of a bank inspector or appraiser is to the bank and not the buyer.  Therefore, only the bank would have a potential recourse against that inspector or appraiser.

How much does real estate litigation cost?

The costs of litigation can very greatly depending on the attorney you hire, the value of the dispute and what actions the opposing party takes during the case that may require more work on the part of the attorney.  Most litigation attorneys charge either a large percentage of what you recover or an hourly billing rate that can be unpredictable as certain months will require significantly more work than others.  We understand that litigation is often an unbudgeted expense and it can be difficult when you receive a large bill for months that included extensive depositions or time-consuming work on the part of the attorney.  Therefore, beginning in 2017, we have started billing clients based upon a flat-rate litigation model that is comprised of an initial payment that is generally between $500 t0 $3,000 and then monthly payments that range from $250 – $1,000 throughout the course of the litigation.  Moreover, if the case is not resolved within the time frames set forth in the initial retainer agreement due to court schedules or other factors beyond your control, the monthly payment will be cut in half for the remainder of the litigation.

Our goals with implementing this flat-rate billing structure is to provide our clients with predictable monthly expenses and to align the firm’s goals with those of our clients as the flat rate billing structure encourages us to be more efficient when providing legal services.  The flat rate also allows you to feel free to call or email the firm with quick questions or for status updates on your case without worrying about the bill you receive at the end of the month.  Finally, by breaking the fee into monthly payments instead of requiring payment in full up front, you do not end up overpaying when the case is settled prior to trial.

 

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