Jessica and Jim Jepsen thought they did everything right when it came to buying their home.
Thanks to an estate sale in March 2012, they got a great deal on a five-story, split-level California-style house in Valparaiso, IN, a college town about an hour east of Chicago. A well-regarded home inspector from a nearby town checked out the house and said there were no major issues to cause concern.
And so, on a Monday, the Jepsens closed on their dream home and immediately moved in.
That Friday, Jessica came home while it was raining and found a deluge pouring through the roof and into the living room.
She soon discovered that the previous occupant had replaced the rubber roof with shingles -- a violation of local building code that seriously compromised the water-proofing abilities of the roof. All told, it's led to a nightmarishly complicated $70,000 repair that the Jepsens are still dealing with. And as it turned out, rain problems were just the start.
"When the previous owner put shingles on the roof, they also caused ventilation issues," Jessica says. "We've been piecing together the best route to fixing all the problems, because no roofer around here knows what to do -- and they kept suggesting 'the right' fix, but none of it ever really makes sense."
The Jepsens say they did everything they were supposed to do as new homeowners. But they got screwed anyway. So how do you avoid a situation where your dream home turns into a dud? And, if you can't, is there anything you can do?
Blame is difficult to assign
Cases such as the Jepsens' aren't very common, but they definitely do happen. Once you buy a home, you might think you've signed so many documents that insulate the seller from liability that you're pretty much stuck with any problems that pop up.
That's not entirely true -- you do have legal recourse. But holding the former owner liable in court might be an uphill battle.
Many states require sellers to submit documents disclosing any known issues with a home before closing. If a big problem -- such as a porous roof or a crack-laden foundation -- becomes apparent soon after your purchase, then you may be able to file a lawsuit against the seller.
But let's have a quick reality check here: Showing that the prior owner hid a defect is often easier said than done, according to Lauren Jackson, a real estate attorney in Elgin, IL.
"In order to have any recourse, you have to prove that the seller knew about the problem and did not disclose it, or even lied outright about it," Jackson said. "That can require interviewing neighbors. The proof part is difficult, to say the least." And even if you do find your smoking gun, the exact statute of limitations for your legal action varies from state to state and can depend on the type of complaint filed.
The Jepsens believe the problem was covered up just well enough that it got past the home inspector. In their case, they could conceivably sue both the previous owner and the home inspector.
Unfortunately, a clause in the home inspector's contract meant the Jepsens could recover only the cost of the home inspection itself. And the fact that the home had been sold at an estate sale complicated things -- the profits were distributed to multiple siblings, and each of them would have had to be sued individually to recover relatively small amounts of money.
"We would have to file small claims against many people just to get maybe $35,000," Jessica says.
Preventive measures work best
The most important thing buyers can do, according to Mark LaRose, who has been practicing real estate law in Illinois for more than three decades, is to ensure they're protected from liability with:
- Seller's disclosure form
- Home inspection
- Title report
- Property survey
In the event of issues after closing, those documents will determine what sort of claim a buyer has against a seller, if any. Plus, a violation of state disclosure laws can be a lot easier to prove in court than showing a seller lied about an issue with the home.
Next, is your Spidey sense tingling over the seller's disclosure? Maybe the seller is dragging his feet on providing information. Or perhaps some of the disclosed information seems incomplete and the seller refuses to clarify. Now's the time to consult with a real estate attorney to cover your bases.
Still feeling uneasy? Take a deep breath and call off the closing, LaRose recommends. It's not your dream home if it means having to pay for costly repairs down the line.
But if you proceed, know that buying a home always comes with risks.
"You can protect yourself, look for defects," he says. "Sometimes stuff just happens and you're still going to have to whip out your checkbook."