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Are NY Homebuyers Penny-Wise and Pound-Foolish?

April 24, 2012

Searching through hundreds of listings on your iPhone or your realtor’s website to find the perfect home is a time-consuming process. Once you find the perfect red-brick, 4-bed, 2-bath cape on the quiet, tree-lined sidestreet around the corner from your favorite café, the work isn’t over. I’m not just referring to the seemingly endless stack of papers you’ll be asked to read (ha!), sign, and initial. I’m not talking about the enjoyable and gratifying job of packing up every single item you own into those little cardboard banker boxes you swiped from the copy room at the office. You’ve negotiated the price, you’ve secured a lender, and now comes the infamous property inspection. That’s where the old adage “Buyer Beware” comes into play.

It’s not just a saying, it’s the law in New York. A buyer has the legal responsibility to dig, delve, and inquire into the property’s condition. It is the buyer, not the seller, the realtor, or the lawyer who has the duty to inspect and inquire about the condition of the property. But what if you move in and you find out you missed something?…Something BIG. The foundation is cracked, the roof has a gaping hole, or the walls are crawling with termites. If you find a serious problem with your dream home after closing, absent the seller’s fraud or active concealment of a known defect, you may be in a tough spot.

Generally, in NY, a buyer will not be successful in a case against a seller where the problem is:

  1. Open and Obvious; or
  2. Discoverable by a Reasonable Inspection of the Premises or of Public Records; or
  3. Not Concealed or Hidden by a Seller, and No Fraudulent Misrepresentations were made by the Seller.

Even if you’ve hired a home inspector for the specific purpose of finding problems, they ordinarily do not check for things like asbestos, mold, water quality, flow rates, or lead paint. Even if they miss something they were supposed to inspect, often times they can only be held liable up to the amount of the fee you were charged for the inspection.

People pay a lot of attention to the pennies they pay at the pump or at the supermarket, but when it comes to large purchases, like your house, buyers sometimes make quick decisions without the same concern for the expense. Don’t be so quick to waive available tests or release contingencies relating to radon, lead paint, asbestos, or mold, for example. If the property is serviced by a well, you may want to run a water quality test or a flow-rate test. If you don’t, it could mean that you just bought someone else’s problems, and it could also mean that it will cost a lot more at this stage for you to attempt to correct those problems – whether it be with the help of a repairman or an attorney or, in some cases, both.

What can you do to protect yourself? Spend a little bit more time and a little bit more money before you close – and save yourself the headaches and a lot more money:

  • READ the Property Condition Disclosure Statement, make sure every question is answered, and be aware of situations where the PCDS is not required (such as for the sale of a condo, a foreclosed property, or in transactions between family members).
  • Use the INTERNET to educate yourself about issues or phrases you’re not familiar with
  • ASK the Seller direct questions
  • Find out what the Property Inspector is NOT inspecting, and inspect those things
  • Bring an Engineer, a Plumber, or other professionals to inspect the property with you and explain issues
  • TALK to neighbors about the property, the neighborhood, and whether there has been any recent work done at the property. If so, talk to the contractors
  • Order the available TESTING for radon, lead, mold, flow rates, and water quality
  • Inspect the quality, fitness, and value of anything being sold “AS IS”
  • INCLUDE a provision allowing the prevailing party in subsequent litigation to recover attorneys’ fees

If you discover a problem before closing, ask the seller to repair it at their expense or provide you with a credit for an appropriate amount based on a reliable estimate of the expected costs to repair the issue. Don’t ignore red flags; beware of them. If you can’t resolve the issue, cancel the contract.

In just about any situation involving a major decision, such as a home purchase, there is no downside to getting legal advice. Even if the result is that you are reassured that you’re making wise decisions, the peace of mind you’ll get makes it worthwhile. Of course, the upside is that you could end up saving significant dollars and avoiding unanticipated expenses.