Buyer Beware – What Not To Do When An Inspection Reveals A Defect

Home buyers are not entitled to relief from sellers who knowingly sell them a mold-infested home, fraudulently concealing the mold with insulation and caulking, where buyers’ pre-purchase inspection shows potential water penetration. Douglas v. Visser, 173 Wn.App. 823 (Feb. 2013). In Douglas, buyers received sellers’ Form 17 Disclosure Statement. Sellers answered nearly every question “I don’t know.” Unsatisfied, buyers pressed back and asked for more thorough answers and a copy of sellers’ inspection report from when sellers purchased the home. Sellers did not provide the inspection report and provided more inadequate follow-up answers. Later but before closing, buyers and their inspector walked through the home. They noticed a small area of rot/decay near the roof line, along with some caulking that suggested a previous roof leak. Buyers did not discuss or disclose their inspector’s report with sellers. The transaction closed. Shortly thereafter buyers noticed a damp smell and potato bugs around the home’s exterior. They hired mold specialists, who determined the home was uninhabitable and that it would cost more to remove the mold than to tear down the house and build a new one. Buyers then sued the sellers for breach of contract, for fraudulently concealing the mold, and for violating Washington’s Consumer Protections Act (CPA). The trial court awarded buyers a judgment for approximately $200,000. Sellers appealed. On appeal, the Court reversed and held sellers were entitled to a judgment for the amount of their attorney’s fees because “[w]here an actual inspection demonstrates some evidence of water penetration, a buyer must make inquiries of the seller” unless doing so would be fruitless. Because buyers didn’t inquire further after their inspection, deciding instead to close the transaction, buyers’ claims were barred. Buyers “cannot succeed when the extent of the defect is greater than anticipated, even when it is magnitudes greater.” Lesson learned: when an inspection reveals defects, even ones appearing to be minor, consider doing a follow-up inspection to determine the true extent of the defect. Otherwise, the general rule is “buyer beware.”

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