Author Topic: Rescission  (Read 2092 times)

JDsNova

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Rescission
« on: January 27, 2018, 11:39:51 PM »
Recently purchased a home and Shortly after moving in, the assessor shows up to investigate why the square footage from the sale doesn’t match what is on record.   Notifies us that Approx 1000 sqft are unpermitted.  Obviously this wasn’t disclosed in the contract.   Soon after, we discover water damage and mold (also not disclosed) and mold that is confirmed to be black mold.    I move my wife and 2 very young children out until the mold is removed.   

During the removal of mold where part of the walls are cut away, the contractor/mold removal guy shows me some of the very poor work that was done in the construction of the unpermitted property.... plumbing and electrical not to code, etc. 

Out of curiosity has anyone had a similar experience and had any luck with unwinding a real estate deal?   I have a lawyer working with me on this, but looking to see what others have had experience with.   


Thanks!

waltworks

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Re: Rescission
« Reply #1 on: January 28, 2018, 09:15:00 PM »
Did you do an inspection? If so, what were the results?

To "unwind" the deal, you'd need to show that the sellers *knowingly* misrepresented the issues with the property. This is a VERY hard hurdle to clear - black mold? We didn't know about that, sorry. No permits? We didn't do that work, it was the previous owners, etc.

I was actually sued once by someone who bought a house built in the 1800s (and remodeled/added to many times since, through probably 15 different owners) and 6 months later found asbestos debris in the crawlspace (we're talking _crawl_) of the oldest part of the house. The stuff had probably been there for 50 years, and since we'd never entered the crawlspace, there was no way for us to have known about it. The judge literally laughed the suit out of court and dismissed it with prejudice.

Now, if you have incriminating emails between the seller and her realtor talking about hiding the black mold with spraypaint and duct tape or something, then you have a case. But I doubt that. You have to prove that the sellers *defrauded* you and lied.

The bottom line is that it is *really* hard to win a lawsuit in your shoes, which is why you do a crazy amount of inspecting/due diligence before closing.

Fix the problems, consider it a lesson learned, and go on with your life.

-W

JDsNova

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Re: Rescission
« Reply #2 on: January 28, 2018, 10:23:08 PM »
Did you do an inspection? If so, what were the results?

To "unwind" the deal, you'd need to show that the sellers *knowingly* misrepresented the issues with the property. This is a VERY hard hurdle to clear - black mold? We didn't know about that, sorry. No permits? We didn't do that work, it was the previous owners, etc.

I was actually sued once by someone who bought a house built in the 1800s (and remodeled/added to many times since, through probably 15 different owners) and 6 months later found asbestos debris in the crawlspace (we're talking _crawl_) of the oldest part of the house. The stuff had probably been there for 50 years, and since we'd never entered the crawlspace, there was no way for us to have known about it. The judge literally laughed the suit out of court and dismissed it with prejudice.

Now, if you have incriminating emails between the seller and her realtor talking about hiding the black mold with spraypaint and duct tape or something, then you have a case. But I doubt that. You have to prove that the sellers *defrauded* you and lied.

The bottom line is that it is *really* hard to win a lawsuit in your shoes, which is why you do a crazy amount of inspecting/due diligence before closing.

Fix the problems, consider it a lesson learned, and go on with your life.

-W


I didn’t say they were getting off the hook, I just asked if anyone had experience with rescission.  I have a contractor that wrote a report stating they painted over mold and have plenty of pictures to back that claim.  Regarding the lack of permits, the seller built the add-ons themselves.  This situation is a lot more complex than what I initially mentioned, simply because I’m curious about rescission.

Thanks. 

nereo

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Re: Rescission
« Reply #3 on: January 29, 2018, 06:16:28 AM »
Did you have an inspection done before purchase?  If so, what were the results?
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ender

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Re: Rescission
« Reply #4 on: January 29, 2018, 06:32:04 AM »
Did you have an inspection done before purchase?  If so, what were the results?

+1

Water damage is pretty hard to hide in most cases.

JDsNova

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Re: Rescission
« Reply #5 on: January 29, 2018, 07:34:03 AM »
Did you have an inspection done before purchase?  If so, what were the results?

Yes an inspection was done and no water damage was noted.  The testers concluded that mold and water damage to be there Approx 1-2 years. 

ender

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Re: Rescission
« Reply #6 on: January 29, 2018, 07:35:39 AM »
Did you have an inspection done before purchase?  If so, what were the results?

Yes an inspection was done and no water damage was noted.  The testers concluded that mold and water damage to be there Approx 1-2 years.

Did your sellers sign a disclosure saying no water damage?

Have they owned more than 1-2 years?

If so, they might have put themselves into a bad spot, if it's provable they knew or should have known there would be water damage...

nereo

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Re: Rescission
« Reply #7 on: January 29, 2018, 07:51:49 AM »
Did you have an inspection done before purchase?  If so, what were the results?

Yes an inspection was done and no water damage was noted.  The testers concluded that mold and water damage to be there Approx 1-2 years.

Did your sellers sign a disclosure saying no water damage?

Have they owned more than 1-2 years?

If so, they might have put themselves into a bad spot, if it's provable they knew or should have known there would be water damage...

This is difficult for you, as you must prove two things;

i) the water damage was caused by the seller.
ii) the seller knew about it and tried to cover it up.


There's a number of approaches the seller might take to avoid any clawback -
Regarding #1:
s/he did not notice the mold. S/he was unaware of a water leak. There might have been some leak 'a while back' but it was fixed and the plumber didn't think it was a problem so they forgot about it (plausible deniability).

Regarding #2:
s/he thought the walls just looked 'dingy' and so painted over them. s/he saw some mold and attempted to 'treat' it with paint and primer (note this is actually a reasonable practice for surface mold if the correct primer/paint is used.)

Like Walt said, this is a tough road to climb, which is why a thorough inspection and due diligence is so important for the buyer.  The fact that your own inspector(s) did not notice anything could make this harder for you - if your inspector didn't notice anything amiss how could they know there was a problem?  You need to somehow prove that they knew and actively covered it up. Since painting before selling is common (even expected) that's not going to prove they were covering up a problem. You need to somehow show that before they prepped it for sale the problem was known or obvious to even a non-professional.
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waltworks

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Re: Rescission
« Reply #8 on: January 29, 2018, 11:00:10 AM »
Did you have an inspection done before purchase?  If so, what were the results?

Yes an inspection was done and no water damage was noted.  The testers concluded that mold and water damage to be there Approx 1-2 years.

Yeah, if the inspector didn't find this stuff, then your beef is with the inspector. If a professional inspector didn't find a problem, you can't usually claim that the owners must have known about it.

As for the unpermitted stuff, was there a specific part of the disclosures that they signed that says there was no unpermitted work done?

I think you are probably best off just fixing things and learning your lesson - a lawsuit is very, very unlikely to succeed given that you did an inspection.

-W

lexde

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Re: Rescission
« Reply #9 on: January 29, 2018, 11:37:02 AM »
What state is this in? That will help with discussing your rights as to the contract. What type of deed did you purchase?


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waltworks

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Re: Rescission
« Reply #10 on: January 29, 2018, 11:44:43 AM »
Your purchase contract should have a section on buyer's due diligence. What does it say?

-W

JDsNova

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Re: Rescission
« Reply #11 on: January 29, 2018, 02:37:24 PM »
Thanks for the replies. 

California is the state of the purchase. 
They checked the “yes” box to unpermitted property.  And in the comments section noted the detached garage as being un permitted.   I made them get permits for that as part of the deal.   No mention of any other unpermitted property was talked about.   Also, the “no” box was checked for water damage or mold, and I have reports from professionals stating the damage and mold has been ongoing for the past year to 2 years.  As well as evidence of them repairing warped base board to due water damage as well paint over mold, and different flooring.   

I do agree that the inspector is on the hook for this.  Also, the seller was also the listing agent on this deal.   

From what I understand, the court system tends to favor the buyer in cases that are “murky”.

Thanks again. 

nereo

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Re: Rescission
« Reply #12 on: January 29, 2018, 03:56:27 PM »
California is the state of the purchase. 
They checked the “yes” box to unpermitted property.  And in the comments section noted the detached garage as being un permitted.   I made them get permits for that as part of the deal.   No mention of any other unpermitted property was talked about.   
They checked "yes" for unpermitted property.  Oral agreements don't hold up well in lawsuits because it's difficult to prove.  Unless you can point to something where they buyer wrote "only the garage was unpermitted' I don't see much recourse here.
What other areas were unpermitted and is there anything in your documents that indicate otherwise?

 
 Also, the “no” box was checked for water damage or mold, and I have reports from professionals stating the damage and mold has been ongoing for the past year to 2 years.  As well as evidence of them repairing warped base board to due water damage as well paint over mold, and different flooring.   

What "evidence"?  They are likely to argue they did not know about the mold or water damage.  You have to prove that they both replaced these boards and did so because of the water/mold issue and that a reasonable person would not assume this 'fixed' the problem.. 
I'm not saying you are wrong here, but what matters is what can be proven - not what happened. It's a tall order.

Bottom line - what's the ultimate $ figure for repairs? Are we talking about $30k or just $3k?  If its the latter I wouldn't even bother... If it requires tens of thousands to repair it might be worth pushing foward... though it can take years.
Definitely pursue your building inspector for missing these things on inspection. But about all that's likely to happen is they might refund the few hundred $ they charged for the inspection in the first place. I've never heard of an inspector paying out for the full repair of missed items.

...just my 2¢ from my own experience.
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JDsNova

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Re: Rescission
« Reply #13 on: January 29, 2018, 06:20:26 PM »
California is the state of the purchase. 
They checked the “yes” box to unpermitted property.  And in the comments section noted the detached garage as being un permitted.   I made them get permits for that as part of the deal.   No mention of any other unpermitted property was talked about.   
They checked "yes" for unpermitted property.  Oral agreements don't hold up well in lawsuits because it's difficult to prove.  Unless you can point to something where they buyer wrote "only the garage was unpermitted' I don't see much recourse here.
What other areas were unpermitted and is there anything in your documents that indicate otherwise?

 
 Also, the “no” box was checked for water damage or mold, and I have reports from professionals stating the damage and mold has been ongoing for the past year to 2 years.  As well as evidence of them repairing warped base board to due water damage as well paint over mold, and different flooring.   

What "evidence"?  They are likely to argue they did not know about the mold or water damage.  You have to prove that they both replaced these boards and did so because of the water/mold issue and that a reasonable person would not assume this 'fixed' the problem.. 
I'm not saying you are wrong here, but what matters is what can be proven - not what happened. It's a tall order.

Bottom line - what's the ultimate $ figure for repairs? Are we talking about $30k or just $3k?  If its the latter I wouldn't even bother... If it requires tens of thousands to repair it might be worth pushing foward... though it can take years.
Definitely pursue your building inspector for missing these things on inspection. But about all that's likely to happen is they might refund the few hundred $ they charged for the inspection in the first place. I've never heard of an inspector paying out for the full repair of missed items.

...just my 2¢ from my own experience.


Though I believe a battle lies ahead, I tend to be hopeful that a contract is worth more than the paper it’s written on.  And that people who are deceived by inaccurate and misleading information will be made whole in a court of law.  Ideally, I’m hopeful this can be settled before it comes to a long legal process. 

waltworks

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Re: Rescission
« Reply #14 on: January 29, 2018, 07:07:57 PM »
You are better off complaining to the CAR than taking it to court, IMO. If the seller is a realtor, they can easily lose their license for that kind of stuff.

I wouldn't do court unless it's tens of thousands of dollars in damage, and even then, I might not. Legal fees will be significant, and IMO your chances of winning are only so-so.

-W

nereo

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Re: Rescission
« Reply #15 on: January 29, 2018, 07:10:48 PM »
I understand that you are angry over what has happened, and you have every right to be.
I get wanting to have it made ‘right’.

You asked for others opionions and experiences, and I am giving you mine.  FWIW, my former partner was a lawyer who did exactly this sort of thing, in California. I just want you to be aware that from a financial/reward perspective this is probably not going to be worth it if the damages are just a few $k.

Look at it from a legal standpoint.  If the sellers honestly didn’t know about these issues than there’s no fraud and you don’t have a legal recourse. Maybe the sellers will be genuinely nice people who will split some of the costs... stranger things have happened.  If they did knowingly lie than these are not nice, honest people and there’s no reason you should expect them to be nice, honest people going forward.  YOu missed it, your inspector missed it... you’ll need some strong evidence. You have a professional opinion - could the seller provide a contrary professional opinion?

I’m just trying to prepare you - idealists don’t win in court.  Thankfully for you the threshold in civil court / small claims is much lower.

Keep us posted...
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coopdog

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Re: Rescission
« Reply #16 on: January 29, 2018, 07:28:55 PM »
Whether the owners committed fraud or not, it sounds like the inspector missed some pretty evident issues. As a requirement of his employment, I'm betting you signed something resolving him of responsibility. However, he may be covered by errors and omissions insurance that could make it worth pursuing restitution.

Also, it sounds odd that the sellers could get "permits" after the fact. Permits require a series of inspections some of which just can't be done when the work is done and everything is buttoned up.

JDsNova

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Re: Rescission
« Reply #17 on: May 02, 2018, 09:24:21 PM »
Update.....

After months of gathering facts and data, the sellers have been notified of the situation.   We are now at a point where the seller is offering us two options:

In a demand letter i stated that I was seeking $125k in damages and the possibility that further repairs might need to be made because of poor construction that was done in addition to the money we are out for repairs and removal of black mold. 

Their eventual response provided us with 2 options:

1) $45k with the agreement that they are released of all further liability.   

2) they are offering rescission with an additional $15k. 

There are a lot of unknowns with keeping the house.  There are 3 unpermitted rooms and the potential exists that more problems with the home will surface somewhere down the road, as I seek to get the remainder of the home permitted.   $45k does cover the costs to repair the damages so far discovered and a little more, but there is risk involved with staying and possibly uncovering some costly repairs. 

Taking rescission and an additional $15k would put us in the hole for about $20k after all was said and done.   The costs associated with buying the home, loan fees, etc won’t be covered by the additional $15k. 

Also, I have a very young family and moving is a stressful event.  Also, there doesn’t appear to be a lot on the market right now for the area we want to live.   

Any outside viewpoints or words of wisdom are appreciated. 

Thanks. 


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JDsNova

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Re: Rescission
« Reply #18 on: May 02, 2018, 09:30:46 PM »
Additionally, keeping the home is high risk with high reward.  If there’s no further damage, there is potential equity.  If there is significant damage, it’ll be a loser, financially speaking. 

Also, the tax laws have changed in 2018 with regard to real estate taxes, what you can write off, etc. 

Also, interest rates have gone up in the last 6 months. 




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FINate

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Re: Rescission
« Reply #19 on: May 02, 2018, 09:41:55 PM »
I would take the $45k and be done with it. Why chance it in court, along with the legal fees?

Yes, there may be more repairs down the road... welcome to the joys of home ownership. The previous owners aren't responsible for protecting you from all future issues, even if those issues started before you bought the house.

waltworks

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Re: Rescission
« Reply #20 on: May 02, 2018, 09:42:24 PM »
Seller is terrified you'll go to the CAR, eh? Good on you.

I'd take the $15k and find another house.

-W

JDsNova

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Re: Rescission
« Reply #21 on: May 02, 2018, 10:25:08 PM »
I would take the $45k and be done with it. Why chance it in court, along with the legal fees?

Yes, there may be more repairs down the road... welcome to the joys of home ownership. The previous owners aren't responsible for protecting you from all future issues, even if those issues started before you bought the house.

There would be no court or legal fees.  The seller is offering to buy the house back at what we paid plus give us $15k. 


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Joel

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Re: Rescission
« Reply #22 on: May 02, 2018, 10:42:11 PM »
Take the 15 and run.

FINate

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Re: Rescission
« Reply #23 on: May 02, 2018, 11:23:37 PM »
I would take the $45k and be done with it. Why chance it in court, along with the legal fees?

Yes, there may be more repairs down the road... welcome to the joys of home ownership. The previous owners aren't responsible for protecting you from all future issues, even if those issues started before you bought the house.

There would be no court or legal fees.  The seller is offering to buy the house back at what we paid plus give us $15k. 


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I mean vs. trying to press for more than $45. Or, if you really think it's a huge money pit then take the $15 and rescission and the eat the cost of fees etc. However, where I live in CA almost every house has a host of problems but the market it so tight that people just accept that they will have to sink some money into it down the road. I guess it comes down to your estimate of how much your current place may cost to fix (less the $45k) compared to how much more you'd pay for a comparable house in today's market (with it's own unknown issues). I would not want to be competing for a house in my local market at this time with all the over offer bids, though this is very location dependant and maybe your location is less crazy.

Jon Bon

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Re: Rescission
« Reply #24 on: May 03, 2018, 06:04:02 AM »
Wow, those are crazy outcomes not what I would have expected at all! Good on you at least you have some recourse.  Honestly the real estate market out there is wild so I cant add much.

My only thoughts where:
A. They are really guilty, which feels possible but proving that in court is a nightmare for everyone.
Or
B. He thinks he can sell the house for more after he buys it back from you? The market is insane everywhere.



Id say take the 45k if you were in my state, but like I said before California is a different ballgame.


JDsNova

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Re: Rescission
« Reply #25 on: May 03, 2018, 06:37:22 AM »
Wow, those are crazy outcomes not what I would have expected at all! Good on you at least you have some recourse.  Honestly the real estate market out there is wild so I cant add much.

My only thoughts where:
A. They are really guilty, which feels possible but proving that in court is a nightmare for everyone.
Or
B. He thinks he can sell the house for more after he buys it back from you? The market is insane everywhere.



Id say take the 45k if you were in my state, but like I said before California is a different ballgame.

Both of your thoughts have validity.   The amount of proof shows guilt they have a hard time denying.  And we believe they want to maintain their reputations and avoid their names being drug through the mud. 

Also, like you say, this property has the potential to sell for more than what it was sold to me for.  And so they probably feel they can make some repairs and sell for more the second time around. 


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nereo

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Re: Rescission
« Reply #26 on: May 03, 2018, 06:39:20 AM »
Wow, those are crazy outcomes not what I would have expected at all! Good on you at least you have some recourse.  Honestly the real estate market out there is wild so I cant add much.

My only thoughts where:
A. They are really guilty, which feels possible but proving that in court is a nightmare for everyone.
Or
B. He thinks he can sell the house for more after he buys it back from you? The market is insane everywhere.


I'm guessing B.  Additional motivation may come from not wanting a long, drawn-out legal battle, but I'm guessing they think they can turn around and re-sell and still make money.
Which is a fine outcome for everyone in this situation.  The OP gets out of it with some bonus cash.  The seller takes the house back with all of its problems. Future buyers should have at least a better idea of the property they are buying.
Win win.
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