Author Topic: who is liable?  (Read 7310 times)

A mom

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who is liable?
« on: April 23, 2014, 05:57:00 AM »
Some friends of mine recently bought a house. They had a home inspection and also purchased a home warranty. After they took possession, they discovered that both older furnaces were leaking CO. They will need to be replaced at a cost of $7000. The home inspector says he doesn't test for CO. The home warranty says it was a pre-existing condition and, as such, is not covered. Do any of you real estate experts have any ideas for this young couple who just put all their cash into a down payment?

Thanks.

DoubleDown

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Re: who is liable?
« Reply #1 on: April 23, 2014, 12:05:44 PM »
Unfortunately, your friends likely have no recourse and will have to cover the cost of repair or replacement themselves. You mentioned the furnaces are older, so it's unlikely they're covered by any kind of manufacturer's or installer's warranty. Even if the previous owners knew of the condition (which seems unlikely), proving they knew would be difficult at best. And it is true that a home inspector would not routinely test for CO and could not be reasonably expected to detect that situation.

However, I would advise them to read that homeowner's warranty very carefully, and see what it says about HVAC systems or "preexisting conditions." Of course, many insurance companies are in the business of denying claims whenever they can. Just because the problem was discovered now does not mean it was necessarily preexisting. If there is any wiggle room in the policy contract, I would argue hard against the insurance company. Making a fuss can often yield results, and if they don't like the stock answer they got on their first call, they can escalate until they get results. Even getting the insurance company to cover part of the cost, or the cost of repair vs. replacement, would be a win.

If it gives your friends any psychological solace, they can look at it this way: they knew they were buying a house with an old furnace that likely had little life left in it, so it was only a matter of short time before it was going to fail. Now they will get a new furnace that will last many years, and more importantly they didn't die of CO poisoning. Next time they'll know to keep a little cash on hand for needed repairs. One last piece of advice: since they spent all their cash on the down payment, lots of HVAC places or Home Depot/Lowe's offer one year, zero percent interest credit accounts to install a new system. They could take advantage of this, and just be sure to save up enough over the next year to pay it in full so they don't get socked with the high interest rates one year later.

DoubleDown

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Re: who is liable?
« Reply #2 on: April 23, 2014, 12:09:30 PM »
One other thing: Now is a great time to replace an HVAC system in most parts of the country, since this is the mild season and people aren't calling in tons of calls to repair their A/C or furnace. They can likely get a new system for 35-40% less than peak seasons. Honestly, since your friends had an old system, it would not have been a bad idea to proactively replace it now anyhow, even if they hadn't discovered the CO leak. If the system died in the middle of the next winter, they'd pay much more to fix it then.

Frankies Girl

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Re: who is liable?
« Reply #3 on: April 23, 2014, 12:17:09 PM »
Same thing happened to me, down to the home warranty (which was a waste of money - they didn't pay for anything we found after the fact) saying it was preexisting... Had to get a new furnace on my dime less than a year after we bought our house.

Life lesson - always check the HVAC carefully. I wouldn't buy a house now without having an actual HVAC person in to check the system over carefully. The home inspectors just do basic cosmetic/structural stuff, but they don't tell you that when you are in the midst of buying a house.

Oh and I totally agree about not putting all your liquid cash into a home purchase. Even if it is brand new, there will be something you need to buy or fix up, but older homes will always have something that needs fixing or replacing within the first year. Houses are money pits.
« Last Edit: April 23, 2014, 12:24:03 PM by Frankies Girl »

dragoncar

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Re: who is liable?
« Reply #4 on: April 23, 2014, 12:47:18 PM »
However, I would advise them to read that homeowner's warranty very carefully, and see what it says about HVAC systems or "preexisting conditions."

Yeah, if it wasn't in the inspection, how do they know it's pre-existing?

How did they discover the furnaces were leaking CO?

A mom

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Re: who is liable?
« Reply #5 on: April 23, 2014, 01:17:20 PM »
Thanks for your responses everyone.  I will pass all this info on to them. They are from another country and not native English speakers, so this whole thing has been super stressful for them.

Dragoncar, they smelled gas and called someone, can't remember if it was gas company or HVAC. It turned out that there was a gas leak AND CO issues. Gas company replaced the interior gas pipe for free.

jba302

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Re: who is liable?
« Reply #6 on: April 25, 2014, 09:15:51 AM »
Take a look at the inspection contract, and then look up what the contract should be in the state, as well as what the reasonable standard is for home inspections. There are certain warranties that cannot be waived by contract, if this is one of them then the inspector could be held liable.


Here is a good place to start-
http://homeguides.sfgate.com/real-estate-home-inspector-liable-misses-major-problem-73084.html

Simply put, just because your inspector says "I don't do that" doesn't mean he wasn't supposed to do that. If it's an industry standard, in the contract, or a reasonable expectation based on local law, he could readily be liable for it.

arebelspy

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Re: who is liable?
« Reply #7 on: April 25, 2014, 09:21:05 PM »
Dragoncar, they smelled gas and called someone, can't remember if it was gas company or HVAC. It turned out that there was a gas leak AND CO issues. Gas company replaced the interior gas pipe for free.

And how do they know the CO leaks didn't just start?

To the best of their knowledge, they may well have.

I'd be working the home warranty company.

In the end, they may be SOL, but if it's a covered item (besides the preexisting claim), I think they can force the issue.  It doesn't show as an issue on the home inspection (since it wasn't tested), and if it's not on the seller's disclosure, then they just discovered it now when the gas guy came in.  Therefore it is a new problem.  If they're insistant, I think they can get it fixed.
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AlexK

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Re: who is liable?
« Reply #8 on: April 25, 2014, 09:42:09 PM »
I'm not saying there isn't a CO leak but it is a pretty common scam for a HVAC company to "find" a CO leak and sell a new furnace. Fear is a great motivator to spend money.

http://carbonmonoxidemyths.com/

If it were me I would get a second opinion from another HVAC company and buy a bunch of CO detectors and see if they go off.

AccidentalMiser

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Re: who is liable?
« Reply #9 on: April 26, 2014, 04:30:52 PM »
Much as I hate to say this, you might want to consult with an attorney.  It doesn't seem that your friends should be liable for a major defect when they paid for an inspection and a warranty.  Seems the home inspector was potentially negligent to me, but I'm no lawyer.

Thegoblinchief

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Re: who is liable?
« Reply #10 on: April 29, 2014, 07:24:21 AM »
How old is old? We recently had our secondary heat exchanger replaced free of charge under warranty. Furnace was 18 years old. I believe Carrier's warranty term was 20 years.

Also, depending on what exactly has failed to cause the CO issue, a repair is theoretically cheaper than a whole unit if they are super cash tight.

paddedhat

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Re: who is liable?
« Reply #11 on: April 29, 2014, 07:54:41 AM »
Take a look at the inspection contract, and then look up what the contract should be in the state, as well as what the reasonable standard is for home inspections. There are certain warranties that cannot be waived by contract, if this is one of them then the inspector could be held liable.

As a long time homebuilder, I have encountered several friends and neighbors who got horribly screwed by home inspectors. One ended up replacing an obviously visibly defective roof, shortly after the purchase, even though the inspection report claimed that the roof had an additional fifteen years of life left. The other bought an absolute house of horrors, a dangerous dump that any diligent code official would of condemned, but also had a fraudulent, and glowing review from the home inspector. Both took their inspection contract to lawyers and got the same opinion. The contracts are so well written to protect the inspector, that it's typically a total waste of time and money to attempt to seek damages in court.

Bottom line IMHO, most inspections are a joke. I sold two nearly 100 year old estate homes that were awash in asbestos in the HVAC ducting. The realtor flat out told me that the inspectors know exactly what they are looking at, and will either fail to note it, or claim that they did visually inspect it, but cannot confirm the composition of the material, and recommend that the homeowner might want to further investigate. The same goes for obviously functionally inadequate wiring and a whole host of other issues with older homes. Any honest realtor will admit that most inspectors are a tool used by the real estate industry to help the deal flow smoothly, they know which inspectors are real tough pricks, and they work real hard to keep clients away from them, and the truth about the actual condition of the property. I have actually seen an agent gasp and get pale when she heard that the buyer was hiring a local inspector with a reputation for being a deal killer, IOW, somebody who won't lie to keep getting work from agents.

arebelspy

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Re: who is liable?
« Reply #12 on: April 29, 2014, 08:18:34 AM »
I'm not sure why everyone's so hung up on the inspector.  There's no evidence that the inspector missed anything.  All we have is a leak that was discovered after they moved in.  It seems clear to me that the home warranty company should fix it (if it'd normally be a covered fix), unless they have clear proof it was a "preexisting condition," which is what they are claiming, but have no proof for, IMO.  It was just discovered, and, as far as the homeowners know, it just happened.

I've had this exact situation (though on a more minor incident) and insisted the home warranty company fix it.

I think you guys are approaching this the wrong way, assuming the home inspector missed it, rather than it's a new problem.

(I mean that's much more likely, I will grant you, but from the homeowner's perspective, there's no evidence when this started, and it was just discovered as a new problem.  Done.)
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mpbaker22

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Re: who is liable?
« Reply #13 on: April 29, 2014, 10:20:53 AM »
What about the actual cost of replacement?  What type of (and how many) unit(s) are you replacing?  I don't see why it's $7,000 to begin with. 

Daleth

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Re: who is liable?
« Reply #14 on: April 29, 2014, 12:43:17 PM »
Our home warranty covered a furnace repair that we needed before the house was even sold. I mean they came and repaired it before closing! It was discovered after we contracted with the warranty company, so it was covered. Definitely check the warranty contract.

Also, I would call their realtor. She could tell the seller's realtor what's up-usually if not always it's realtors who get sellers hooked up with warranty companies, so I would think realtors are both motivated to make sure things work out and powerful, at least more powerful than home buyers, when it comes to combing in warranty companies to cough up the dough.


arebelspy

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Re: who is liable?
« Reply #15 on: April 29, 2014, 01:02:45 PM »
Our home warranty covered a furnace repair that we needed before the house was even sold. I mean they came and repaired it before closing! It was discovered after we contracted with the warranty company, so it was covered. Definitely check the warranty contract.

Also, I would call their realtor. She could tell the seller's realtor what's up-usually if not always it's realtors who get sellers hooked up with warranty companies, so I would think realtors are both motivated to make sure things work out and powerful, at least more powerful than home buyers, when it comes to combing in warranty companies to cough up the dough.

Usually you don't pay the warranty company until closing, but that's pretty neat that it worked out like that.
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Daleth

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Re: who is liable?
« Reply #16 on: April 29, 2014, 01:49:24 PM »
We didn't pay the warranty company until closing, and yet it worked out because we had already entered into a contract with them! I think the home warranty company had some deal with or possibly even was co-owned by our realty company. So I would really suggest that the OP's friends get their realtor involved and the seller's realtor and lean on the warrant company.

the fixer

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Re: who is liable?
« Reply #17 on: April 29, 2014, 03:01:12 PM »
I'm not saying there isn't a CO leak but it is a pretty common scam for a HVAC company to "find" a CO leak and sell a new furnace. Fear is a great motivator to spend money.

http://carbonmonoxidemyths.com/

If it were me I would get a second opinion from another HVAC company and buy a bunch of CO detectors and see if they go off.
Just wanted to note that this advice may be dangerous without an understanding of the capabilities and limitations of UL 2034 CO detectors. http://www.buellinspections.com/so-you-think-you-know-everything-there-is-to-know-about-co-detectors/

If the homeowner bought a real CO detector that had better sensitivity, like what the above-linked inspector uses, they should be able to diagnose the problem themselves.

higgins2013

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Re: who is liable?
« Reply #18 on: April 29, 2014, 04:06:53 PM »
Fine Homebuilding magazine's editor just did his monthly editorial on this issue: home inspection companies' liability is usually limited to the cost of their inspection services, as noted in contract boilerplate.  Many inspectors miss big ticket items during their home inspections.  We joke that our own home inspector was "literally blind" because he missed so much stuff - but we knew our old house had issues and that we'd do lots of work anyways.  Here's another way of looking at this issue: thank goodness they discovered the problem, that the gas company made repairs, that they CAN buy new equipment, and that no one was hurt or injured.  There are natural gas explosions and carbon monoxide poisonings everyday.

A mom

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Re: who is liable?
« Reply #19 on: April 29, 2014, 04:22:55 PM »
Thanks for all the additional replies. I'm sorry, I had guests and didn't get back to this thread for a bit.

I had suggested they go back to the realtor, but she proved to be quite unhelpful.

Although this is a smallish raised ranch, there were two furnaces and both seem to be bad. I guess that's why the cost of replacement is so high. I don't know for sure how old they were.

I did finally dig up the name of real estate attorney for them.  I'll let you know how things turn out.

arebelspy

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Re: who is liable?
« Reply #20 on: April 29, 2014, 04:35:52 PM »
I did finally dig up the name of real estate attorney for them.  I'll let you know how things turn out.

With the plan to sue.... Whom?

Did you see all my posts about getting the home warranty company to fix it? That's what they're for.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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Daleth

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Re: who is liable?
« Reply #21 on: April 29, 2014, 09:23:34 PM »
I don't see why anyone would need two furnaces in a small ranch. They don't have to duplicate the existing setup.

paddedhat

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Re: who is liable?
« Reply #22 on: April 30, 2014, 08:54:42 AM »
I don't see why anyone would need two furnaces in a small ranch. They don't have to duplicate the existing setup.

X2 There is absolutely no reason to duplicate a dumb idea. If the place needs that much money to replace TWO furnaces in a modest ranch, the first option would be to spend it on a competently designed and installed, single furnace system, or doing a split system heat pump.

mpbaker22

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Re: who is liable?
« Reply #23 on: April 30, 2014, 12:09:52 PM »
I had bids to put zoned temperature control in a house I just bought.  This involved two furnaces, two A/C unites, and ductwork, albeit minimal, (through the 2nd story ceiling and 1st story floor) for $10,000.  I don't understand why just the furnaces would be 70% of that.