It’s perfect. It has four bedrooms for you and your little ones and extra space for that home office you’ve always wanted. The dog can romp in the fenced-in back yard and there’s extra space in the garage for you to hang your beer sign collection. You have to have it. You call your real estate agent and tell her to make an offer now before someone else can snag it. You find yourself on pins and needles waiting to hear back. Can your agent work magic? Will it be yours?
Though wonderful and life-changing, purchasing a home is the largest transaction into which most people ever enter. Real estate agents act as knowledgeable liaisons in facilitating this matter. However, what happens when the process of purchasing your dream home halts because your agent finds themselves in a quandary over disturbing information about your very piece of real property heaven?
For example, a realtor recently came to our office with issues a buyer was having with purchasing a house with a large and undocumented addition. The fact pattern was essentially as follows:
What does the realtor do knowing that an undocumented addition exists? As realtors, the agent is stuck regarding the new property disclosure—this addition appears to not have been correctly permitted. Buyers are concerned about full disclosure and being protected in the future should they want to sell the house. Do they, as buyers, go on the word of the sellers? What should real estate agents do in situations like these?
After discussing this issue with fellow real property practitioners, the following advice was found most pertinent and is offered to realtors, sellers, and home buyers. (Though this answer refers to the above-mentioned fact pattern, it may be more broadly construed in similar undocumented addition situations.):
“Realtors need to stay on top of the standards of practice published or endorsed by the Real Estate Commission with respect to their due diligence requirements concerning the sewage system for this house. If the realtors do not do their due diligence and fail to disclose the facts to the buyers, then there should be a claim for negligence for not performing their due diligence (and maybe advertising the house as a 4-bedroom house when the sewage system would not support a 4-bedroom house). Additionally, if the realtors do not disclose these facts to the buyers, the sellers and the realtors may be liable for an unfair and deceptive trade practices claim.
If a new permit for a 4-bedroom house is issued by the health department, and if the sewage system is built or modified so that it is passes a compliance inspection by the health department inspector (get it in writing and a copy of the permit with annotations of passing the inspection thereon if usually made by that office) for a 4-bedroom house, then the realtors, the closing attorney, and the seller should be alright with respect to how to handle the sewage system. However, proper written disclosures and releases should be secured from the buyers for the realtors and closing attorney. A written guarantee on the soundness of the new sewage construction and the compliance of the old addition may be required from the seller to the buyers, if feasible.
With respect to the building addition, buyers should have an engineer inspect the addition at the sellers’ expense and certify that it complied with the building code at the time of construction and that it is structurally sound. Additionally, have the Inspection Office issue a letter (based upon the engineer’s certification and conclusion) that even if a building permit were not secured when the addition was built, the Inspections Department confirms that the addition was and is in compliance with all building codes, ordinances, and regulatory requirements.“[i]
Though this process may seem cumbersome and cause more work for all parties involved, it will be worth it to get the home you desire. These safeguards are necessary to protect sellers, buyers, realtors, and attorneys. Thus, after proper inspections and full disclosures, your real estate agent will have properly fulfilled their duties and you, as the homebuyer, can feel more secure about finally acquiring your dream house. Now, kick back in your large garage, bask in the glow of your favorite neon beverage sign, and enjoy your new home.