Any real estate licensee will encounter clients wondering whether a condition in their property should have been disclosed. And the tough part of answering that question often turns on whether the seller knew about the undisclosed condition. Here’s seven key places to look for evidence of knowledge.
1) Documents Left in the Property.
Often sellers leave behind documents that prove they knew about problems they deny. For major problems in a property, sellers usually obtain repair quotes. Sellers frequently leave these documents behind after closing. Often, it’s inadvertent; the seller doesn’t have further use for the document, so he doesn’t bother packing it in a rush to move. In fact, sometimes these documents stay in the house through multiple transactions. These documents prove that a seller knew the property had a problem, and buyers can use them to hold fraudsters responsible.
A conversation with each nearby neighbor often yields considerable evidence in real estate fraud cases. For instance, a seller who denied a roofing problem on his SPDS will have great difficulty explaining why he asked three neighbors for roofing referrals two months before listing the property.
3) Home Owner Associations.
HOAs often receive complaints related to the properties they manage. Also, HOA architectural committees have power to approve certain repairs and improvements. These files usually include descriptions of the work and the reason the homeowner wants to do it. Sometimes, these files reveal that an owner wants to conduct major construction because of a problem with the property. For example, he knows the property tends to flood during monsoons and wants to divert the water away from the house. That proves knowledge of a flooding problem. If the seller doesn’t disclose that problem, he’s liable for fraud.
4) Physical evidence of repairs.
Sellers often attempt to repair problems with a property on their own or with a cheap cosmetic fix. These repairs often conceal the problem during the inspection period and work well enough that the buyer doesn’t notice the problem until weeks or months after closing. Then a problem appears. Sometimes the repair wasn’t thorough. Other times, something wears out near the repair site. But the buyer now has a problem resulting from the non-disclosure. Often, the new owner can ask the contractors whether it looks like any work was done in that area of the house in the recent past. This will reveal evidence of a recent repair the Seller failed to disclose.
One red flag for this behavior is mismatched or non-conforming parts. In one extreme example, Sellers attempted to repair a plumbing problem themselves, but used the wrong pipe size. Another common problem is the partial roof repair. The need for roof repair increases as the roof nears the end of its life. Sometimes sellers notice roof leaks and obtain a relatively small, cheap repair. They just patch a small part. But a seller who fails to disclose a pattern of roof leaks faces liability; a reasonable buyer would have known the roof was near the end of its life if told it leaked four times in three years.
5) Title Insurance Companies.
Title insurers face a deluge of claims, including plenty that aren’t covered or don’t relate directly to title. In fact, some owners file claims on their title policies complaining that problems unrelated to title should have been disclosed. Those same owners often turn around and sell properties without disclosing the same underlying issues. And the title claim proves knowledge.
Tenants often have encyclopedic knowledge of a property’s history. Whenever an investor receives a maintenance request from a long-term tenant, the investor should ask the tenant what he knows about the history of related problems. That tenant will know whether he’s made similar maintenance requests, whether there was a pattern of similar problems, and what the prior owner said about them. Moreover, he may have a long history of correspondence with the prior owner related to that problem.
7) Property Manager.
Property managers often have thorough files related to maintenance history. They often retain every maintenance request made by every tenant. They retain estimates and invoices for any repairs performed. And they have correspondence with the owner related to those issues. The property manager’s file is fertile ground for evidence of real estate fraud.
Samuel Doncaster is a trial lawyer who’s very active in real estate fraud cases. He routinely helps people get their money back when they’ve been cheated in real estate deals. If you have a client who needs help with a disclosure issue, you can help them set an appointment by calling (602) 427-4437 for a strategy session. That strategy session comes with a risk-free, 100% money-back guarantee.