Can I Seek Compensation If I Discover Problems After Buying a House?

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A reader has a question about a house they purchased, built in 1947. Shortly after moving in, they noticed water leaking from the bathroom into the basement. They’re wondering if they can request the seller to cover the repair costs, especially since they had signed some contingencies during the purchase. The issue took weeks to discover and has become a significant concern.

It’s Best to Discover Issues Early

Ideally, any defects in the home should be addressed before the closing, whether they were discovered during inspections or noticed during the final walk-through. In such cases, your real estate agent should negotiate solutions with the seller’s agent, such as:

Requesting the seller to cover the repair expenses.
Asking the seller for additional credits during the closing.
Requesting that a portion of the transaction amount be held in escrow until the issue is resolved.
Refusing to proceed with the transaction until the repairs are completed to your satisfaction.

If problems arise in your newly purchased house within days, weeks, or even years, and the seller/seller’s agent/home inspector should have discovered and disclosed them but didn’t, below are some considerations.

Determine Responsibility

If you believe you are not at fault and wish to pursue legal action, parties potentially responsible may include:

1. The Seller

Most states in the U.S. have laws requiring sellers to disclose certain property defects by filling out standard disclosure forms before the transaction is completed.

However, the specific items that must be disclosed can vary from state to state. Sellers generally do not have an obligation to find issues they are unaware of, but if there are obvious problems that the seller failed to disclose and had knowledge of, you may have evidence of their awareness — for example, if the seller repaired or patched up a problem area or if neighbors inform you that the seller had dealt with the issue in the past.

2. The Seller’s Agent

In some states, laws dictate that if the seller’s agent becomes aware of issues with the property or if the seller informed them about these issues, they must disclose this information to the buyer, or they may face legal consequences.

However, their liability is typically limited. You should check your state’s laws regarding property disclosure in real estate transactions and determine whether the issues you’re facing should have been known by the seller’s agent before the transaction. Carefully review the disclosure terms and the home inspection report from when you purchased the property to see if there are any records of damage.

3. Your Home Inspector

A professional home inspection is usually conducted before buying a home, during which the inspector may discover problems that even the seller wasn’t aware of. If the inspector neglects issues that they should have noticed as part of their professional duty, they may be held responsible. Thoroughly review your home inspection report to see if there are any records of damage in the affected areas.

Seeking Compensation or Mediation

Even if the evidence is in your favor, going to court should not be the first resort. There are simpler (and cheaper) options, including:

Sending a demand letter to the responsible party requesting them to cover the repair costs.
Seeking arbitration and mediation: Inform the responsible party about the issue and inquire whether they are willing to mediate the situation.

Legal Litigation

If you cannot resolve the dispute through the above methods, you may need to decide whether to pursue legal action. You may sue the responsible party based on one or more of the following:

Breach of contract.
Breach of warranty.
Failure to disclose (depending on the laws of your state).
Fraud.
Negligence.
Negligent misrepresentation.

When pursuing legal action, consider the following:

Make sure you file within the statute of limitations: Each state limits the time frame within which you can sue someone from the date you discovered or should have discovered the problem.
Consider Small Claims Court: It’s simpler and much cheaper than regular litigation. You can represent yourself, and in some states, you cannot even have an attorney (small claims courts typically handle cases with amounts below a certain threshold, like $5,000 in Virginia). However, small claims courts typically only deal with monetary disputes and may not address other claims like damage to reputation.
File in State Court: If the amount involved exceeds the small claims court limit, you’ll need to go through regular litigation, which is more complex and costly and may require legal representation.

Determine If the Case Is in Your Favor

Once you identify potential responsible parties, you need to know if their actions or inactions give you the right to compensation. If your situation aligns with the following criteria, the case may be in your favor. These legal principles are quite general but should apply to various situations in most U.S. states:

The defect existed before the closing. Issues that arise after the closing, such as problems caused by natural weather events, aging, or maintenance errors, are typically your responsibility. Determining when the issue began can sometimes be challenging. For example, a clogged sewer line could be a new problem or a pre-existing issue that has resurfaced, like tree roots growing into the pipe. You may need professional analysis.
The defect was not obvious, and you should not have noticed it before purchasing. If, for example, you saw a major crack in the living room ceiling during an open house but only claimed it after the closing, your case might be challenging to win. However, if the seller concealed the crack, preventing you from seeing it, your case might favor you. If your home inspector should have identified these issues but didn’t, you might have a claim against the inspector.
No one informed you of the defect before the closing, or someone intentionally lied about it. As mentioned earlier, responsible parties could include the seller, the seller’s agent, or the home inspector.
You made the purchase decision based on these errors or undisclosed information. For instance, if the seller stated that the home renovations were up to local building codes, and you decided to buy based on this information, but later found it wasn’t true, you might have a basis for compensation.
You suffered financial losses due to the issue. Legally, your repair costs or related damages (such as personal property damage due to a flooded basement or a decrease in property value due to undisclosed environmental hazards) can be considered damages you may seek compensation for.

Derek Yang

I’m an immigrant living with my family in a small town on the East Coast. I love classical music, enjoy a good cup of coffee, and have a soft spot for BMWs. I believe in lifelong learning and look forward to connecting with you to share our life experiences. Twitter @mrderekyang.

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