Know Your Legal Rights: Selling or Buying a Home?

Make sure your legal bases are covered

by KEVIN TROST, Founding Attorney, Trost LLC, Madison

Perhaps it was an accidental mistake, or perhaps it was an intentional deception. Either way, undisclosed defects are discovered in residential real estate sales more often than you would expect. 

Such undisclosed defects could be something as mundane as a window that doesn’t latch, or something as serious as a foundation problem that threatens the stability of a house. 

One of the most frequently encountered defects is a leaky basement due to foundation problems or improper grading in the yard. Another is home or basement renovation work that was performed without permits and thus received no code inspection by the local municipality. 

Under Wisconsin law, sellers of single-family houses have a legal obligation to disclose defects known to them.

Sellers are legally required to complete a real estate condition report: a standard form that lists defects or problems with a house. Sellers must acknowledge their awareness of any defects and include additional details. Once a seller accepts an offer, she or he has 10 days to provide the buyer with a copy of the report. 

When sellers fail to disclose known property defects, buyers can pursue claims against the sellers for false advertising, misrepresentation or breach of contract in order to pay for the cost of repairing the problems. 

But before sellers start losing sleep about completing the required disclosures, they should remember that potential legal liability arises when they do not disclose defects of which they are aware. Sellers are also not a source of money for buyers to repair unknown problems.

When undisclosed defects are discovered, claims brought by buyers focus on proving that the sellers knew about a problem with the house and failed to disclose it during the real estate sale. There may not be direct evidence of the sellers’ knowledge unless the buyers find that the sellers had received repair recommendations from a professional contractor and chose to ignore them. 

In most cases, buyers’ claims rely on circumstantial evidence that the sellers knew about a defect with the house. For example, buyers can point to water entering the basement with every rain as evidence that the sellers knew about a problem and failed to disclose it. Although some disputes over undisclosed defects result in a lawsuit in court, many can be resolved informally without a court filing.  

Savvy sellers and buyers should take steps prior to completing a sale to avoid future legal entanglements over undisclosed defects. 

Sellers should thoughtfully and carefully complete the real estate condition report and not treat the form’s questions as a task that can be completed in 10 minutes. Sellers should remember that they are best off oversharing when disclosing their home’s problems.

For their part, buyers should inspect houses with a critical eye and think ahead about who will assist with that process. When buyers decide to start looking for a new home, they should talk to several licensed home inspectors, check references and hire the one they believe is the most knowledgeable, detailed and trustworthy. By planning ahead, buyers are not scrambling at the last minute to find a qualified expert and are more likely to receive discerning feedback.

If both the buyer and the seller take these actions, the need for litigation will be less likely. 

Know Your Legal Rights is a bimonthly column distributed by the State Bar of Wisconsin (wislaw.org) and written by members of its Lawyer Referral and Information Service, which connects Wisconsin residents with lawyers throughout the state.