By: Stephen J. Nash
Nash Law Firm, PLLC
Many if not most, buyers do very little to protect themselves when making the biggest purchase of their life - buying a home. Yet, they are shocked when they find out that the transaction did not go as expected.
Buyers are too trusting that everything will go right, that everything they are told is true and that the law should protect them from all problems. Many buyers simply don't want to pay the cost to protect themselves. This can be a dangerous and expensive mistake.
While lawsuits are necessary to resolve disputes, the best lawsuit is one that never happens. Lawsuits are expensive, time-consuming and often neither party to the lawsuit is happy with the result. Buyers should be less trusting of representations and protect themselves before they close by verifying the representations given.
While a seller can provide the buyer with a written representation that there has been no water in the basement, if water has been in the basement, the buyer has bought themselves a lawsuit. A better result would be for the buyer to verify that there has been no water in the basement with an inspection before closing. While discovering a problem can kill a sale, it is better than buying a lawsuit.
Lawsuits Are Not What They Are Cracked Up To Be
You read and hear every day about how easy it is to sue someone and get millions. Unfortunately, it is not that easy. In a real estate case, most knowledgeable, experienced real estate lawyers will not take the case on a contingent fee basis which means that you pay as you go. The cost of lawsuits is very high because they are time consuming. The more issues, the greater the cost. The more facts in dispute, the greater the cost. The more witnesses, the greater the cost. The more experts needed, the greater the cost.
Due to the cost, the time, and the risk of the result, the vast majority of cases settle prior to trial. The real issue is how far it goes before it is settled. The farther the case proceeds, the greater the cost. In the old days, the client and the lawyer could “pace” the case to hold down costs to the last second when it became clear that the case was going to trail. Today, in Minnesota, neither the lawyers or the clients control the pace of the case. The court will issue a Scheduling Order that tells the parties when they have to complete various parts of the litigation. This results in less cases taking years to wind through the system but does not allow the client to hold down costs until right before trial.
A common perception is that the winning party will recovery their attorney fees. This perception is incorrect. The common rule is that everyone pays their own legal fees win, lose or draw unless there is a specific law that allows such a recovery or there is a written contract between the parties allowing for such a recovery.
Another common misconception is that you should be a able to recover “punitive damages” for what the other people did to you. Punitive damages are extremely rare. The fact that the other party breached a contract does not by itself entitle you to punitive damages.
Can You Prove It?
The other problem with lawsuits is that you have a to have a legal claim and there are rules that have to be followed regarding how damages are arrived at. Just because someone “wronged” you does not mean that they are liable under the law. There are many things in the world I believe to be true but I could not prove in a court of law. On the other hand, there are things that I do not believe to be true that could be proved based on the evidence available. If you can't prove the elements of the claim, you will not win.
You Win - What Do You Get?
Once you win, there are rules in place to determine what damages you are entitled to. Sometimes people win but do not win what they wanted. In those cases both parties to the lawsuit feel that they have lost.
How Buyers Can Avoid Lawsuits
Professional Inspections. When hiring a company to do an inspection, the buyer needs to make sure that the company is reputable, know what the inspection involves, and know what happens if the inspector misses something. If the company has a terrible reputation, the inspection consists of a 5 minute walk through and the only remedy for a mistake is that the buyer gets the money paid for the inspection returned. They are not buying much protection. The buyer should also make sure that there is plenty of time for the inspection. The buyer should not feel that the inspection process is rushed. Quite often only 3 to 5 days are provided for an inspection. What is the hurry? A buyer is making the biggest purchase of their lives and should be given as much time as needed to verify the condition of the home.
Buyers Own Inspections. The buyer should not rely solely on the inspection. The buyer should make a detailed inspection of their own. Open and close everything that can be opened and closed. Turn on and off every mechanical/electronic device to see if they work. If the buyer sees things that raise questions, they should then use due diligence to get answers to their concerns. Again, solely relying on the sellers representations is not enough.
Written Representations of Seller
The written representations and disclosures of sellers can be very misleading. The disclosures are to the “best of the sellers knowledge” not an absolute warranty. Many homeowners (like myself) do not know every detail about the condition of their home. They leave work in the morning in the dark and return at night in the dark. They don't go on the roof to inspect the condition of the roof and don't know a good shingle from a bad one. Is this the type of person you want to rely on concerning the condition of the home?
The other problem with disclosures is that everyone's perspective is different. What is a problem for one person is no issue to the next person. To someone who has lived all of their life in the inner suburbs, two mice in the house is an infestation, to the person used to living in the out suburbs, two mice means that it is fall and there are 20 more that you haven't seen. Some people expect a used home to be perfect while others view almost any problem as to be one expected of a “house this age”.
The bottom line is that disclosures are shaped by the sellers knowledge (or lack thereof) and perspective. It is difficult for a buyer to gauge either of these factors so it is much safer not to rely on the disclosures. In other words, treat the disclosures as a starting point but not the end-all.
Talk to the Neighbors
People are curious. We like to get know about everyone's problems. Entertainment Tonight, Paris Hilton, TMZ, National Enquirer and the like are everywhere. Even though we say we don't, obviously a great many people view and read them. Neighbors know a lot about the house next door. It is amazing what you can find out just by talking to the neighbors. It is better to find out what they know before the buyer closes than after the closing preparing for trial.
The Bottom Line
People do not always get along and there has to be a way to resolve disputes. Litigation and arbitration are two methods to solve disputes. Both have advantages and disadvantages but it is always better to spend the time and money necessary to avoid a lawsuit or arbitration than it is to go through either process.