Thursday, April 1, 2010

Water damage found on way to closing

A purchaser makes an inspection the morning of his closing to purchase a house. Unfortunately, he witnesses major water damage in the basement. Its unfinished so there isn't property damage, but water damage can render a structure unsound and create issues with mold, among other things. What should he do?

Adjourn the closing. That is really the only choice. Any other option is too risky. The purchaser is not an engineer or a building inspector and will not be qualified to know the extent of the damage or the amount a repair will cost. The purchaser should insist on an adjournment until the property is repaired by the seller and proof of same is offered to the purchaser. Yes, escrow is an option, but how much should be escrowed? Its a risk to guess. Also, a price reduction is nice, but again, how much?

If the purchaser wants the house regardless of this sound advise, the attorney and real estate agents should have him sign an informed consent letter that explains the above risks or they may face liability for allowing him to close with the house in this condition. If not in their wallet, definitely in their reputation.