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Can you sell your home during construction defect litigation

While the home buyer and seller may encounter some difficulties throughout the process, it's possible to sell a home during construction defect litigation. However, it's important to understand how to avoid further problems during litigation and problems with liability going forward.
The following are some factors to consider when attempting to sell a home while construction defect litigation is pending.

Date:   1/4/2021 4:33:21 PM   ( 22 mon ) ... viewed 309 times


While the home buyer and seller may encounter some difficulties throughout the process, it's possible to sell a home during construction defect litigation. However, it's important to understand how to avoid further problems during litigation and problems with liability going forward.

The following are some factors to consider when attempting to sell a home while construction defect litigation is pending.

What Qualifies as a Construction Defect?

Construction defects are any issue found with design, construction materials, or workmanship that could reduce the value of the home or put people at risk of injury. Some construction defects are categorized as obvious and are spotted during construction before they go into the final project. Others are latent and only become apparent once the property becomes damaged or an injury accident occurs.

Design defects include inadequate specification of installations for a project that lead to improper installation. A defect in workmanship may include the failure to properly install roofing materials or seal certain areas. Material defects may include understrength concrete or low-quality roofing materials.

Regardless of the type of construction defect that's present in the structure, all defects can lead to litigation against the responsible parties, including contractors, manufacturers, architects, engineers, or subcontractors. If homeowners wish to sell a home while suing a homebuilder after discovering these defects, the laws for doing so will vary from state to state.

Construction Defects Often Add Stress to a Homeowner's Life

Construction defects may take months or even years to notice after construction has been completed. Defects discovered may range from structural issues to foundational failures that lead to collapse. Leaking windows, roofing, and doors may also be hard to notice until a heavy rainfall.

Defects can be a pain for homeowners to deal with as they work to repair damage and clean the home. They can also depreciate the value of the home. Many homeowners may experience stress as they handle defects and attempt to recover compensation from the liable parties. In some cases, homeowners may want to contest taxes with a property tax appeal if the value of the home has depreciated.

It's Still Possible to Sell the Home During Construction Defect Litigation

Homeowners may want to file construction defect claims to pursue compensation for any defects they discovered. At the same time, they may want to sell the home. Fortunately, homeowners going through the construction defect litigation process are still able to sell the home, but they will need to disclose any defects to potential buyers.

If the home is up for sale and the homeowner wishes to sue the parties responsible for one or more defects, they will need to inform the real estate agent and anyone who may be interested in purchasing the property.

Sellers Need to Disclose Litigation to Prospective Buyers

In some cases, homeowners may be tempted to hide or ignore construction defect litigation and keep potential buyers unaware. However, this could lead to legal repercussions for the homeowners. Regardless of how far along the litigation is, and whether it will end before closing a sale, it's still necessary for homeowners to disclose any and all defects and litigation.

Homeowners in most states in the U.S. are required by law to disclose all known defects to prospective homebuyers. Courts across the country consider this to be the homeowner's obligation. In addition to disputes regarding construction defects, any dispute involving the builder may also qualify as a material issue that warrants disclosure.

A failure to disclose defects or ensuing litigation could lead to buyers suing the previous homeowner for damages after closing the sale. The buyers may also pursue compensation if the defect is serious enough to significantly depreciate the value of the home.

In some cases, buyers who discover undisclosed defects may decide to reverse the sale, working to transfer the title back to the original homeowner and receive a refund for the purchase. This would also contribute more hassle and inconvenience for the seller.

While some homeowners may believe that buyers wouldn't be able to uncover ongoing litigation, any buyer engaged in reasonable due diligence would be able to learn about the litigation prior to purchasing the home. The buyer could then use this as grounds to double down on negotiations or turn away from the sale entirely.

In any case, it's in both the seller's and buyer's best interest for the seller to disclose any defects and litigation from the start.

Sellers Must Make Any Necessary Repairs

Throughout both the litigation and sales processes, home sellers are required to make necessary repairs to the home to prevent additional damage. Even if the defect appears to be the fault of another party, sellers are still obligated to have repairs performed.

If homeowners don't do what they can to repair potentially depreciative or even dangerous defects, this could compromise the sale for buyers. This could also turn away mortgage lenders who may be unwilling to allow a sale to proceed if a defect is left uncorrected.

Ultimately, sellers need to make sure that any defects present in the structure of the home are replaced and repaired. While sellers may be worried about the cost of such maintenance, the costs of repairs may be recoverable in court if the seller reaches a favorable settlement following the litigation process.

Avoiding Legal Liability as a Seller

The best way for a home seller to avoid any potential legal liability is to fully disclose any and all defects and litigation. If the seller doesn't know what he or she is specifically obligated to disclose, the best action to take is to simply disclose as much as is known.

Sellers can also take the time to learn about the laws specific to their state regarding the disclosure of defects. Home sellers can request an inspection and disclose the results of the inspection to potential buyers via a report.

In some states, sellers may need to complete a disclosure form when selling the home, which could further protect the seller legally and relieve him or her of any liability. Even if a disclosure form isn't required, sellers should provide written disclosure whenever they can. Otherwise, buyers may be able to sue the seller or agent for fraud, misrepresentation, or negligence if they discover any defects after purchasing the property.

Whether selling the home to any interested buyers or selling a home to loved ones as part of the estate planning process, sellers should always do what they can to identify any defects and disclose them to buyers, along with any litigation.

Working with Experienced Professionals When Selling the Property

Working with professionals who have experience with selling property during litigation can help sellers avoid legal issues.

When interviewing real estate agents, sellers can ask about experience with selling homes that are currently undergoing litigation or have other restrictions in place. Oftentimes, these homes come with additional challenges during the sales process, so having an agent who knows how to navigate and resolve them can be a huge asset.

In some cases, it may be in the seller's best interest to work with a real estate attorney who can provide legal advice and help the seller avoid any liability before selling the home.

Taking all of these aspects into consideration when selling a home while undergoing litigation can help prevent potential issues during sales. Fully disclosing all defects and litigation to prospective buyers and performing the necessary repairs can help keep the sales process smooth and free of potential issues.


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