How to Handle the Issue of Wet Basements

business-planning

One of the issues our homeowners and sellers experience in the mid-west is wet basements. Often, it is not the amount of rain in the spring and summer which causes the most problems with wet basements, but rather, drought conditions in prior years which causes the soil to pull away from home, giving rain and water a direct path down the foundation.

Regardless of the cause, we as the Realtors, do find ourselves involved in these issues and we have to be careful of the role we can and cannot play in helping them get resolved.

Your Listings 

In the event your seller experiences water problems at the property during the listing term, there are some clear steps that need to be initially taken.

  1. The seller needs to get any resulting damage cleaned up.  If the damage is significant, it may necessitate putting the property in temporary withdrawn status in the MLS while the seller completes any repairs.
  2. Through the use of professional foundation companies, plumbers and/or engineers, the cause of the water intrusion needs to be determined.  Was it a simple sump pump failure?  Does the foundation need engineered repairs to prevent future occurrences?  It is impossible to address the next step of “disclosure,” unless and until the seller knows what to disclose.

Both the Exclusive Right to Sell Contract and Seller’s Disclosure inform and instruct the seller of their legal duty to update the Seller’s Disclosure throughout the listing period and while under contract with a buyer.  So, once the water intrusion issue is known, the seller must update their disclosure documents with this information.

A common question that often comes up is whether the water intrusion still has to be disclosed even if the seller has fixed the damage and cause of the problem?  For example, if a sump pump failure was the cause of the water intrusion and damage, and the seller both repaired the damage and corrected the sump pump failure – is a disclosure of the original problem still required?  Yes, any prospective buyer deserves the opportunity to determine through their own inspections and investigations whether their professionals agree with the repairs and corrections made by the seller.  Water intrusion issues remain one of the most litigated issues between buyers and sellers and sellers are doing themselves no favors by shielding a buyer from past problems with the property.  In all instances, update the Seller’s Disclosure AND provide copies of the reports, invoices and other documents from the vendors that performed the work.  Plus, the neighbors will always tell the new homeowners how many times they saw the plumbers, contractors and engineers in the driveway before the sale.

After Closing 

Now, let’s be honest…unfortunately, wet basement issues most commonly come to our attention after the closing has occurred.  These are the instances that have the potential to place us in a position of acting well outside permissible agency rules in Kansas and Missouri.  Under applicable KREC and MREC rules, our agency relationship terminates at the closing of the transaction – so our involvement in these post-closing disputes must be handled carefully.  Certainly, our clients rightly expect our assistance and we need to be there for them, but it is important to let them know what we can assist with and what we will need to defer to other professionals – potentially an attorney.

When that client contacts you after closing informing you of damages they have incurred as a result of water intrusion, here are the things that you can immediately do to assist:

  1. You will likely hear from your past client before the water has even receded…like the listing instructions earlier, the first step is getting the homeowner connected to service providers that can begin to repair the water damage;
  2. The sellers need to arrange for several professionals to evaluate the property and determine the root cause of the water intrusion and what are the necessary repairs and costs.  This will determine whether the problem is systemic and if the property shows signs of past issues;
  3. If they have already buried their paperwork and documents from the real estate transaction, offer to get them all the documentation, which will include the Seller’s Disclosure, inspection reports and other relevant information that would indicate what was disclosed to the buyer during their purchase;
  4. If the professionals indicate or other evidence (i.e the neighbors) shows the property has experienced past water intrusion issues which were not corrected, not corrected fully AND not disclosed to the buyer, then they buyer can begin considering any efforts to communicate their concerns and/or claims to the seller. A couple points here, no one wants to believe an issue they are experiencing with a recently purchased home is the first time it has happened, it must have happened before, right?  This is why the buyer doesn’t start with Step 4, but rather determines through professionals whether this has likely occurred before or not.  Sometimes it hasn’t…

Assuming, the professionals retained by the buyer have determined that this was a pre-existing problem and the buyer is wishing to inform the seller and potentially assert a claim for damages, this is where the Realtors need to carefully balance their assistance.

  • As the Realtors we are not attorneys for the buyers and sellers.  When a buyer comes to you and said the seller failed to disclose something, I have damages and I want the seller to pay me for those damages, what does that sound like?  Sounds a whole lot like a potential lawsuit to me.  I am fairly certain, no where in the KREC or MREC definition of real estate activities, are there provisions giving us the right to prosecute, negotiate or settle legal disputes for buyers and sellers.
  • Since you did assist them all through Steps 1-4 above, this is where you instruct the buyer to take all that information they gathered and draft a letter TO THE SELLER outlining their concerns, the damages, their claim … etc.  This can initially be done either by the buyers themselves or through an attorney.
  • Offer to help get that communication/letter to the seller (however, often the closing documents will have the seller’s new address).  It is okay to be the initial conduit of this first communication, and you may even have to enlist the listing agent to get the letter to their seller. Just be reassuring to the listing agent, you are not seeking to get them involved, but rather just getting the buyer and seller communicating directly about the problem.
  • This also works if you are the listing agent and are contacted by an irate buyer’s agent looking to personally argue the matter before the Supreme Court.  Remind them that neither of you are the attorneys for the buyers and sellers so getting them communicating directly is best for everyone involved.
  • Once the seller is provided the buyer’s letter, the seller should be instructed to direct any response directly back to the buyer – there is no reason to continue being the conduit at this point because the seller knows the buyer’s address (remember, they used to live there …)
  • Resist the temptation to write or be the communicator for either the buyer or seller – we are just passing on the client’s letters, not our own.  Too many Realtors try and respond on behalf of their client and end up implicating themselves in the underlying problem …

We seek to avoid directly handling the dispute resolution aspect of this because we are not armed with the right information, documents and not to mention, legal ability to do so.  What if the seller writes a check to the buyer, do we write up a settlement agreement?  What if another claim arises in 6 months, does the buyer’s past acceptance of money from the seller preclude future claims?

The best and most appropriate thing we can do for our clients in these situations is give them good advice and when necessary, suggest they speak to legal counsel to pursue a potential claim resulting from the contract.


Written by Chris Kelly
Chief Administrative & Legal Officer
ReeceNichols Real Estate, Corporate