- The Washington Times - Friday, March 15, 2002

Today's real estate market is fast-paced and competitive. Home buyers often bid on several homes before they actually purchase one. This kind of environment can make a buyer over-eager, even careless. Sometimes a buyer will not discover problems with the new property until after settlement and that is not a good time to learn that a roof leaks, a basement floods or appliances do not work.

If you do find a problem like this after you have gone to closing and have taken possession of your new home, what can you do?

"Civil litigation is an option, but this is usually the worst way to solve the problem," says Ralph Holmen, associate general counsel for the National Association of Realtors (NAR). "Going to court in a case like this usually doesn't help anyone."

Suing might be a viable option if you feel certain the seller was fully aware of the problem and tried to conceal it. That would make him guilty of fraud. But proving such an charge will not be easy, or inexpensive.

"Another way to handle a dispute is for the disgruntled buyer to contact an attorney, who can then contact the seller," Mr. Holmen says. "Then the lawyers for each side can have a discussion to figure out the strengths of each case, and advise their clients how to settle things without going to court."

Obviously, resolving a problem with your home purchase through legal channels is not easy. It may even be more trouble than it's worth, especially if the disputed item isn't worth a lot of money.

"Perhaps the best thing you can do is contact the seller and the seller's Realtor," Mr. Holmen says. "Explain why you feel you have been wronged, and see how they respond. This can often lead to an amicable conclusion."

Although post-settlement disputes are rare, they can be troublesome. To help avoid lengthy legal battles, NAR has developed a Dispute Resolution System that local Realtor associations can use as a model for creating their own mediation programs.

According to NAR, mediation is a more rapid and cost-effective option that reaches a settlement two-thirds of the time.

A mediated dispute is still an emotional and trying experience.

That's why most problems with a property should be and can be discovered before you ever get to the settlement table.

To avoid disputes after settlement, the real-estate industry has developed a number of tools to ensure buyers are fully aware of a home's condition before they buy it. The most important of these tools are the home inspection and the walk-through.

"By having the home inspected and doing your final walk-through, you should be able to uncover any problems with the property you are buying," says David Rathgeber of Century 21 Laughlin Realty in McLean.

Hiring a competent home inspector to look carefully at your prospective home should reveal problems with the structure or operation of the appliances.

This inspection costs the buyer about $350 money well spent if it avoids future headaches.

For instance, if the inspector discovers a problem with the wiring of a light fixture, the buyer can offer to purchase the home on the condition that the problem is fixed. Without an inspection, it may be years before that issue is discovered and resolved.

The other type of inspection is the final walk-through. Typically done on the day of settlement, this is an opportunity for you and your Realtor to go through the home and be sure all of the terms of your contract have been met. Was that wiring repaired? Did the seller remove the junk from the basement as agreed? Were the washer and dryer left as stated in the contract? If you go through the Realtor's standard checklist, your walk-through inspection should take about an hour.

Mr. Rathgeber recently helped a client who discovered during the walk-through that the furnace wasn't functioning.

"It had been working fine at the home inspection, but now it wasn't," Mr. Rathgeber says. "So, before we sat down at the settlement table we got the seller to agree to put $1,500 in escrow to be used to repair the furnace. The seller wasn't happy about this, but he understood it was his responsibility, and he wanted to go to settlement."

Another tool to help buyers is the seller's disclosure statement.

Many states have passed laws that require sellers to disclose information about the condition of a property before settlement.

"In my experience, this has proven to be very helpful," says Peter Clute, a Realtor with Pardoe & Graham's Georgetown office. "It makes the seller take a look at the property and consider carefully what kind of condition it is in. Sometimes, sellers will even make repairs before putting the home on the market, because the disclosure statement brought something to their attention."

Maryland, Virginia and the District all have such laws, but there is a significant difference between them. Home sellers in Maryland and Virginia may choose to sign a disclaimer statement in lieu of the disclosure statement, an option sellers in the District do not have. The disclaimer states that the sellers are not trying to hide anything, but they do not believe they are qualified to answer all the questions on the disclosure statement.

"The statements are supposed to provide a disciplined way for the buyer to review and think through the questions that they need to ask before making an offer on a home," Mr. Holmen says. "But some states have provided sellers this other option."

In effect, sellers who sign the disclaimer statement are selling their home "as is." It is, therefore, up to the buyer to discover any problems that may exist in the home just like it was before the disclosure laws were passed.

Because the seller might be held liable for any incorrect responses on the disclosure statement, virtually all home sellers in Virginia and Maryland choose instead to sign the disclaimer statement.

"It has been a long time before I saw anyone choose the disclosure option," Mr. Rathgeber says.

Still, if there is a material defect in the property, the seller is required by law to disclose this to the buyer. It is illegal to conceal a material that is the legal term for major defect that could affect the value of the property or the health of the residents. In other words, you can get in big trouble if you are aware but do not tell your buyer that the roof leaks, the furnace does not work or the basement floods regularly.

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