Liability Selling A Rehab??
As you may have guessed, I am new to rehabbing but I have a question about liability to the buyer after you sell off the property.
I was in a discussion with my agent, and she tells me there is a liability issue when selling a rehab to the end user. What is she talking about, and how can I protect myself from being sued if something should happen after a buyer purchases a home I rehabbed? What can they come after me for in the event something happens (fire from electric problems, plumbing issues, leaky roof..etc) Where is the line drawn?
I hope I got my question across 
Thanks TCI
Chris G
Did you get permit to do rehab? If not, you may not be up to code. Is that what she is talking about?[ Edited by SmileyFace on Date 04/20/2004 ]
Not sure....So from what you are saying, you have to get a permit from the local governemtn to do rehabs? Could you elaborate for me??
Thanks!!
Chris
Buying is location, location, location.
Selling is disclosure, disclosure, disclosure.
Nobody can sue you for something if they knew about it before they bought it from you.
I just did a deal in New Castle and it was a rehabbed house. The end buyer bought the house "as is". But I have done several other houses this year throughout Western Pa. Some of them had to have code inspections from the muncipality in which they are located some didn't. Most RE Investors have the buyers sign off at closing.
It would depend on the boro,township, city, ect. what is required.
Lori
[addsig]
Tinman,
Where do you find your leads for my area? Also, what part of town are you doing these rehabs in?
Just curious...
Thanks
Chris G
People call me daily because of a "friend they know that heard of my success" I get most of my business handed to me by other REI's. I network with a lot of people, I have many years of experience and I help a lot of investors at my local REI meeting.
Lori
[addsig]
thanks for the great info :-o
Quote:
On 2004-04-20 11:05, The-Rehabinator wrote:
Buying is location, location, location.
Selling is disclosure, disclosure, disclosure.
Nobody can sue you for something if they knew about it before they bought it from you.
I agree with you Rehab, but tell that to the folks that sucked on cigarettes all their lives only to sue the manufactures for the getting cancer.........even after the manufacture DISCLOSED that their product was deemed harmful.
In today's litigious society, it pays to start up a corporation in order to protect yourself.
NC
Question for the rehabinator regarding disclosure. Are there certain things by law you need to disclose (e.g. lead paint if you have knowledge of it) or is it buyer beware, let them have an inspection and make there decision to purchase based on that...unless you want to sell as-is. Even with as-is do you need to disclose?
Pushcart:
As the man said,"disclosure, disclosure, disclosere". As a rule, you must disclose any factor that would have an adverse effect on the property's value. Your example of lead paint is a good one. In MA, any residential transaction must include a "lead paint disclosure form". Both the buyer and seller must sign it in order for the RE to change hands.
That's not just in MA Boston, It is every state.
JohnNH
Pushcart - There is no such thing as buyer beware if you have knowledge of an item and lie by not disclosing. Disclose, disclose, disclose and you have nothing to worry about. If you tell a buyer you will get cancer if you buy this house, your wife will have an affair and your kids will kick you in the shins, and the buyer decides to buy the house and his kids kick him, his wife has an affair and he gets cancer he can't sue you for it since you told him up front.
Seriously, in regard to lead paint. Do you know for certain that the house has lead based paint or are you assuming it does based on the year. If you know it for certain due to testing or you were told by the previous owner then you have to disclose that the house has lead based paint. If you suspect it does based on the year of the house, just like 99.9% of all the rest of us then you use the standard lead based paint disclosure that every realtor has, it just says due to the fact that the house was built before 1977 there is a good chance this house could have lead based paint. The buyer is asked if he understands the document and if he does to sign it that he has been warned. End of story, you are free from liability due to disclosure.
If the house has mold for sure I would discolose it. Tell the buyer what it had and what you did about it, have him sign a statement that he understands what you had and what you did. You are free from liability, you disclosed.
Radon, asbestos, chance of a hole openning up under the house and swallowing it, what ever you want to protect yourself, as long as the buyer signs that you told him you are protected.
If you sell it as-is you then just have the buyer sign the as-is documents acknowleding that he understands what as-is means, with all faults, you are not warrantying anything, I still would have him sign any disclosures you want, once disclosed there are no issues, if you know about it you have to tell the buyer, if you don't then you have him sign a document saying there might be, but you don't know.
Get serious about disclosure, if your house is next to a drug dealer and you know it, you better think about disclosing it, if you want a 100% bullet proof sale, or roll the dice and chances are nothing will happen, but if you are nervous and want a super safe deal with nothing to come back to haunt you then disclose.
Again, there is no buyer beware, unless of course you are the buyer as an investor, then none of this applies to you :-D [ Edited by The-Rehabinator on Date 04/22/2004 ]
Mr Yank,
Yep, if you aren't operating under a corporation or and LLC then you might as well start crossing the street with your eyes closed.
Nobody is going to take my personal crib from me except the wife if she becomes the x. :-D
I would also think seriously about an umbrella insurance policy also just for personal problems such as a simple auto accident if you run into a bus load of kids or nuns.
Disclose all that you know regarding the rehab that you copmpleted. Since you are selling retail another safegaurd would be to purchase a home warranty for the buyer ( 350.00) which should cover most everything. Gives the buyer peace of mind.
Good Luck and make $$$
Tom
Thanks Rehabinator and everyone else. Great advise! The lead paint was a hypothetical example but the resulting answers showed the importance of disclosure in general.
Tom, Interesting idea regarding the home warranty. Is this typically available through a standard insurance co. that one uses for Homeowners policies? If not, how do you purchase this warranty...I assumed these warranties were for new construction only... Thanks!