Advice from Nashville's Financial Guru Dave Ramsey

Dave Says
By Dave Ramsey
Author of Financial Peace and The Total Money Makeover
10/6/2004

What do you do about an unknown problem with a new house?

Dear Dave,

We purchased a house and, unknown to us, there was a leak in the basement. Our homeowner’s insurance is refusing coverage because it’s classified as a pre-existing condition. The home shield policy purchased by the seller won’t cover it. The person who sold me the house said they had this problem fixed. Am I going to have to go back to the person who supposedly repaired the problem in the past to get them to repair this correctly? The leak is obvious and appears to have been going on for some time. 

Todd 
Nashville, Tenn. 

Dear Todd, 

I think you probably need to address this with the person who sold you the house. The seller hired the repairman and told you the basement was in good condition. You live in a state that has seller disclosure rules. According to the law the seller must disclose anything wrong with the house if he knows about it. 

I would call an attorney and ask what rights you have. Then I would call the seller and his agent and ask for a meeting. Over a cup of coffee, you can very tactfully and calmly tell them that a reasonable person would have known this basement was leaking and they failed to disclose that. Tell them you’ve been misled and the seller will pay to repair this. If he doesn’t, you will have a judge assist him in paying to repair this. Now, I don’t just hire an attorney and start beating on people. I sit down, talk to them, give them the chance to be reasonable and do the right thing. But if they’re not willing to do the right thing, then you have to be prepared to take legal action. 

It’s possible the seller may be able to take action against the person who did the repairs. However, unless the seller transferred warranty to you when you purchased the house, I don’t think you really have any action you can take against the repairman. Now, I’m not a lawyer and you need to consult one to be sure, but from my real estate background I can tell you there are some serious seller disclosure laws in your state that make the seller liable if they were aware this was happening and didn’t disclose it. Just make sure you know your rights before you talk to the seller.
Dave

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