Make Sure You’re Solid Before You’re Sold: Important Duties on Buyers and Sellers in Real Estate Transactions
As the Wisconsin weather continues to improve, so too does the local real estate market. Each spring/summer, scores of individuals and families young and old take to the streets in search of their dream home. Whether you are a first time home-buyer or a veteran of the process, there are some important duties on the parties to a transaction that should be fulfilled prior to transferring a piece of real estate.
Luckily, when it comes to a major life step such as the purchase of a home, the traditional doctrine of caveat emptor (“let the buyer beware”) no longer has its full effect. Wisconsin law now places heightened duties on sellers and provides safeguards to home-buyers for known deficiencies in the property that were undisclosed at the time of purchase.
We hear horror stories involving real estate transactions quite often. The excited newlyweds finally close on the purchase of their first property, only to discover their home is below the flood plain and suffers from chronic flooding in its basement during the rainy seasons. The retirees downsize to a more manageable property in the suburbs only to find massive deficiencies in the home’s plumbing, requiring hundreds of hours of labor and thousands of dollars to repair. The list goes on.
In December of last year, a three-judge panel on the Wisconsin Court of Appeals unanimously ruled that “as-is” and exculpatory clauses contained in contracts for the sale of real property do not relieve brokers/sellers of liability for misrepresentations concerning real estate. In Fricano v. Bank of America (2015), the contract for sale contained a provision stating that the seller had minimal knowledge of any material defects to the property. However, there was direct evidence that the seller did have knowledge of a severe mold infestation in the basement resulting from past repeated flooding. Furthermore, the exculpatory provision of the contract purported to place all investigatory burdens upon the buyer, effectively shielding the seller from any potential liability. Wisconsin Statute § 100.18 (1) prohibits a person or agent from selling real estate and other property to another through statements or representations which are untrue, deceptive, or misleading. The seller argued that the contractual language, as well as a third-party inspection of the property, relieved them of all liability under the Wisconsin Statutes. The Court of Appeals disagreed.
When a seller has knowledge of a material property defect and the buyer inquires about potential problems, sellers have an obligation to disclose the issue. Buyers do indeed bear a burden to inquire about material defects and should always hire an inspector to assess the property for any structural or environmental concerns; however, since Fricano, a seller is not entirely relieved of liability through exculpatory contractual language.
Real estate transactions are complex undertakings involving buyers, sellers, brokers, bankers, and inspectors. Buyers and sellers can alleviate many of the common headaches that arise as a result of these transactions by consulting an experienced real estate attorney prior to signing any legally binding documents. A properly drafted real estate contract can help mitigate any potential liability for past, present, and future issues with the property. Don’t let the purchase or sale of your dream home become a nightmare. Contact John M. Kelly, Attorney at Law, LLC to ensure that you are compliant with the laws governing real estate transactions in Wisconsin.
For additional information on real estate transactions, see State Bar of Wisconsin, Buying/Selling Residential Real Estate: Answering Your Legal Questions.