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Ask Ely Your Own Question
Ely, Counselor at Law
Category: Real Estate Law
Satisfied Customers: 102171
Experience:  Qualified attorney in private practice including business, family, criminal, and real estate issues.
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We purchased an investment property ten years ago. It was

Customer Question

We purchased an investment property ten years ago. It was purchased as a single family home. Our lender later informed us that it was a manufactured home and that we would have to get outside insurance. It is built on a slab and includes the land. We did NOT know it was a manufactured home at the time of purchase. Exhibit A is not in our docs. We have subsequently been subjected to the confines of owning a manufactured hom as far as refinancing goes. Can we argue this is the lenders fault?
Submitted: 2 years ago.
Category: Real Estate Law
Expert:  Ely replied 2 years ago.
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I am sorry to hear about this situation. On this website, I do not always get to give good news, and this is one of these times. I understand that hearing things less than optimal is not easy, and I empathize. Thanks in advance for not "shooting the messenger."
The case here may be weak.
There is a strong doctrine that states that a real estate buyer knows what he is buying. As such, the idea is that the buyer knows what they are buying and have done their homework. The lender's job here is to lend money, and they are not in charge of confirming what the buyer does or does not know about the property.
To sue in a state court, one needs to have a "cause of action." There are numerous causes of action, such as "breach of contract," "negligence," "fraud," "unjust enrichment," etc., as well as causes of action rooted in statutory law. Every state has their own although they are very similar to each other in every state because they all stem from the same common law. A pleading in Court needs at least one cause of action, although it is not unusual to have more than one.
Here, the closest would be negligence. The essential elements of actionable negligence are: (1) the existence of a duty owed to the complaining party; (2) a breach thereof; (3) a resulting injury; and (4) a proximate cause between the claimed breach and resulting injury. Hansen v. Washington Natural Gas Co., 95 Wn.2d 773, 776, 632 P.2d 504 (1981).
The problem is that - remember from earlier - the lender had no duty to confirm anything to the buyer. Someone in your situation would have to show that the lender had a DUTY to correct any misconceived notions you had about the home, and did not do so. This would be a hard sell (no pun intended), as this was not their primary role.
Now one can argue that the Exhibit A missing shows that they did this on purpose - fraud. The nine elements of fraud are: (1) representation of an existing fact; (2) materiality; (3) falsity; (4) the speaker's knowledge of its falsity; (5) intent of the speaker that it should be acted upon by the plaintiff; (6) plaintiff's ignorance of its falsity; (7) plaintiff's reliance on the truth of the representation; (8) plaintiff's right to rely upon it; and (9) damages suffered by the plaintiff. Stiley v. Block, 925 P. 2d 194 - Wash: Supreme Court 1996 (internal citation omitted). However, this would be a stretch because then one would have to show that the lender planned this all along and specifically withheld Exhibit A to make you think that this was not manufactured just so you would buy it. I do not know if a Jury would be open to this.
So in short, this is likely a weak case.
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