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socrateaser, Lawyer
Category: Real Estate Law
Satisfied Customers: 39010
Experience:  Attorney and Real Estate broker -- Retired (mostly)
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I am currently in a lease-purchase agreement. Before signing

Customer Question

I am currently in a lease-purchase agreement.
Before signing the agreement I had the property inspected by a licensed home inspector and appraised by a licensed real estate agent / appraiser.
The home inspection did come back with, as the seller promised me, typical maintenance items associated with a 20 year old home, but it failed to mention all of the mold and rotting wood within the sub floor. The report contained 6 photos that were either focused too far out to see mold and rotting wood, or they were photos of the best looking areas of the sub floor at a distance. The report did mention moisture in the crawlspace along with falling down insulation between the floor joist and water stains on the foundation walls that he could not determine if they were recent or active. The recommendation was to remove the insulation to keep from trapping moisture. Again, no mention of mold or rotting wood even after I directly asked about what the presence of moisture meant and what shape the sub floor was in. I signed the lease-purchase agreement thinking at this point I needed to have control of the property to take care of these "minor" repairs only to find out the true condition of the sub floor a few weeks later when I called a crawlspace specialist to come remove the insulation and look at the foundation stains in depth. He informed me, with a slew of proper photos, that the moisture in the crawlspace has been high for a long time and the ground water seepage is active. The photos revealed mold, rot, a highly active moisture problem, and "light" ground water seepage into the crawlspace. After 3 more specialist, 4 quotes total, I found out that the repair, waterproofing, and remediation costs of just the crawlspace averaged over $40,000. The cost does not include the risk that I will be taking after the repairs. The insulation between the joist is still concealing several square feet, so technically I could have another $60,000 in sub floor rot repair, another $100,000 in complete floor replacement (carpet, hardwoods, etc...), and who knows how much more mold remediation may be required in everything above the sub floor.
The house appraised for $237,000, and my contract amount is $229,000 with the lease portion ending in 8 months.
The seller did know of the moisture problem prior, but was probably just as ignorant as me about the gravity of its affects and the state of the crawlspace at that time. Cooks Pest Control pointed out the moisture problem 10 years ago claiming the sub floor venting didn't meet building codes, so the seller paid them to add vents. This year ServPro provided water damage services for a slow leaking water heater and pointed out the moisture problem again (20% moisture content in the sub floor woods). The ServPro rep documented it in his report that's still around.
The seller's insurance denied mold and water damage claims a week ago based on the state of the crawlspace being due to improper maintenance over the years.
The seller has stated that he wants to help the situation, but doesn't have much equity in the property; 2nd mortgage I suspect.
Help, please! What should be my next step?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  socrateaser replied 1 year ago.


Legally, you have only three options:

1. Attempt to negotiate a settlement with the seller. This is self evident, but I can't avoid discussing the issue. The question is whether or not the seller really wants to sell the property. Obviously, unless the seller decides to commit fraud with any subsequent buyer (assuming you back out of the deal), then the property will not sell without either credit for the costs necessary to remedy the property's defects, or the direct repair of those defects. That is precisely how I would put the issue to the seller. He can either reduce the property's cost to permit you to remedy the defects, or you will have to cancel the deal.

2. If you have already made a down payment, and you can't reach a settlement, then your recourse is to send a letter stating that you are rescinding the contract on grounds of mutual mistake, and that unless your down payment is returned, you will have no alternative other than to sue to recover your damages. The proof required for a rescission is that the property damage is far greater than either you or the seller realized. In legal terms, rescission is permitted where there as a basic and material mistake concerning the contract about which both parties were unaware at the time of contract making. You have stated sufficient grounds, and you apparently have sufficient proof to support those grounds.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, I receive nothing for my efforts in your behalf.

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