And to further insulate themselves from liability, the bank sold you the home 'as is' with not guarantees or promises.
An example of a defect known while in the banks possession would be if the copper pipe was stolen after they foreclosed. They would have to disclose this fact - which in fact benefits them as once the buyer is aware of the defect they are assuming responsibility for repair of the defect as they purchased the home 'as is'.
You will need to talk to your insurance company. They may attempt to tell you it was a pre existing condition which limits their liability, unless you can prove that part or all of the damage is new.
Typically, REO properties are sold "as-is", and the seller (bank) makes no representation as to the condition or possible issues with the property. They are exempt from providing disclosures, because they have not occupied the property. Either you, your agent, or attorney should have also done a little research on any insurance claims that were previously made on the home. Had this been done, you would have been aware of the potential of this problem prior to purchase.
Additionally - was an inspection done on this property? I am a little confused by the fact that it seems like you had no indication that anything was wrong with the property prior to occupying the home. Foundation issues don't happen "overnight" - so any issue, or potential of issue, should have been uncovered during the inspection period generally built into your contract - to allow you an "out" if you were uncomfortable with anything.
Either you bought this property completely "blind" - or I am missing some critical information. I would consult with an attorney to review your contract/addendum and determine an appropriate course of action.
You will certainly need to speak with an Attorney who specializes in Real Estate law. You should also bring out your property inspector prior to any repairs being made to have them re-inspect the home. There may have been clear signs of this problem when the home was inspected, therefore the inspector should have listed them in their report. Your inspector will be able to determine if this was infact a pre-existing problem that they missed. As Bob mentioned below, requesting a CLUE report from the Seller or at the least calling your insurance company to verify the homes insurability during your inspection period may have flagged this problem in advance as well. As far as the Bank being responsible, they can only disclose known material facts. Because the home was a foreclosure most of the standard disclosures are not required simply because the bank or their reps have not lived in the home. Property inspections take on an even bigger importance when purchasing a foreclosed home. Good luck to you!
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