Home Buying in Denver>Question Details

Bob, Home Buyer in Denver, CO

What are the Colorado requirements for previous water leaks in a foreclosure?

Asked by Bob, Denver, CO Wed Jan 9, 2013

My son bought a foreclosure and found out from the meter reader that there had been a continuous leak in the walkout basement while the bank owned it and when it was for sale.

No mention of the problem was ever made in writing by the bank or the agent, even though the agent apparently hired the person who tried to fix the problem.

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In light of the additional information, there could be two other parties who your son could contact regarding the repairs: the inspector and the buyer's agent. If damage from the leak was visible at the time of the inspection, but was overlooked by the inspector, the inspector could have some responsibility. If the leak was apparent at the final walk-through, perhaps the buyer's agent should have suggested that your son have it addressed before closing. As a practical matter, the severity of the leak and the damage caused should be taken into consideration. Some water leaks and the damage caused are minor and not worth the time and aggravation involved in pursuing remedies from third parties. If the damages are more extensive (e.g. structural or mold issues) and the cost of repairing the leak and the damages is significant, your son may decide that it is worth pursuing.
1 vote Thank Flag Link Wed Jan 9, 2013
Thanks for the reply. I hope it all works out satisfactorily for your son.
Flag Wed Jan 9, 2013
The buyer broker voluntarily refunded a portion of his commission. This satisfied my son as to his involvement.
The leak was not happening during the inspection.
My son is getting additional bids and listening to more of what dad tries to tell him.
Thanks for taking the time to give your thoughts. Your reputation in Jeffco has always been excellent. I can see why.
Flag Wed Jan 9, 2013

Sellers are obligated to disclose material defects, however trying to make a bank to disclose and fix anything can be a loosing proposition, as they have a buyer sign disclosures that the property is sold strictly "as is' with no warranties or repairs. They also advise the buyer to conduct their own inspection. In the past, I've seen banks (or listing agents) fixing water leaks. These days banks don't fix anything.

Good luck!
2 votes Thank Flag Link Wed Jan 9, 2013
Hi Bob,
Material defects must be disclosed if known by the seller of the agent. If you have proof the agent knew about the leak, you should ask them to address it. Not knowing the situation, I can't say for sure, but the agent may have thought it was fixed if they hired someone to fix it. It would be best to address it with the agent and see if they will take care of you before escalating the situation.
2 votes Thank Flag Link Wed Jan 9, 2013
This is a question for a lawyer. I'm not a lawyer, but in general, if the seller or listing broker knew about a water leak, they should have disclosed it. If a seller fails to disclose a material fact, they could be held responsible for the repair. So, the question is whether the leak was a material fact -- if your son had known about the leak, would it have made a difference as to whether he would have purchased the property or how much he would have paid. Among other factors to consider are whether the seller or listing broker purposely covered up the leak or damage caused by the leak, whether the leak was properly repaired, how much damage the leak caused, has your son made repairs, etc. If your son has suffered substantial damages due to the leak, you should consult with a lawyer.
1 vote Thank Flag Link Wed Jan 9, 2013

This is a somewhat complex problem. One thing to do is to find out what the problem is and how much it will take to repair. If it is a minor repair, I would get it fixed and go after the bank and the Listing broker for reimbursement. You probably know how hard it is to go after a bank. But since it is a material defect that was known by the bank and the agent you may have a shot. The first thing is to get an answer from the listing broker and his managing broker. After that you need to contact a real estate attorney if you don't get satisfaction. The other thing to sometimes consider is addressing it with your inspector, but this does not seem to be a problem detectable by a normal home inspection. Sorry for you predicament. I hope your Buyer's Agent is being helpful as well in this process. Good success with getting to the bottom of this and getting it taken care of.

Robert McGuire ASR
Your Castle Real Estate
Direct - 303-669-1246
0 votes Thank Flag Link Sat Jan 12, 2013
I agree with the advice from both Phil & James. Get a Master Plumber's bid for repair and/or contact previous plumber to see if he can remedy his work...as he may discount charge because he was the one who originally worked on the valve.
0 votes Thank Flag Link Wed Jan 9, 2013
Thanks for your thoughtfulness Pat. The cost of the valve was a very small part of the mold issue. i should have mentioned that the buyer broker took care of that as well as contributing some of his income to help out with the bigger problems.
Flag Wed Jan 9, 2013
What you're describing with the water turn on and off with a bank property doesn't sound unusual to me; it's always seems to be a headache. Having said that, what I hear you describing doesn't sound like an expensive problem, but let me ask you; have you gotten a bid for the fix? I am not suggesting it's not a big deal or anything, I've just dealt with a lot of plumbing leak type issues over my career and they're usually a non-event for the most part. Before going through too much trouble with the bank and the agent, i would suggest getting an estimate from a plumber to see what the cost will be and going from there. Unless structural damage has occurred due to the leak, you're probably looking at less than $300 to fix it. The agent may be willing to pay the expense or share the expense to make the problem go away.
0 votes Thank Flag Link Wed Jan 9, 2013
Thanks for all the response. I just stumbled on this amazing forum today while searching for any cases for similar situations. Another broker told my son that some downtown Denver law firm had written an opinion to one of the realtor associations about a similar situation a couple of years ago and it was available online. I'm still looking and if any of you professionals can help, please let me know.

I could have given better info. At the risk of being too wordy, let me add more background.

My independent, 24 year old, first time buyer, son bought the house in Littleton. I don't have the bank's name readily available, but it was out of Texas and the house had been winterized. After the contract was signed, the buyer agent kept trying to get the utilities turned on for an inspection, but the listing agent kept delaying it, saying there was a problem with the water district. What he neglected to say was that the water district had turned off the water because of a leaky main valve in the basement, which was apparently leaking for some time.

The agent finally told my son's agent that a "plumber" had to "fix a valve" and he was working on getting this done. After a couple of contract extensions because of the delayed inspection, the water was turned on and an inspection was done. The water had dried up when the inspection occurred and it wasn't until a followup inspection shortly before closing that the repair leaked and the listing agent disclosed the history. By then, my son was committed to the purchase.

Obviously, the house was bought as-is. After he moved in he started learning more about the fact that the listing agent knew about the severity of the leak for at least a month while my son's contract was in place, and the agent waited until after closing to send more info in an email. As an aside, the listing agent and bank also failed to supply carbon monoxide detectors, as well as a couple of other items specified in the contract.

My son called me and told me that he has decided to file a small claims suit against the bank and the listing agent to see what can be done to off set some of the remedial work he has learned that he needs to do. I had him send an email to the listing agent asking for a meeting, since I felt that communication was the best first step, but the agent declined, and stated that he did nothing wrong.
0 votes Thank Flag Link Wed Jan 9, 2013
Hi Bob,

Firstly, when did you close & was the property winterized while bank owned property?

A lot depends on which bank owned your REO. If HUD owned it, the buyer gets authorization to turn on/off utilities for inspection. If this is the case, and you didn't turn off water bill, then you would be liable for not turning off water. (This is only my opinion on what HUD would do, so I can't speak for them - but they typically don't pay for anything). If it was an asset management company representing a bank, there is a likelihood that the listing agent was responsible for utilities & would be billed for charge. After closing, the listing agent would invoice for outstanding utility charges while bank owned property, then get reimbursed from asset management company representing bank.

If all water expenses occurred while bank owned property, then they should be the ones flipping the bill. Unless it was HUD. The water bill dates must show before closing date.

But ultimately, I can't pinpoint an answer for you because: 1) I don't know what bank you were dealing with, 2) if REO was winterized, 3) if you already knew about leak while under contract & agreed to as-is condition, 4) did you sign anything that held harmless the bank from any known defects or events while you turned on utilities, and 5) who was responsible for paying for & turning off utilities? The property should have been winterized with water shut off. In Colorado, if I remember, banks winterize properties by late July / August.

Like James said, contact listing agent to go over these things I mentioned. Good Luck !
0 votes Thank Flag Link Wed Jan 9, 2013
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