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.
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.
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
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.
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.
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 !