Home Buying in Indiana>Question Details

Cj, Home Buyer in Indiana

Indiana Limited Agency explanation- Realtor did not disclose known Material Defect

Asked by Cj, Indiana Mon Feb 9, 2009

I purchased a property that was listed, and signed a "limited Agency Agreement". It is my understanding that the realtor must disclose adverse material facts to the buyer that he/she was aware of . She had a buyer 1 year before that had the septic inspected, and was found defective and leaching on the neighbors property. The buyer backed out because of the speptic. We were not told this and found out after closing although we have emails from the realtor indicating that the septic worked fine and had no problems when we asked We did our own inspection when looking at the property, we did not hire a septic company. The ground around the septic was dry, no leaching the toiliet flushed, and the realtor said the seller never had a problem with it. The property was bought "As is", because the building needed some fix up. No disclosures. The realtor is admitting that she knew, but is saying that we bought " AS IS". and she didn't owe us anything. Brokers Input?

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There is nothing in the Indiana Real Estate Commission Laws and Regulations which absolves an Agent or Broker from their duty to practice full disclosure. Zip. Nada. Zilch.

Real Estate Law supersedes Limited Agency and Inspection waivers, and neither agreement/waiver eliminates the Agent's legal obligation to fully disclose such defects.

Smoke screen? That's putting it mildly.

Here's some other important info from Indiana License Law:

IC 32-21-5-10
Disclosure form; presentation required before acceptance of offer
Sec. 10. (a) An owner must complete and sign a disclosure formand submit the form to a prospective buyer before an offer for the sale of the residential real estate is accepted.
(b) An appraiser retained to appraise the residential real estate for which the disclosure form has been prepared shall be given a copy of the form upon request. This subsection applies only to appraisals made for the buyer or an entity from which the buyer is seeking financing.
(c) Before closing, an accepted offer is not enforceable against the buyer until the owner and the prospective buyer have signed the disclosure form. After closing, the failure of the owner to deliver a disclosure statement form to the buyer does not by itself invalidate a real estate transaction.
As added by P.L.2-2002, SEC.6.

So while not having received a full disclosure from the Seller prior to closing might not invalidate the sale, there is certainly still the requirement that the Seller disclose the known defect prior to closing.

If you have evidence that both the Seller and the Listing Broker knew of the defect and failed to disclose it to you, it is my judgment that you have them over the proverbial barrel.

Good luck.

Joe Shoemaker
Principal Broker, REALTOR®
MacDuff Realty Group
1 vote Thank Flag Link Mon Feb 9, 2009
Talk to a real estate attorney.
0 votes Thank Flag Link Thu Feb 12, 2009
Thank You Joe for your response...I have spoke with an attorney and we started off with writing a letter, which the E & O insurance company had an attorney respond to. Basically the defense is that the realtor is not responsible because of a clause in the Limited Agency Agreement that states : "it should be disclosed if it could not be discovered by a reasonable and timely inspection of the property by the parties" We are understanding that clause to say that we the buyers or parties of the contract had to do a reasonable inspection of the property, which we did. The attorney for the Realtors E& O Insurance is saying that since we waived our inspection that clause applies to that, because we should of paid for an septic inspection. I do not believe that is what the clause means, I think it is a smoke screen, so I wanted to get a Brokers opinion before proceeding further with possibly a law suit.
0 votes Thank Flag Link Mon Feb 9, 2009
I highly encourage you to contact a Real Estate attorney ASAP. If you need a referral, I'm happy to oblige.

Brokers and Agents are required by Indiana License Law to disclose ALL known defects to both Buyer and Seller as soon as they're discovered. If a problem existed with the septic system which was either newly discovered or a previously know issue prior to your closing of the transaction, it was the legal obligation of the Broker/Agent to disclose that defect. Period.

Stating a property is being sold "as-is" is not a legitimate reason for failing to disclose a defect.

From the Indiana Real Estate Commission Laws & Regulations:

IC 25-34.1-10-11 Licensee representing buyer or tenant; duties; disclosure of information
Sec. 11. (a) A licensee representing a buyer or tenant has the following duties and obligations:
...
(3) To promote the interests of the buyer or tenant by:
...
(C) disclosing to the buyer or tenant adverse material facts or risks actually known by the licensee ...
concerning the real estate transaction;
...

Best always,

Joe Shoemaker
Principal Broker
MacDuff Realty Group
0 votes Thank Flag Link Mon Feb 9, 2009
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