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| Photograph by Shannon Schaefer |
Question: What went wrong in the Yeboah case?
Answer: One view is the problem was with the disclosure form, the offer contract form along with a lack of good legal advice assisting the sellers with what is an "active" vs a problem that has been repaired.
All homes have some problems, but does ever repair need to be disclosed? This case makes the answer to that question less than clear.
The decision by the Court of Appeals of Iowa in Yeboah
vs. Emans most certainly left the West Des Moines, Iowa homeowner-sellers dismayed.
Everyone on the sell-side of that deal had to be scratching their heads and
left wondering what went wrong. The answer may be simpler than you might think.
Let's first look at the outcome. The sellers were left paying the buyers an
additional $17,280.92 and then the Court remanded the case back to the Iowa
District Court for an award of appellate fees. The pain just became a whole lot worse. Obviously the amount the sellers
would have to pay was higher than $18,000 and may have easily exceeded $20,000.
Unfortunately for the sellers it’s doubtful any insurance policy covered this
award; that money more than likely will come out of their pocket and in many
instances will reduce the home equity they have to use to buy another home. In
the end everyone involved had to ask how this could have occurred. I would
guess even the buyers were left scratching their heads because the window problem was not found to be actionable. Here is what the Court said about the roof leak.
On
that claim, the court found the sellers “had actual knowledge of the existence
of a problem involving a leak in the roof of the sunroom” and failed to
disclose the leak in their disclosure statement. [Page
3]
The buyers had to be wondering why they were paid for
the leaky roof but not the bad windows. The repair job evidence must have made it look more like cosmetic surgery, rather than an actual repair of the existing problem. Keep in mind the homeowner did the repair work, rather than a contractor. I suspect that raises a red flag in the Court's mind. Then the repair work wasn't extensive enough and if the homeowner looked inside the roof he should have seen the damage was more extensive and required additional repairs. He did look inside the roof, but failed to understand what he was looking at or what it required to be properly repaired. Is that actionable in every case? I'm not certain, but with the set of facts in this case it was actionable. So the lousy repair job is the most obvious problem, but there are others.
Obviously this blog isn’t the place
to hash out all the problems with the disclosures so I won’t, but let’s discuss
our solution for Iowa sellers.
Like all appellate court decisions we have little to go
on except what is written in the decision. A court decision can’t fully
describe all the facts; the court provides only those facts relevant to its
decision. So I hesitate to extrapolate much from what is stated in the
statement of facts, but with just those facts homeowners, sellers, buyers,
agents and brokers must try and figure out what did go wrong.
A careful reading of the Court’s decision indicates the
court is critical of the form being used. I am and can easily understand the
Court discussing the form in their opinion.
The
form also included a list of questions and check-box answers under the heading,
“Appliances/Systems/Services.” This portion of the form was designated “not
mandatory” and only “for the convenience of Buyer/Seller.” Among the questions
was a request for information about the condition of the windows. The sellers
checked the box indicating that the windows were “[w]orking.” [Page
1]
Who provided that form? Who wrote it? Who sat down with the sellers to discuss the extent of the repairs and how they are made? Probably no one because no agent wants to be give advice creating a duty; that way the agents won't get sued. But is the HO really being served?
Not even a home inspection uncovered the problems the
subject of the alleged defects. That’s bothersome because the sellers and
buyers had to be wondering why they were paying so much to so many
professionals and getting so little in return. After all what are they paying
for? It seems like the inspection amounted to telling them the obvious and then
concluding with telling them what they could already see.
Six
to eight weeks after closing, the buyers noticed wetness in the northeast
corner of the sunroom and wetness in the drywall on the ceiling. Yeboah tore
off a deck above the sunroom and found that one wall was soft. The buyers hired
contractors to repair the damage. The total cost was $17,280.92. [Page
3]
Katrina, a lawyer in our office summed it up the
allegations as a failure to fully disclose a leaky roof and damaged windows. This
is one of several cases that should make you aware of the need homeowners have as sellers for a
lawyer to review and to assist them in how to properly fill out the disclosure
forms. It made me re-examine the disclosure forms being used and to suggest
additional disclosures along with how to position what needs to be disclosed.
The
buyers also found that four of the windows in the home would not open. They
obtained a replacement cost estimate of $4365. [Page
3]
In this case it’s too easy to simply blame the sellers
for failing to disclose a known problem, because they did make disclosures of
what they thought was a problem and they took corrective action on what was a
leaky roof. I don’t blame the sellers for the disclosure statement but frankly
I have to wonder why they didn't seek legal advice to protect themselves from
future claims. Were they told to seek legal advice? Were they told by a person
or just in the fine print of one of the half dozen documents they were asked to
sign?
Take a step back and think for a moment about how this deal went wrong
and how it could have been done differently to everyone’s satisfaction – do that
and maybe they get paid a little less for the house, maybe they have some
additional repair costs and maybe everyone walks away happy with their real
estate agents and brokers. The way it worked out no one was happy and who
knows what happened to the sellers and how they came up with the money to
satisfy the judgment.
Here is what the Court stated about Iowa law: Iowa Code section 558A.2(1) requires a
person interested in transferring real property to deliver “a written
disclosure statement to a person interested in being transferred the real
property.” This disclosure is to include “information relating to the condition
and important characteristics of the property . . . including significant
defects in the structural integrity of the structure.” Iowa Code § 558A.4(1).
The seller is not liable “for the error, inaccuracy, or omission in information
required in a disclosure statement, unless that person has actual knowledge of
the inaccuracy, or fails to exercise ordinary care in obtaining the
information.” Id. § 558A.6(1).
A person who violates this statutory provision is ordinarily liable for the
actual damages that the buyer suffers. Id.
§ 558A.6.
This is a difficult part of selling your home, because
no home is perfect, not even new homes. Lowes and Home Depot encourage DIY repair-work Katrina and I read this decision and as a
lawyer-broker I made the decision to restructure how we would do this portion
of the deal. As a law firm we offer this service across the entire state of Iowa, all 99
counties. We can do it via the Internet. Contact Katrina and I if you have questions about how to fill out your disclosure statement. We charge a one-time fee of $250 and we take credit cards.
Call us, contact the Lombardi Law Firm and ask for
either Steve Lombardi or Katrina Schaefer.
HOW
TO CONTACT US
5000 Westown Parkway, Suite 440
West
Des Moines, Iowa 50266
Telephone:
515-222-1110
Fax:
515-222-0718
Write
to Steve or Katrina
