Seller Violated Bldg Code-Breach of Contract?

I purchased a home in VA in 1999 directly from the seller, a contractor who told me the home had previously had foundation problems, which he had fixed. The home inspector said the renovations were well done. Three weeks after moving in, settlement cracks (BIG ones!) started to appear. I called the seller, who stated that soil testing he had done had shown NO "shrink swell" soil. After a structural engineer examined and said home had severe structural defects due to shrink swell soil, I began to investigate. Turns out the seller had bought the home "as-is", with a structural engineer's report attached to HIS purchase contract showing the home had problems for 30 years and would continue to unless soil was stabilized. Soil test said soil was non-critical, but not that No shrink swell soil was present. Also said fireplace had been replaced due to prior settlement. Neither doc disclosed prior to settlement. Also, the contractor (seller) had given an estimate to realtor who sold him the house for $60K worth of foundation repairs he said house needed. Any repairs he did are questionable, since he never obtained a building permit for them. House is sinking, and has sustained damage in past year. Later soil tests show house is sitting on large area of severe shrink swell soil. I want it off my hands. The purchase contract I signed says that seller warrants they are not in violation of any building codes at time of closing-which seller was-and the local bldg inspector will testify to it. I have sued seller for misrepresentation, but really want him to just take the house back. Even if it is fixed, can only guarantee for 10 years, and I would have to disclose the whole messy history then. House is "tainted" for resale. Can I obtain recission of the purchase contract I signed, based on seller's violation of bldg codes at time of closing? Sorry for the long post, but I have a long trail of documentation showing the seller knew everything beforehand-bought house cheap-"fixed" it cheaply-and sold for 2X his purchase price. Thanks for your help!

[HomeGuru]

Yours is a good example of why using an experienced Realtor would have been good.
Now do you have an attorney or are you foolishly representing yourself again?

Oh Great Home Guru (said with the utmost respect!)-well, I'm a slow learner, apparently, because I initially filed the lawsuit using a lousy attorney (neglected to end me correspondence from the contractor's attorney, which ticked them off royally, because they thought I was stonewalling them.) Anyway, I finally found a young, but honest lawyer, who is handling the case very aggressively after the first lawyer let it languish for some months. In fact, we are going to non-binding arbitration tomorrow, where I will have the opportunity to present the evidence I have accumulated. Although we do not expect that the contractor will agree to take the house back (which is letting him off extremely easy!), we will at least have a better sense of whatever defense his attorney plans to use. Then we will probably have to go hi-ho, hi-ho, it's off to court we go! By the way, I bought and sold my very first home on "handshake" contracts, and never had a problem. I suspect that the seller would have concealed the pertinent background and his failure to obtain a permit from any realtor also, since he has lied to my face about his prior knowledge, even when that knowledge was documented. Crooked is crooked, no matter what. BUT, you are indeed correct-using a realtor would more likely have shielded me from this horrible situation. Thanks for replying. Pooskatz

[HomeGuru]

Good Realtors always make sure that there is a building permit check. If you did this one thing as part of your due diligence and prior to closing, you would have discovered the problem beforehand rather than later when it's too late.

Dear Home Guru-sorry to bother you again, but I fear that the seller of my defective home is trying to take advantage of me a second time (sort of adding insult to injury). Mmy attorney and I went to non-binding arbitration last week. The seller agreed to take the house back, but on terms which I think are extremely "fishy". Before I go further, pls let me say that the agreement is only verbal and non-binding at present). The agreement was that I deed the house back to the seller within 30 days. The seller would then write me a check to cover the mortgage payments, which I, in turn, would continue making to the lender, until the seller took out a mortgage within 12 months to pay off my outstanding mortgage loan. Seller's rationale is that if the mortgage company saw their (seller's) name on the mortgage checks, they might call the loan. However, the seller is not on the loan-only I am. It seems that the seller has 0% liability here-and I have 100%; since they would have the property, and I would have the outstanding debt, with no collateral. If the seller ceased making payments to me, I would have to pay them to avoid foreclosure (I hold a clearance and can't have bad credit-not that I want it anyway). true, I could sue the seller for clear breach of contract, but I'd still be responsible for the debt. In addition, couldn't the seller re-sell the house (at 100% profit), and I would still be stuck with the mortgage? Mmy attorney told me that I should accept the offer during the arbitration, but I have not signed anything yet, and am increasingly uncomfortable about putting myself at financial risk by doing this. The arbitrator used the term "quiet title" in referring to this transaction. Please, wise Home Guru-am I paranoid after having been burned once-or does this seem like a shady setup to you? Thanks for your help! Pooskatz

[HomeGuru]

First of all, let me say that you have been understanding and tactful. Many readers get offended at some of my responses, take it personal, get a bit upset and then do not get any help from me again.

Anyway, with respect to the verbal settlement offer; that is one of the lamest proposals that I have heard in a long time. Why not just give your car to the Seller as a parting gift?

You are not protected.
Why would you want to give up the property (even if it is a lemon) yet still be liable for the mortgage?

Here is my counter: Seller pays you $100K down payment on a contract for deed with a term of 12 months. Monthly payments on the contract are the same amount as what you are paying now.
This way, you still retain title and the Seler has contracted to purchase the property back from you within 12 months. The large down would show that the Seller is serious about buying the property back.
You also need to execute a rental agreement so you have helegal right to occupy the property until such time as the Seller pays you in full.

If you deeded the property back to the Seller per the non-binding verbal offer on the table and the Seller got hit by a car and died, how would you get your money back? When you file tax returns would you claim mortgage interest paid or would the Seller since the Seller would be paying you the mortgage payments for the 12 months? Who would be responsible for the insurance, real property taxes and minor repair/maintenance? Who would be responsible for emergency major repair costs if the structure settles, cracks and sinks further during the 12 month period?
I have a bunch more scenarios but I will let you ponder this stuff for now.

[Edited by HomeGuru on 04-23-2001 at 02:13 PM]

Dear Home Guru-you have already validated the concerns that I have about the proposed agreement. At the time when I agreed to it, I was so tired and confused that I took my attorney's advice. Surprisingly (or maybe not), he sounded somewhat perturbed when I phoned him with my concerns today. What I can't fathom is why the supposedly neutral arbitrator promoted this deal. HE had to see that it is completely one-sided. However, he was also the one who brought along case law showing that basically I was at fault for buying a defective house (even thought the seller had failed to disclose specific defects, of which he had prior knowledge). Anyway, I asked the arbitrator who would get the tax benefits during the "waiting" period between giving the seller the deed and when the mortgage was paid off, and he said the other party would, because he would own the house. So PLEASE bring on your other scenarios, so that I can pose them to my attorney when we review the proposed agreement in writing. Thanks so much! Pooskatz

[LegalBeagle]

Hey dude, lose your attorney, he sucks! The fact he even allowed the arbitrator to finish the 2nd sentence of the offer should tell you that you currently have no one sat in your corner looking out for your best interests!