Buyer discovers foundation problem hidden behind paneling

Q. We just bought a home and discovered a major undisclosed foundation problem after moving in. The seller insisted on an as-is sale, so we relied on the home inspector to find any serious problem. In the basement, he noticed old water stains in an alcove that had been paneled and carpeted. We asked the seller to replace the paneling and carpet, but he refused to do any kind of work on the property. So we agreed to replace the stained materials after the sale in exchange for material costs. But when we removed the paneling, we found a foundation wall that was crumbling and leaning. A contractor friend tells us that the patio will need to be removed and the exterior excavated to enable replacement of this wall. Do we have any recourse with the seller for nondisclosure?

A. The seller had the right to an as-is sale, but he also had the obligation to disclose all known defects. The underlying question is whether or not he knew about the faulty foundation. If the paneling was installed during the time he owned the property, he was probably aware of the damage and should have disclosed it.

When you agreed to do the repair work yourselves, you should have removed the paneling before completing the purchase. That would have been part of your discovery process. Then the extent of the problem would have been revealed before you bought the property. Home inspectors often recommend evaluation of concealed conditions before the close of escrow, especially where evidence of past leakage is apparent.

Now that the extent of the problem is known, you'll have to decide whether to pursue the seller for nondisclosure or simply accept the outcome as a learning experience. A real estate attorney can advise you regarding the costs and likely outcome of pursuing the seller. In some cases, a strongly worded letter is all that is needed.

Q. My husband and I bought our home about a year ago. It was inspected, and no major defects were found. The previous owner renovated the interior, including the basement, and installed a french drain system. We asked if there was ever a problem of water in the basement, and the seller said there never was. But now, we get water in the basement every time it rains. There's no way the previous owner did not know about this, especially if he installed a french drain. Do you think he is liable for the cost of repairs?

A. If your state requires seller disclosure, the seller should have informed you of this condition, especially if the question of drainage was raised at the time of the sale. You should notify the seller of your concerns immediately and ask that he address this problem. Communication should be made by certified mail so that you have documentation. To determine the cost of repair, the problem should be evaluated by a geotechnical engineer or a licensed contractor who specializes in drainage repairs. If the cost of repair is within the range of small claims court, you'll have the seller in a vulnerable position. If legal action becomes necessary, be sure to consult an attorney.

E-mail questions to Barry Stone through his website, housedetective.com, or write AMG, 1776 Jami Lee Court, Suite 218, San Luis Obispo, CA 94301.Access Media Group