Sellers Disclosure

[dursty87]

i got a question for you all as I am kinda worried about something that popped up today.

I went under contract on 6/5 with a close date of 7/10. Everything has been going pretty smooth. All documents have been submitted, title came back clear, inspection came back pretty well only a couple minor problems. Overall a pretty smooth process this far.

Anyways today my insurance agent calls and says we have a problem. Apparently there is an open water damage claim on the property and he can't bind insurance because of it. He also said there was a $15,000 water damage claim in 2012 that was paid out. Now I know the water heater/plumbing was all replaced in 2012 so one can assume that is from their claim whatever it may be. When I called my RE agent about he obviously had no idea about it nor did the listing agent. The only thing in the sellers disclosure was the fact that the plumbing and water heater were replaced in 2012. There was nothing regarding water damage let alone once in 2012 and again in Feb. 2015. 

Should I be worried? It seems to me as if they might be trying to hide something. Or is this normal and I'm just overreacting? I'm not sure what to do. FYI the inspection didn't mention anything about any water damage.

[ezdriver]

Have your agent ask the listing agent for explanation and documentation of the water damage claims ...especially the open claim that was brought to your attention by your insurance agent. That is a significant amount of money so there definitely had to have been some significant water damage. Once you know more, you may want to have your inspector return to the house for another look.

[Anonymous]

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@dursty87 wrote:

i got a question for you all as I am kinda worried about something that popped up today.

I went under contract on 6/5 with a close date of 7/10. Everything has been going pretty smooth. All documents have been submitted, title came back clear, inspection came back pretty well only a couple minor problems. Overall a pretty smooth process this far.

Anyways today my insurance agent calls and says we have a problem. Apparently there is an open water damage claim on the property and he can't bind insurance because of it. He also said there was a $15,000 water damage claim in 2012 that was paid out. Now I know the water heater/plumbing was all replaced in 2012 so one can assume that is from their claim whatever it may be. When I called my RE agent about he obviously had no idea about it nor did the listing agent. The only thing in the sellers disclosure was the fact that the plumbing and water heater were replaced in 2012. There was nothing regarding water damage let alone once in 2012 and again in Feb. 2015. 

Should I be worried? It seems to me as if they might be trying to hide something. Or is this normal and I'm just overreacting? I'm not sure what to do. FYI the inspection didn't mention anything about any water damage.

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Yes, you should be worried. You need full disclosure about the water damage claims from both 2012 and 2015. Don't assume the water damage is related to the water heater/plumbing replacement in 2012 - it may be, it may not be. Now you have another water damage claim from 2015? Water damage from what? Did a pipe break, was it flooding from grading/drainage problems, did someone overflow a bathtub, was it a roof leak, what? What insurance carrier is the current open claim with? What exactly is it for? Is it going to be paid, and when? What exactly does your insurance agent need in order to write the insurance binder for you?

What would worry me most is what else did the seller not disclose? An open insurance claim is a pretty big deal to leave out of a disclosure; it makes me wonder what else they aren't saying.

I'm not dissing home inspectors, but some of them aren't very thorough and many, many people have discovered huge problems in their new homes that the inspector missed entirely. And a pattern of water damage is no joke.

[Anonymous]

Oh, also of concern - the current insurance claim - if the damage was repaired and claimed in Feb 2015, has the repair contractor been paid? If not, and the insurance carrier refuses to pay the claim, is there a lien in your future if the seller hasn't/doesn't pay for the repairs done in Feb 2015? Liens attach to property not to people and it's always possible the contractor (if he/she has not already been paid) may file a lien against the property between now and closing (especially if he/she knows about the sale) which will throw a major monkey wrench into the whole affair.

I'd be digging into this situation like a manic rat terrier.

[mynameainttracy]

I would be very concerned, especially since the damage is enough that insurance claims are being filed.

In a similar story...

Last year my next door neighbors had their house for sale. I knew that they had a basement water problem because not only were we friends but I saw the Servicemaster vans there on a regular basis. In their MLS listing they had the seller disclosures as an attachment and of course, me being nosy, I read them. The only flooding/basement water issues they had disclosed were from over 5 years ago. I was shocked. Buyer beware.

[StartingOver10]

I agree with the posters above, water damage is a serious issue. Especially if there have been two large insurance claims. The fact that the seller failed to disclose is a major issue too. When you have an insurance claim on the property that loss is kept in a data base and can be ordered by you - it is a CLUE report. See this link: http://www.lexisnexis.com/risk/products/insurance/clue-home-seller.aspx

Having multiple insurance claims on a property dimenishes the value of the property (at a minimum).

Find out from the sellers exactly what the damage is and its cause. Also find out from the insurance claims what the damage is and compare. Be wary here. You may want to have another inspection for these water issues or you may want to reduce the price of the contract or cancel it altogether. Discuss a strategy with your agent. If it is serious enough, consider cancelling.

[dursty87]

Thank you everyone for the info and I apologize for taking so long to give an update(started new job, moved, etc). Anyways I got all of the information from the seller regarding the water damage claims.

First, there was only 1 claim that actually paid out and that was in 2012. Apparently the refrigerator line busted and caused damage to the kitchen, drywall/baseboards, and ended up going into the master bedroom and damaging the flooring. They replaced the entire flooring in the house, re plumbed the whole house, and replaced the drywall/baseboards that were damaged. They did provide me all the receipts regarding those - they also had the water heater replaced when they re piped the house.

As far as the second claim goes it was from this year - and the claim itself was denied. Apparently the sellers went on vacation and left the A/C unit off which caused some damage to a part of the floor because of the humidity. The insurance company denied the claim because there was no actual water damage. They replaced that part of the flooring and had the moisture removed which they also provided receipts/explanations for. 

I really love the house. I'm not sure what to do because at this point, even after all the documentation/receipts the sellers provided, I am iffy about the whole situation and why they didn't disclose any of this upfront 

[mynameainttracy]

They might not have been being shady about it. Maybe they didn't realize that was something that would need to be disclosed and it sounds like those were legit accidents that could happen to any of us. I would personally be ok with proceeding based on the info you got about it.