If I bought a house 10 months ago and it passed FHA inspections, what should i do if I found out that it has a bad foundation?

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If I bought a house 10 months ago and it passed FHA inspections, what should i do if I found out that it has a bad foundation?

Homeowners doesn’t cover it.

Asked on May 15, 2012 under Real Estate Law, California

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

If the seller knew of the bad foundation and didn't disclose it, you could sue the seller for fraud.  Fraud is the intentional misrepresentation of a material fact made with knowledge of its falsity and with the intent to induce your reliance upon which you justifiably relied to your detriment.  Fraud is also applicable in cases of nondisclosure by the seller when buyer could not have reasonably discovered the true facts.  Seller's nondisclosure was to induce your reliance upon which you justiifiably relied to your detriment.  In other words, you would not have bought the house had you known of the bad foundation.

Your damages (the amount of compensation you are seeking in a lawsuit for fraud against the seller) would be either the benefit of the bargain or your out of pocket loss.

Benefit of the bargain means a defrauded purchaser may recover the difference between the real and represented value of the property regardless of the fact that your actual loss suffered may have been less.

Out of pocket means that your recovery for fraudulent misrepresentation would be the difference between the price you paid and the actual value of the property acquired.

In addition to your cause of action (claim) for fraud against the seller, you could include a separate cause of action for negligence against the FHA.  Negligence is the failure to exercise due care (that degree of care that a reasonable inspector  would have exercised when inspecting the house under the same or similar circumstances to prevent foreseeable harm).  Your damages for negligence would be the cost of repairs.


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