When sellers fail to disclose electrical problems and the inspector does not catch this problem, who is liable?

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When sellers fail to disclose electrical problems and the inspector does not catch this problem, who is liable?

I recently purchased a home and it has electrical problems which were not disclosed by the sellers. Two contractors have confirmed this as well as the next door neighbor who told me the sellers were aware of the electrial problems because they had done the wiring themselves. I had a home inspection and the inspector failed to note these electrical wiring issues on his report. Both contractors stated that the inspector should have caught these problems. I was represented by the sellers real estate agent. Which of these involved parties is responsible or would they all be to some extent for payment of the repairs? Are they liable for more than just the cost of repairs?

Asked on May 17, 2012 under Real Estate Law, California

Answers:

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

Answered 9 years ago | Contributor

You can sue the seller, the seller's real estate agent, and the inspector.  You would file one lawsuit naming these three defendants.

You would have separate causes of action (claims) in the lawsuit for fraud and negligence.  You would sue the seller for fraud, the seller's real estate agent for negligence as it would be difficult to prove fraud against the real estate agent, and you would sue the inspector for negligence.

Fraud is the intentional misrepresentation of a material fact made with knowledge of its falsity to induce your reliance upon which you justifiably relied to your detriment.  In other words, you justifiably relied on the seller's misrepresentations and would not have purchased the house had you known about the electrical problems.  Fraud also applies in cases of nondisclosure where the seller did not disclose a material fact which the buyer could not have reasonably discovered as in your situation with the electrical problems.  Your damages (the amount of compensation you are seeking in a lawsuit) for fraud 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 purchased regardless of the fact the your actual loss may have been less.

Out of pocket damages for fraudulent misrepresentation permits recovery of the difference between the price paid and the actual value of the property acquired.

Your other cause of action (claim) is for negligence, which is the failure to exercise due care (that degree of care in this case that a reasonable (real estate agent / home inspector) would have exercised under the same or similar circumstances to prevent foreseeable harm.  Your damages for negligence would be the cost of repairs for the electrical problems.


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