What Happens If I Buy a Lemon Home?

Buying your first home is incredibly exciting, but it can also be a bit scary. Although shopping for a new car will represent one of the biggest purchases you’ll ever make, your first home will inevitably take precedence in the end. Not only do you need to go through the process of finding a home that you love, but you’ll also need to be approved for a mortgage and potentially even compete with other buyers for the house. This can take months, and by the time you actually buy your house and are ready to move in, it’s understandable if you want to just relax and enjoy the feeling of being a homeowner for a moment. Most new homeowners can indeed do so. But unfortunately, others are forced to deal with unforeseen problems due to the fact that they have unintentionally purchased lemons.

A home that qualifies as a “lemon” is no different from a car that we might refer to in the same terms. Essentially, its quality is so low that it’s virtually unusable (or in this case, unlivable) as it is. A homeowner would have to make extensive and costly repairs to make this kind of home properly livable on a comfortable level.

The issue, of course, is that if you were sold a home in this condition without realizing what you got yourself into, you probably won’t be prepared to make such repairs. Additionally, it’s quite likely that those who sold you the home were very much aware of its flaws before it was sold. These types of situations are why home buyer protection laws were created. However, many new homeowners are unaware of the fact that these laws exist. They’re also unaware of the ways in which con artists who sell lemons get away with the sale in the first place.

Let’s explore the tactics that sellers use to sell homes in poor condition to unsuspecting buyers and how home buyer protection laws can help you if you fall prey to such sellers. Though houses in poor condition can be renovated (and in some cases can even be great deals in the long term), you deserve to know what you’re getting yourself into as a buyer.

How Can I Avoid Buying a Lemon?

There are a lot of steps that you can take to avoid buying a lemon, but perhaps the most important first step is recognizing that it can happen to anyone. The home buyers who are most at risk of buying lemons are those who don’t realize that the practice of selling them exists. They assume that they will be able to catch the damage in question before the home is sold, not recognizing that those who sell such homes purposefully employ sophisticated practices in order to avoid detection.

Of course, it’s also important to affirm that not all people that sell these types of homes realize that the buyers are unaware of the issues present. They may not intend to scam you in any way, but that doesn’t mean that they’ll be willing to compensate you for repairs after you buy the home. There is a level of personal responsibility that you need to consider when shopping for houses.

Now, there are certain home buyer protection laws in place which can prevent you from buying a lemon of a home. Usually, sellers are required by state law to disclose material defects present within a home before it is sold. As with any law, there are potential loopholes that may allow individuals to skirt around mentioning certain types of damage. What’s more, owners aren’t always legally responsible for making repairs before a home is sold. Furthermore, home builders will frequently offer warranties for houses that have been newly constructed. Furthermore, these warranties can be bought for resale homes as well.

Home buyer protection laws aside, the most important thing a buyer can do to protect themselves from buying a lemon home is to conduct a home inspection before the sale. Home inspections are often required by mortgage lenders before a home is sold. However, if you’re buying a home outright with cash or through a hard money lender, you may not necessarily be required to conduct an inspection. As buyers usually fund these inspections themselves, some may find it tempting to forgo an inspection in order to save money. But this is a major way to set yourself up for failure as you buy. Instead, you should insist on an inspection of your own — even if the home was inspected by a separate inspector recently.

What Should I Look For In a Home Inspector?

As you prepare for a home inspection, you should remember that not all inspectors are equally qualified. If your inspector misses damage, you could very well end up needing to pay for major repairs that you’ll be unable to avoid, regardless of home buyer protection laws. You should look for a home inspector with a background in construction, as it’s often easier for these types of inspectors to detect structural issues within a home. Many of the serious problems within a home can be internal (and therefore difficult to find) if a home inspector lacks hands-on construction experience. They should also have experience as professional home inspectors and a long-term tenure within the industry.

It can understandably be a bit nerve-wracking when you’re searching for a home inspector. Aside from home buyer protection laws, the inspector is the main obstacle standing between you and an investment in a lemon home. You should try to get recommendations from those within your community. People who’ve had a great experience with a reputable home inspector will likely be able to point you in the direction of someone you can trust. A great home inspector will likely be more expensive than one who doesn’t have a lot of experience under their belt. But keep in mind that when you invest in a more reputable home inspector, you’re also investing in your future home.

Once you’ve hired a great inspector, you may want to consider having them conduct supplemental inspections. The time frame permitted for multiple inspections can be rather compressed. You should try to cram in as many inspections as possible. A supplemental inspection may be more specific, zoning in on a specific type of issue within the home — like storm damage, termites, or mold. As the home is being inspected, you may also want to visit your city’s building department to look up a list of permits that have been pulled for the property in question. If a seller is attempting to sell you a home that has been improved without the proper permits, the workmanship in question could be subpar.

How Else Can I Avoid Buying a Lemon?

You should be careful about the homes that you consider buying before you invest in them, of course. For one thing, if a home is older, it may need more supplemental inspections than a brand new home. At the same time, some new construction homes can be poorly made. It depends on the builders in question and their standards. You should do your research before buying a new home, making sure to explore the builder’s previous work. Don’t assume that because a home is new that it will be in pristine condition.

You may also want to avoid buying from an owner who is selling a house on their own. The for sale by owner, or FSBO, process gives a homeowner a lot of liberties. Typically, a real estate agent will require a homeowner to make certain repairs to a home before it hits the market. Furthermore, a real estate agent will want a home to sell as quickly as possible and they understand that this means making certain repairs ahead of time. While homes that are for sale by owner are not always bad deals, it can be easier for them to slip through the cracks. You should have a home that is FSBO inspected multiple times before you agree to the sale.

But sometimes, no matter what you do, you may end up with a home that is in fact a lemon. So what do you do from there?

What Do I Do If I Bought a Bad Home?

Everyone’s definition of a lemon will be individual to them. There isn’t necessarily one specific definition of a lemon home, nor is there one right solution if you unknowingly buy one. It’s inadvisable to pursue legal action just because a paint job is unexpectedly peeling; home buyer protection laws probably won’t do much to help you then. Often, the issues that make a home a lemon can take months to show up. There is a difference between issues that grow because you haven’t been maintaining a home and issues that were already existing when you bought the house. Those issues may grow because you weren’t aware of them and therefore couldn’t mend them. If you thought that the house you bought had a finished basement, you may not treat that basement with as much care as you would one that you know isn’t finished.

If you buy a house that turns out to be a lemon, you can consult with real estate lawyers to determine whether or not home buyer protection laws apply to your case. You may very well be able to recoup some of, or even all of, the money that you invested in the property. Much of the issue can depend on why you bought the home. If you were somehow misinformed about the home before you bought it and that misinformation led you to make your decision, that could make a big difference in terms of the success of your case.

One issue to consider is whether or not the realtor informed you about all of the potential issues with the home. Residential home buying can be a competitive industry and it’s not unheard of for realtors to omit certain problems that may keep a buyer from committing to a home. If the buyer can prove that a real estate agent withheld information about damage during the home’s sale, the buyer can be entitled to compensation from both the agent and the licensee. The issue is that it can sometimes be difficult, though not impossible, to litigate these cases.

If the house is a new construction home, there are other violations that the buyers may be able to hold the sellers or builders accountable for. While problems with preexisting homes should be caught through an inspection conducted by a buyer, new construction homes are other matters entirely. Home buyer protection laws can come in handy in cases involving these newer homes, as the homes’ problems may fall under federal construction standards violations. These violations will depend on the state in which they occur. Typically, the builders will then have about 60 days to fix defects that lead to serious safety hazards. If the builders are unwilling to fix these defects, they will then be obliged to buy the homes back. Again, the consequences for these violations will vary depending on the state in which they occur.

Certain states will also require those warranties that protect buyers investing in new construction homes. This is why existing homes can sometimes be a bit more complicated to buy. Though it’s easier for investors to make cash offers for homes that are preexisting, it’s much more difficult for them to follow up on issues involving damage. When they do, they often have to work through brokers rather than lawyers.

Working through a broker to resolve issues that home buyer protection laws cannot may save you money. There is no guarantee, however, that it will work out in the long term. Real estate risk management services can furthermore aid buyers in resolving the problems that they may not be able to take to court. If your real estate contract includes an arbitration clause, you may need to go through an arbitration process to settle a dispute. But risk management services can help offset the costs of arbitration and mediation, as well as sometimes litigation fees.

The degree to which you’re able to pursue litigation or compensation following the sale of a lemon home depends on many different factors. These include the state in which you buy the home, the type of home you buy, and the damage involved. You need to be careful when buying a home so that you can avoid the problem in the first place. But you aren’t completely without options if it does happen to you. With over 900,000 homes sold worldwide in July 2020 alone, this is a problem that can’t be ignored. Don’t let yourself be taken advantage of and understand how home buyer protection laws can aid you.

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