Legal Remedies If A Home Seller Lies or Conceals a Defect in Michigan

For Michigan buyers, it's all about what the seller knew and when he or she knew it.

Updated 2/16/2021

There is nothing more exciting than moving in to your newly purchased house, unpacking your boxes, hanging your pictures, and making it your home. This happy feeling can quickly turn to surprise, then anger, however, if you notice a problem with the house that you were unaware of before the closing. For example, after the first heavy rainstorm, your basement may flood. Or, maybe you discover that the heater doesn't work after the weather turns particularly cold one evening. You may suspect that the seller lied to you about the condition of the property.

While you shouldn't expect the house to be perfect (no house is, and they're all deteriorating day by day), you likely expect it to be in the condition that the seller represented to you prior to closing (taking into account subsequent wear and tear). If there is a serious issue that was not disclosed, you may have a legal remedy against the seller, the seller's broker, or possibly, the home inspector.

Steps to Take After Discovering a Property Defect

Before trying to determine whether another party is responsible for the problem, the first thing you should do is to take steps to fix it. This is important for two reasons. First, if you do not repair the problem, it may get worse. So, the repair should be made for your comfort and well-being. Second, in some situations, you actually have a duty to reduce or minimize the damage discovered. This is called a "duty to mitigate." It means that you will not be able to sue for any damage that you could have avoided.

A good place to start when you discover a defect is with your homeowners' insurance company. Is the problem covered by your policy? What is your deductible? If you file a claim, will your insurance rate increase? Does the insurance company require you to work with particular contractors to assess or repair the problem? A call to your insurance company will answer any questions that you have about coverage. Depending on the issue, and after considering your options, you may want to pursue an insurance claim.

Some buyers purchase a home warranty when they close on a house (or have one purchased for them by the seller). Generally, a home warranty will cover the repair or replacement of appliances and, in some cases, structural components and other home systems, such as plumbing and HVAC. So, if you do have a home warranty, it may cover (after a small service payment) the cost to repair or replace the defect at issue. Read the fine print on the home warranty carefully, as there may be limitations on claims, such as claims involving pre-existing conditions or ones where you failed to perform regular maintenance.

Depending on the issue, you should also review any product or service warranty that may have been transferred to you as part of the closing, for example on home appliances. It is possible that the defect is covered by such a warranty.

In all cases, you should keep written records concerning any expenses you incur to repair the issue. Keep receipts, copies of quotes, and copies of written correspondence concerning the issue. And, if possible, you should also take pictures of the property defect. This will assist you in any legal action you may bring.

Who Is Legally Responsible for the Property Defect?

The next thing to think about is who could or should have told you about the problem but failed to do so. The seller, broker, and inspector are all on the list of possibilities.

Did the Seller Know About the Problem and Have a Duty to Disclose It to You?

Prior to selling a house, a Michigan seller is required to inform the buyer of certain property conditions by way of a Seller Disclosure Statement. (See Mich. Comp. Laws Ann. § 565.951.) (Also see "Home Sellers in Michigan: Your Disclosure Obligations" for more information.) If the seller intentionally misrepresents or withholds information on the disclosure statement, you may pursue legal action against the seller for fraud or misrepresentation.

The most difficult part of asserting a fraud or misrepresentation claim against the seller is proving that the seller knew that there was a defect and intentionally made a false representation. The seller is not responsible for any errors, inaccuracies, or omissions unless the seller had personal knowledge of the issue. (Mich. Comp. Laws Ann. § 565.955(1).)

It would be unusual for a seller to admit having intentionally misrepresented information about the property. So, the buyer must investigate what the seller actually knew. You may start by reviewing records of prior repair work done on the property, looking for obvious signs of covering up the problem (such as fresh paint over water stains), and speaking with neighbors who might be aware of the issue. You may also review past seller disclosure statements that are public record to determine whether the issue existed and was disclosed to the seller by a previous seller.

To establish fraud or misrepresentation, you must also prove that you relied on the seller's statements. (See the case of Roberts v. Saffell, 760 N.W.2d 715 (Mich. 2008).) This is sometimes difficult to prove if you have hired a home inspector or other professionals to inspect the property. In that case, the seller might claim that you did not rely on the seller's statement, but instead obtained your own assessment of the property.

Did the Broker Know About the Problem and Have a Duty to Disclose It to You?

Although a seller's broker in Michigan has no legal obligation to disclose property defect information to the buyer, and is not liable for the seller's misrepresentations about the property, there is still a possibility that the broker may have some legal liability. (Alfiero v. Bertorelli, 295 N.W.2d 772 (2012)). If you can prove that the broker acted together with the seller to conceal or misrepresent information, the broker may be legally liable for fraud or misrepresentation. (Mich. Comp. Laws Ann. § 565.965).

As discussed above concerning seller liability, the difficulty will be in proving that the broker intentionally misrepresented or worked together with the seller to intentionally misrepresent information (see "What Real Estate Brokers in Michigan Must Disclose About a Property" for more information about broker liability).

Should the Home Inspector Have Spotted the Problem and Brought It to Your Attention?

You may also have a claim against your home inspector if the inspector missed a problem that he or she, as a professional, should have noticed. The home inspection report is often lengthy, and contains pages of property issues noted. Importantly, it also will contain a list of areas that the inspector did not inspect and excluded from the report.

For example, some home inspectors will only inspect "accessible places." In those cases, an inspector may not look at the attic, crawl space, or any area that is obstructed by furniture, boxes, or other items. If the property defect is not located in a clearly visible area, the inspector may not be responsible. To determine whether you have a claim, review your home inspection report carefully.

Additional Information If You Discover a Concealed Defect

If you suspect that the seller concealed a property defect, or find yourself in situation where you need help, please consult an experienced local real estate lawyer. The laws can be complicated, and are best interpreted by professionals who handle such matters every day.

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