When you purchased your Arkansas home, you probably negotiated the purchase price. The price you settled on was based upon your belief as to the home’s market value. Part of that belief was based upon the home’s condition. Was the water pump working? Were the walls painted? Were there any leaks?
Imagine that your Arkansas seller told you that the home was in perfect condition. All appliances were working, the roof and window frames had no leakage or rot, and there were no other significant problems. You made an offer based on this information, and bought the home. But when you moved in, you discovered that the seller had not been honest with you. In fact, there were significant defects that will cost you a small fortune to repair.
Under Arkansas law, did the seller have to disclose those defects to you honestly? And if so, do you have any legal recourse against the seller in court to get your money back for the damages?
Most states have clear legislation that would require a home seller to give a written disclosure report to potential buyers like yourself. This report typically identifies any physical defects in the property, from a defective garage door to a leak in the cellar. Arkansas has no such law, however.
Indeed, Arkansas courts enforce what are known as caveat emptor clauses in purchase contracts. Under the doctrine of caveat emptor (“let the buyer beware”), judges ordinarily refuse to compensate buyers for home defects found after the purchase unless the seller did something to actively prevent the buyer from inspecting the property so as to find all of the defects.
However, if the seller used a real estate agent, the agent has a duty not to lie to you. The Arkansas Real Estate Commission (AREC), which regulates the real estate industry within the state, has some relevant regulations around disclosures of property defects.
AREC is a state agency charged with enforcing much of Arkansas’s real estate laws, as well as administering and issuing licenses to real estate agents. It also requires licensed agents to abide by a set of regulations. AREC Regulation 10.6 states: “[A real estate agent] shall exert reasonable efforts to ascertain those facts which are material to the value or desirability of every property for which the [he or she] accepts the agency, so that in offering the property the [agent] will be informed about its condition and thus able to avoid intentional or negligent misrepresentation to the public concerning such property.”
In other words, any licensed Arkansas real estate agent has a professional obligation to “exert reasonable efforts” to investigate the condition of a property that the agent has been hired to sell. A reputable real estate agent cannot, for example, sell a house with a flooded basement and tell potential buyers that the basement is in fine condition. This would constitute a misrepresentation, which is prohibited by Regulation 10.6. The agent could thus lose his or her license. AREC suggests that, while the definition of “material to the value” of the property might be vague, agents must use their common sense and investigate the property that they intend to sell.
Most likely, the seller used a licensed real estate agent to sell you the property. (If not, the AREC regulations aren’t relevant to your direct sale).
However, nothing in Rule 10.6 required the agent to perform a complete floor-to-ceiling investigation of the home, nor does it require them to hire a professional inspector to find potential physical defects, nor does it requre them to give you a list of problems with the house. Agents merely have an obligation not to misrepresent any information about the property, for example in response to a question from the buyer, or when placing ads or putting information in the listing materials.
Depending on the scope of the defects you find in your home, it might make sense to hire an Arkansas attorney with experience in real estate litigation. The cost of litigation can be significant, so keep a careful eye on how much you stand to gain; you wouldn’t want to end up spending more in legal fees than you would recover in court!
Your real estate attorney will be able to advise you on how Arkansas law applies to your situation. The attorney might also suggest that you have common law causes of action, particularly fraud and breach of contract, against your seller, notwithstanding Arkansas’s general lack of disclosure requirements.
Fraud becomes the basis of a lawsuit in cases where one party made a statement that was knowingly false in order to induce another party to take an action. Imagine that the seller told you that the roof had just been replaced, and was now fully up to code. But in fact, the roof was old and leaky; the seller had no intention of fixing it before the sale. Obviously, the seller told you this so as to make you more likely to buy the home. This is fraud.
Similarly, you may have a breach of contract cause of action against the seller if the language of your purchase contract made certain guarantees. For example, your purchase contract might specifically state that all interior and exterior walls would be freshly painted before the sale. If the seller fails to do this, then the seller has breached the contract. You would be entitled to damages in the amount of a reasonable paint job on the home, which is precisely what you had bargained for in the contract.
You might also contact the real estate agent, if you feel he or she lied to you in violation of the AREC rules, and tell the agent that you intend to report this conduct. The agent, or the company he or she works for, may acknowledge the misconduct and prefer to enter into a settlement with you, rather than risk losing a license.
In short, while it is true that Arkansas lacks the buyer-friendly disclosure laws that many other states enjoy, you still may have legal recourse against the seller. Act quickly and speak with an attorney to ensure that you know your rights and act upon them within any statutory limits.