For most Americans, and most Iowans, buying a home is a monumental financial decision. It is also a significant investment. You hope and expect that the value of your home will rise over time, allowing you to surpass the purchase price. But what if, after moving into the home, you discover that it's not worth as much as you paid for it? For example, imagine that you learn that the house’s foundation is unstable and needs replacement. Or find out that the sewage system is leaking, and must be scrapped. Such defects, which the seller never warned you about, will cost you tens of thousands of dollars—and untold time and aggravation—to replace.
You may wonder: Do you have any legal recourse against the home seller for these undisclosed defects? In Iowa, like in many states, sellers are required to reveal various problems that could affect the property’s value or condition. As a buyer, you may have a cause of action against your seller for the failure to make full and honest disclosures.
You should begin by familiarizing yourself with Iowa Code § 558A, which broadly covers disclosure statements. The law states that the seller “shall deliver a written disclosure statement to a person interested in being transferred the real property… prior to… a written offer for the transfer….”
The statute required the seller to send this written disclosure statement to you either by personal delivery or by certified or registered mail. Disclosures, needless to say, cannot be oral.
The Iowa Department of Licensing and Regulation has created a standard disclosure form that home sellers must fill out. Its many questions require the seller to disclose “all known conditions materially affecting the property.” The form covers all major areas of the home, from the roof to the basement. The form also asks about the presence of various environmental hazards such as radon and asbestos.
Importantly, an Iowa home seller only has to disclose defects within his or her personal knowledge. The seller has no obligation to, for example, hire an engineer or plumber to verify the condition of the house before selling it. The disclosure form requires only that the seller “provide information in good faith and make a reasonable effort to ascertain the required information.” Reasonable effort does not mean any extraordinary or costly efforts.
Still, if you run into a major problem, there's a decent chance the seller was aware of it (though you will want to gather any evidence of that fact, such as signs of previous damage or repairs, or accounts by neighbors who saw repairpeople at the property).
Given these requirements, what course of action might you take against the seller if you are surprised by a troubling defect? Your first step should be to locate the disclosure form within the various legal documents that were likely given to you during the purchase process. Inspect the form and see what, if anything, the seller wrote about the conditions now affecting your home.
Fortunately, the Iowa statute specifically provides for liability against sellers who make misrepresentations on their disclosure forms: “A person who violates this chapter shall be liable to a transferee for the amount of actual damages suffered by the transferee….” In other words, if your seller purposely omitted a material defect in the property from the form, you could recover the cost of fixing whatever that defect is.
Iowa’s legislature also aims to prevent sellers from using half-truths, by requiring that all disclosures be made in good faith: “All information required by this section… shall be disclosed in good faith… [and the] disclosure statement shall be amended, if information disclosed in the statement is or becomes inaccurate or misleading….” This requirement signifies the Iowa’s intent to prevent sellers from engaging in unscrupulous conduct or misstatements.
Beyond the statutory causes of action, you may also consider common law causes of action under Iowa law: fraud and breach of contract.
The legal doctrine of fraud describes a situation where one person makes a statement that is knowingly false in order to induce another person to take an action. If the seller told you the home was in excellent condition—that the structure was sound and that the piping was recently replaced—while knowing that these statements were totally false, this constitutes fraud. The seller lied to you to make you more likely to buy the house, or perhaps more likely to buy at the price the seller wanted to charge you.
Sellers do not always lie intentionally. Sometimes, they simply do not live up to their promises. In this case, you may have a breach of contract cause of action. For example, if the language of your contract made certain guarantees—perhaps that the structurally unsound garage would be renovated before the closing, but it was not—the seller has breached your agreement. You would be entitled to contractual damages.
An Iowa lawyer with experience in real estate disputes would be able to help you consider each of these causes of action and strategize about the best way to hold the seller accountable. Your lawyer may begin by writing the seller a demand letter, which can sometimes light a fire under the seller to settle with you rather than risk a lawsuit. If a letter does not work, your attorney can advise you on whether Iowa’s generally buyer-friendly laws will help you recover.