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Construction Defects

House of Blunders: Navigating the Maze of Real Estate Defects & their Legal Dilemmas

Published October 28, 2023

Introduction:

The real estate industry often presents inherent hazards and risks, sitting comfortably among these are construction defects. Typically categorized into design, material, workmanship, and subsurface defects, these issues can significantly hamper the value of your property and complicate the selling process. This blog explores the complexities intertwined with listing these defects and the lasting impact they create over the lifespan of a property. The explosive new home building going on now in the valley means construction defect claims and litigation will explode at the same rate.

Construction Defect Categories:

1. Design Defects: Even if immaculate precision is applied in adhering to design plans during construction, flaws in building design can lead to performance issues. An intricately constructed roof, for example, may increase susceptibility to water leakage, cracks or wind damage.

2. Material Defects: Inferior or defective building materials can lead to considerable material defects. For instance, even if a window is expertly installed, if it was manufactured or delivered with a deficient seal, water intrusion may be an inevitable concern.

3. Workmanship Defects: Despite precise designs and high-quality materials, poor installation can negatively affect a real estate project. Workmanship defects often lead the list of common construction faults.

4. Subsurface Defects: The actual construction site itself can sometimes harbor problems like expansive soil conditions, subsidence issues, or contaminated soil. These defects appear after delving under the surface.

Legal Claims and Remedies:

The type of legal claims a homeowner can pursue largely depends on state laws. However, typical legal action for construction defects includes breaches of contract, negligence, express and implied warranty issues, and professional negligence against a design professional. Potential remedies may encompass the cost to repair the defects, diminution in property value, loss of use of the property, and recovery for litigation expenses. In addition, homeowners may also recover inconvenience losses if the defect requires a temporary move or result in costly legal fees.

The Implication for Sellers:

It’s paramount that sellers comprehend the enduring obligation to keep all property records throughout the lifespan of the property. The importance of these documents should not be undermined as they must be promptly accessible to prospective buyers. In situations where you, as a seller, have accepted a cash settlement for unresolved defects, it’s prudent to anticipate potential buyers to request an increase in that amount during negotiations. Moreover, disclosing construction defects is not a mere formality. An exhaustive defect report will likely be reviewed by potential buyers, underscoring the need for sellers to exercise judicious reasoning when discussing offers from prospects unveiling defect-related concerns. In line with this, data from the Greater Las Vegas Association Multiple Listing Service further substantiates this claim. Real estate listings stating the existence of a construction defect or claim can often dissuade prospective buyers from even viewing a property, effectively eliminating the chance of an offer being presented. Contrary to what some may believe, firms that approach homeowners in new construction zones inquiring about possible “defects”; within their property do not necessarily have the homeowner’s best interests at heart. It’s crucial to recognize that participating in these litigation processes can be profitable for the attorneys while leaving you with a stained property record, a list of defects still needing repair, and often an insufficient settlement incapable of covering all necessary
repairs. The effects of such litigation are far-reaching and indelible and necessitate full disclosure in every future transaction involving the property. Reflecting on our wealth of experience in real estate transactions, we have seen this scenario unfold from both the listing and buyer sides. Invariably, it is the seller who bears the brunt of the unfavorable consequences. Frequently, many sellers were initially unaware of the enduring implications of their engagement with these litigation groups, merely signing up for it and undergoing an inspection was sufficient to inflict damage on their sales prospects. Therefore, it’s recommended to exercise caution when considering the advances of these firms reaching out to homeowners about defects in their properties. Consider the lasting impacts it could have on your property’s value and salability, and weigh these against any short-term gains. Remember, a well-informed decision now can save you a great deal of regret in the future.

The Implication for Buyers:

Navigating through the purchase of a property with disclosed construction defects should be approached with astute attention to detail. In such transactions, it’s highly recommended for buyers to keep and safely store all pertinent documentation related to the identified defects. Be aware that the burden of disclosing this information carries on undiminished for the complete course of the property’s life. As such, any failure to disclose or misplaced records can potentially initiate legal actions that may further impact financial costs. However, it’s crucial to understand that purchasing a property with known defects often comes with its economic advantages. Such properties typically come at a discounted price compared to those devoid of any disclosed flaws. With the assistance of a proficient and dedicated real estate agent, you could not only recoup the money off the price that the seller was initially credited for but also potentially secure additional discounts. Notably, properties with known defects often face softer competition from other potential buyers, particularly in a regular or “buyer’s”, market.
That said, it’s essential to exercise caution when dealing with real estate agents who downplay the significance of disclosed defects. If you encounter an agent who reassures you with statements like “it’s not a big deal”; or “it doesn’t really affect the property”, as a means to secure a sale, it might be beneficial to consider securing alternative representation instead. It is your right to receive accurate and honest information about the property you aim to purchase. It’s only with such comprehensive and transparent insights that you can make an informed, confident decision about your investment.

Conclusion:

Undoubtedly comprehending the profound impacts associated with an array of construction defects, be it design flaws, material inadequacies, workmanship deficiencies, or subsurface irregularities, can substantively equip both sellers and buyers as they charter the intricate pathways of real estate dealings. It is essential to perceive that these influential elements bear not only immediate consequences but also reverberate into the future, thus shaping the topography of forthcoming transactions. This blog is meticulously crafted and committed to enlightening its readership, namely sellers and buyers, with an invaluable insight on the repercussions of real estate defects and their substantial bearing on property exchanges. The overarching purpose of our endeavor is to stimulate an informed, and comprehensive dialogue which contributes to a more in-depth understanding of the subject matter. Moving forward, we exhort you to remain proactive in amassing knowledge, thereby making sage and conscious decisions when negotiating real estate settlements. It is crucial to remember that this content should not be construed as a substitute for legal advice, but merely an alternative viewpoint often overlooked by sellers when faced with potential litigation. Until our next digital rendezvous, let us continue to embark on this journey of
learning and making the often-complex field of real estate more accessible and understandable. This holistic understanding of the art of transactions will not only empower you in making well-informed decisions, but also provide you with tools to effectively navigate the dynamic realm of real estate.

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