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Court Finds for "Reprehensible" Sellers

Read the full decision: Douglas v. Visser, 173 Wash. App. 823

In Douglas v. Visser, the Court of Appeals of the State of Washington found in favor of property sellers Terry and Diane Visser (“Sellers”), despite evidence that they had concealed pervasive rot that was destroying the house from the inside out.   In reaching its decision, the court determined that the inquiries made by homebuyers Nigel and Kathleen Douglas (“Buyers”) into the condition of the house prior to purchase were not sufficient to satisfy their duties to “beware, inspect and question.”

In 2005, Sellers bought the property as a “fixer-upper,” and initially undertook a number of repairs and renovations.  However, they quickly realized that existing damage to the house went well beyond their original expectations.  They decided to sell, and one of the Sellers, a licensed real estate broker, listed the property for sale.

Two years later, Buyers made an offer.  Upon receiving Sellers’ disclosure statement, they discovered that Sellers had answered “don’t know” to a number of questions. Seeking clarification, Buyers sent follow-up questions and requested a copy of the inspection report prepared prior to Sellers’ 2005 purchase of the property (“2005 Report”). Sellers replied to the follow-up questions, but Buyers remained unsatisfied that their concerns were being properly addressed.  Sellers never provided the 2005 Report to the Buyers.

The inspection ordered by Buyers (“2007 Report”) revealed small areas of rot in the house, as well as multiple repairs made by the Sellers adjacent to the rot.  Buyers did not discuss the report with either the inspector or Sellers prior to their purchase of the property in April 2007.  Buyers bought the house for a purchase price of $189,000, executing a promissory note with the Sellers for $149,000.

After purchase, Buyers began to notice rot and pest problems throughout the house.  Subsequent inspections uncovered damage so extreme that the house was deemed uninhabitable.  In addition, the inspections revealed significant evidence that the rot damage had been intentionally concealed.  Buyers defaulted on the promissory note and sued Sellers, claiming fraudulent concealment, negligent misrepresentation, violation of the Consumer Protection Act, breach of contract, and violation of one of the Sellers’ statutory duties as a real estate agent.

The trial court found that Sellers had intentionally concealed the damage, and that “the defects were unknown to [Buyers] and were not discoverable by a careful and reasonable inspection.”  It ruled in favor of Buyers on all claims and, after offsetting the awarded damages against the amount still owed on the promissory note, entered judgment for Buyers in the amount of $24,245.

The appellate court reversed on all counts, stating in its opinion that while “the Visser’s efforts in concealing the defects of the house they were selling are reprehensible, even more so because Visser is a licensed real estate agent…the law retains a duty on a buyer to beware, to inspect, and to question.”

The crux of the appellate court’s ruling rests on the fact that the 2007 Report revealed areas of rot, and therefore put Buyers on notice of the defects.   Buyers’ argument that they attempted to make inquiries about the conditions of the house through their follow-up to the pre-purchase questionnaire and their request for Sellers’ 2005 Report was to no avail.  The appellate court found that inquiries made prior to the rot-revealing 2007 Report “cannot be construed as inquiries regarding the rot discovered during the inspection.”

The appellate court also noted that “further inquiry is not necessary where it would have been fruitless.”  Nonetheless, because the trial court failed to enter findings that Sellers’ “overt attempts to cover up the defects prior to listing the property, and their pre-inspection evasiveness” demonstrated the fruitlessness of further inquiries, an essential element of each of the Sellers’ claims was not satisfied.

Concluding that Buyers “were on notice of the defect and had a duty to make further inquiry,” the court awarded Sellers the principal on the Promissory note plus 18% interest and, attorney’s fees, as set forth in the promissory note.

Buyer, beware.

Douglas v. Visser, 295 P.3d 800 (Wash. Ct. App. 2013)