BUYER BEWARE: BEST PRACTICES FOR PROSPECTIVE HOME BUYERS 

For many families, buying their first home means the realization of a lifelong dream. Unfortunately for some, that dream can turn into a nightmare when they move in and uncover costly issues with the property that were not disclosed by the seller.  These issues could include a leaky roof, cracks in the foundation, or a wet basement. Although a home is often the most expensive thing anyone will buy in their lifetimes, many buyers do not seek the advice of an attorney until after there is a problem. This article will explain the basics of a residential real estate transaction and identify why timing is critical to protect your rights as a home buyer.

A real estate transaction begins when a prospective buyer submits a purchase contract, called an Offer to Purchase, to the seller. If either party has hired a realtor, this Offer to Purchase will likely be a standard form called a WB-11. If the seller agrees on the terms of the Offer, they sign it and the Offer becomes a binding contract. That simple, right?

Not quite. The Offer to Purchase is not just an agreement on the sale price; it is a dense contract, with many important terms, including when the closing will occur, and whether the buyer will need to finance the purchase with a bank loan. Wisconsin law requires a seller to produce a Real Estate Condition Report within 10 days of acceptance of the Offer to Purchase.[1] On the Condition Report, the seller must disclose knowledge of any and all “defects” in the property. “Defects” include any condition that would have a significant adverse effect on the value of the property. The form specifically requires sellers to disclose any knowledge about defects in the roof, electrical system, basement, and many other common home defects. If a seller fails to produce the Condition Report within 10 days of acceptance of the Offer, the buyer has the right to rescind the Offer and walk away from the deal without penalty. However, if you wait until after acceptance of the Offer to receive the Condition Report, you have likely just forfeited your best chance to recover if the seller lied about a defect in the home.

Section 100.18 of the Wisconsin Statutes is known as the False Advertisement law. This law protects consumers against sellers who make false, deceptive, or misleading public statements. This law provides for actual damages and an award of attorney fees for consumers who have been tricked by dishonest merchants. Wisconsin courts have interpreted a “public statement” to apply even when the statement is to only one person, meaning a seller who makes a false disclosure to a prospective buyer can be subject to the penalties provided under Section 100.18.[2] Critically though, the seller’s statement is only a “public statement” to a buyer before the Offer to Purchase is accepted. Once the Offer is accepted, any statements made by the seller are no longer public and Section 100.18 does not apply. This means that if a buyer waits until after the Offer is accepted to receive a Condition Report, they have lost their right to sue under the False Advertisement law.

Before buying any home, it is critical to talk to an attorney who understands that how to protect your legal rights if a seller tries to conceal defects in the property. If you believe a seller may have failed to disclose a defect during the sale process, please contact our experienced attorneys today to set up a free consultation.

[1] Wis. Stat. § 709.02.

[2] Kaelin v. Armstrong, 2002 WI App 70, 252 Wis. 2d. 676, 643 N.W.2d 132