What to do when the home seller does not disclose problems with the home to the home buyer.

Atty. Tom Olsen: Caleb, you were working on a case yesterday that I want to talk about in some detail if we could, and that is this is that we had somebody call our office and say that they had bought a home, and they felt like the seller did not disclose defects in that home to the buyer, and let's just start by talking about Florida law, and that is, here in the state of Florida, when you sell a piece of property, the seller is obligated to disclose to the buyer any and all substantial defects that are, I would call them, hidden defects. Is that your understanding as well?

Atty. Caleb Maggio: That's right, Tom. The technical term is latent, so anything that cannot be discovered by a purchaser with a reasonable inspection, and beyond that, it has to materially affect the value of the property.

Atty. Olsen: A hole in the living room wall not a latent defect because anybody can see it, but if you happen to know there is, I don't know, mold behind a wall or somewhere, or a problem with your electrical panel box that you wouldn't necessarily find out, those are the kind of things you want to disclose to your buyer.

Atty. Maggio: Yes, Tom, exactly.

Atty. Olsen: I often have people call me their sellers, and they're asking me to do a contract form, and they say, "Well, Tom, should I disclose this to the buyer, should I disclose this to the buyer," and my advice is better safe than sorry, better disclose anything and everything, that way they're not going to come back and sue you.

Atty. Maggio: It's funny you say that, Tom, because I give the opposite advice to my sellers sometimes. A seller's disclosure is actually not required by the law, so as a seller, you're better off not representing anything, because the standard for a case like this is actual knowledge, and that you intentionally did not disclose it. On the other end, as a purchaser, you should always be requiring that seller's disclosure because that's what you're always going to point to when you have these issues after the fact.

Atty. Olsen: You're talking about that three or four-page disclosure form that's got like a hundred questions on it that cover anything and everything.

Atty. Maggio: Exactly.

Atty. Olsen: I know what you're familiar with, and when you're filling one of those out as a seller, you can check yes, you can check no, and you can check I don't know. Checking I don't know is the best choice for a lot of situations.

Atty. Maggio: As long as you actually don't know, yes.

Atty. Olsen: Okay. Caleb let's talk about in your case yesterday and some details, so we had a buyer call us and say, I bought a home, moved in, here's some problems, defects with the home. We feel that the seller knew about them but did not disclose them to us as a buyer. Traditionally, I would tell a buyer, man that's a long, hard, expensive case to pursue, but now I realize there's an easier way for a buyer to pursue such a case, and tell us about that.

Atty. Maggio: Well, Tom, in most of these residential contracts for sale, you agree to mediate any disputes before bringing litigation. What happens is a purchaser will buy a home, they'll discover a few things that they weren't told about or perhaps didn't know about, and rather than having to pony up the money and the time to file a lawsuit, what they can do is send a letter to the opposing side, opting for mediation. What often happens is the other side will grab their attorneys, you'll agree to a mediation, and you'll hire a third party to facilitate a negotiation between everybody. Nothing happens unless everybody's in agreement, and you can sometimes settle that dispute for some cash, and everybody gets to walk away at the end there.

Atty. Olsen: Even though the contract, and we're talking about the standard FAR/BAR contract that most people use here in the state of Florida, even though the contract says before you can sue somebody, you have to first go through mediation. When you write that demand letter to a seller of the property, they do not have to agree to do mediation, do they?

Atty. Maggio: They're technically contractually bound to mediation, and if they were to refuse and you were to file a lawsuit, you could then compel them to mediate by court order.

Atty. Olsen: Okay, and so let's say that they agree to do the mediation, how do the parties choose a mediator? We've got two opposing sides. How's a mediator chosen?

Atty. Maggio: Well, good form is typically to ask the opposing side in your demand letter, please provide three potential mediators, and once they do that, you can review them and then you select one together. There's usually not much dispute about who the mediator is. There's the same players in the same arenas, all the attorneys know them.

Atty. Olsen: Okay, so you're showing up at a mediation now, and by the way, who is paying the fee to this mediator? How is that determined?

Atty. Maggio: In most contracts, and in the FAR/BAR contract, the parties are splitting the cost of the mediator, the mediator does charge an hourly rate.

Atty. Olsen: What do you think a typical hourly rate for a mediator is?

Atty. Maggio: Say median is about $500.

Atty. Olsen: $500 an hour?

Atty. Maggio: Yes, sir.

Atty. Olsen: Oh boy. Okay, so now you're in front of a mediator, and I think as you said this is non-binding, so nothing compels a party to reach an agreement, and non-binding mediation hopefully they will but not required to.

Atty. Maggio: Exactly, nothing's binding until ink hits paper.

Atty. Olsen: Okay, so yesterday you're in front of the mediator with the seller of this property, and so tell us what's the process once you're in there? By the way, where do you meet?

Atty. Maggio: Well, you can meet anywhere. Usually, the attorneys agree on one or the other's office. Sometimes a mediator will actually have an office as most of them are still practicing attorneys, and you can meet at that third-party location, but you show up to the mediation, and the mediator will lay down the foundation and the groundwork, explain what a mediation is.

Both attorneys for each party will give their little opening statements, typically about their claims and their defenses, and then, more often than not, you break up into two separate rooms, and the mediator plays messenger. The mediator is going to sit with you in your room, he's going to go over your claim, and tell you what's good, what's bad. You're going to bring him your opening offer, and he's going to go to the other room and communicate the offer. He's going to tell them what's good and what's bad, and he's almost like a fact finder, where he's really digging into the facts and trying to convince the parties, hey, these are the reasons you should settle today.

Atty. Olsen: You, representing the buyer in that situation, you were the one that gave the initial demand, the dollar amount?

Atty. Maggio: Exactly. We're first to go.

Atty. Olsen: Okay. Then what did you bring to this mediation to help bolster your case, your buyer's case? What were some of the issues that the buyer was raising?

Atty. Maggio: I can't talk about the issues in this specific case, but in general, I'd say that a lot of times you're talking about roof issues, plumbing issues, anything inside the walls. There are some cases where you could tell that a stain in a roof is painted over, a water stain, they paint it over with paint, so you can't see it. That would be a great example of somebody hiding a material defect. It's an important point that you should be as prepared as you can before mediation. You should engage in your own fact-finding, talk to professionals, talk to anybody who serviced the property, get all your documentation together, because ultimately unless you can convince the other side, you have evidence to win at court, they don't have much of a reason to pay you anything.

Atty. Olsen: In a mediation, would you ever bring outside experts to come testify, like a roofer come testify that, hey, here's a leak, and it's probably been there for years, or here's a plumbing issue, it's probably been there for years, or it's just making a broad statement, we talked to a roofer, talked to a plumber, good enough.

Atty. Maggio: Because of the cost of bringing somebody like that, more often than not, the options are to either gain an affidavit from that person that you could present, or generate one of their reports they may have given you, or an invoice that has some of their explanations on there.

Atty. Olsen: Again, what did you bring with you for your client yesterday?

Atty. Maggio: Well, the first thing you want to do is bring a statement of mediation that you could give the mediator that lays out all your claims. Then, you're going to want to bring every invoice for every quote. You're going to have to quote or invoice. You're going to have to pay to repair the damages, because that's your actual damage amount.

Atty. Olsen: Okay. We're going to continue on that discussion. Before the break, we were talking about a case that you mediated yesterday, and it was you were representing the buyer of a home, a residential home. They bought the home, moved in, found defects with it, and were thought that the seller should have disclosed those defects to the buyer. Now you're in mediation, and trying to come up with a dollar amount as to what the seller might pay the buyer to resolve this dispute. You guys were successful. Congratulations.

Atty. Maggio: Thank you.

Atty. Olsen: Then you were talking about what you're bringing to this mediation, because you can't just show up to a mediator and say, hey, this was broken, that was broken. You got to have some kind of evidence that something's wrong, plus what it might cost to fix that, I assume, right?

Atty. Maggio: Correct, Tom. The first thing you're going to want to do is get quotes from different plumbers and electricians, whatever your issues may be, that lays out this is the work that needs to be done. It's very good if it has an explanation of what the damage is, and then it gives you the price for the repair. That's ultimately what you're going to give to the other side and tell them, these are my damages.

Atty. Olsen: Caleb, I'm very happy for you. I've had a lot of people over the years call me in that situation about buying a home and finding these defects, and this mediation is a great way to try and resolve it without a huge attorney fee investment in it. I'll let people know going forward that this is certainly a great option for them.

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