Are disclosure failures more likely in the Des Moines metro home market?


Editor’s Note: This article has been updated to include statements from real estate agent Misty Soldwisch.

Two days after his family moved into their $ 545,000 land in Altoona, Paul Smith was in his home office when he heard a loud noise.

Smith, a 42-year-old father of five, thought something had exploded somewhere in the neighborhood – until he looked into his backyard.

“It was the wall,” he said. “He had just collapsed.

It was one of two huge, 8-foot-high retaining walls that spanned the rear of the Smiths new 3.2-acre property.

A collapsed retaining wall can be seen outside Paul and Andrea Smith's home in Altoona on Friday, June 18, 2021. Two days after the Smiths bought their home, a massive retaining wall in the back yard fell. collapsed.  Repair estimates go up to $ 64,000 and the Smiths, currently in mediation with the home sellers and the sellers' real estate agent, Pennie Carroll, plan to sue next month if mediation does not work.

His weight, he said, could have killed someone.

The estimated cost of repairs: $ 42,000 to $ 64,000.

Across town, near College Avenue and Merle Hay Road in Des Moines, Megan and Sarah Felt closed their $ 195,000 home in May. They didn’t know at the time that a real estate company called Excel Properties in Des Moines had bought it in January for $ 102,500 and returned it five months later.

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Soon after, they discovered mold and rotten wood in their basement, caused by water seeping under their porch.

Then they noticed that a foundation wall, which they had been told had just been repaired, was already starting to crack and tilt inward.

In the garage, the drywall and shoddy siding had started to crack and separate, exposing the rotten wood and the places where the walls were separating from the foundation.

The cost that a company estimated just to repair the basement: $ 32,500.

Even when buyers bring in professional real estate agents and hire home inspectors before they close a home – and these two couples have – they can discover major and costly issues with their new homes that haven’t been disclosed in sellers’ disclosure statements.

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Smith and Felt both reached out to Watchdog this month, wondering if some sellers and agents intentionally failed to disclose issues in their rush to make money in a hot housing market.

“Are people really being honest when they tick these boxes? Smith asked. “I thought everyone was supposed to act in good faith.”

In the metro, housing inventories – townhouses, condos, and single-family homes – and even vacant lots were scarce, hitting historic lows in March. Because properties go so fast, some buyers have made offers at or above asking price without requiring inspections, which experts say is still not recommended.

Close examination by a reputable inspector can prevent huge nightmares, but many of the best have weeks of waiting right now.

Smith said the inspector he and his wife hired prior to their purchase noticed the bulge in the backyard retaining wall and the couple who sold the house gave them a $ 2,800 credit from a local landscaper to repair it.

But the couple, who have since left the state, did not disclose the full extent of the problems in the disclosure statement, he said.

“It turns out that around 90% of the (retaining) walls were rebuilt in 2019 – right down to the footings – because they had collapsed before. They never disclosed this as part of the sale.

After the domed wall fell this year, Smith said, he called Allen Lawn Care and Landscaping, the Des Moines company that did the work for the couple in 2019 and for which he had credit for the repairs.

He said the employees came out and saw the extent of the damage, and immediately became nervous.

Later, he said, he called them back. “They hung up on me,” he said. “I haven’t spoken to them since.

No one from the company answered Watchdog’s phone call for comment.

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The couple have since learned that the landscaping company never got a permit from the county for the 2019 work – a requirement for such a tall retaining wall. The permit would have triggered an inspection, which would have ensured that it was built correctly.

“Obviously we wouldn’t have bought the house if I had known I would potentially be faced with this,” Smith said.

The Smiths, who are currently in mediation with the home sellers and the sellers’ real estate agent, said they plan to sue next month if the outcome is unsatisfactory.

The Felts said they are also preparing a “letter of formal notice” seeking a resolution with Excel Properties, which lists as the address a house in the Township of Saylor owned by Joseph Musselman and the company’s real estate agent, Misty Soldwisch.

A Facebook post from the Misty Soldwisch team after selling Excel to Sarah Felt in Des Moines.

A man who answered the Excel Properties number hung up on Watchdog.

In an email to Watchdog, Soldwisch said no one on his real estate team had ever lived in the College Avenue house and that Excel acknowledged the water issues in the basement and foundations in the statement. of disclosure. SoldwExcel said the east foundation wall was replaced in 2021.

“As stated in the purchase contract, used by the buyer’s sole agent of the buyer, the buyer has stated that it understands that none of the real estate professionals involved are making any representations or warranty regarding the condition of the house, ”Soldwisch said.

She noted that the ability to request additional information is always with the buyers’ agent.

The Iowa Code 558A requires home sellers to provide written representations to anyone interested in purchasing a property before they have made a formal offer or the offer has been accepted.

The code requires the seller to disclose “all known conditions materially affecting the property”. This can include everything from the roof to the basement, including sewer lines, foundations, termites or other infestations and any hazards such as radon and asbestos.

A buyer may withdraw an offer or revoke the acceptance of one without liability within three days of delivery of the disclosure statement, or five days of delivery by courier.

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Any seller who violates the disclosure law by making inaccuracies, omissions or even remarks masking defects may be held liable for actual damages in civil court, including the cost of repairs.

Jeff Evans, chief executive of the Iowa Real Estate Commission, said formal complaints against real estate agents and the companies they represent are relatively rare, but they do happen.

It is important, he said, that sellers are as transparent as possible when filling out disclosures, because buyers need this information, and it helps sellers avoid financial headaches and lawsuits. potential.

“Without it, they could be in a world of suffering and serious financial stress,” he said.

Realtors who experience problems and do not ask sellers to disclose them can face civil fines of up to $ 2,500 for each violation, as well as suspension or revocation, he said. he declares.

But the law puts most of the responsibility for disclosure on the sellers. And in most cases, agents are unaware of homeowners’ attempts to cover up defects, Evans said.

Ever since Iowa imposed a positive responsibility on homeowners to disclose what they know about defects in 1994, people have fought in the courts over the depth and extent of that liability and the amount of liability. of the owners.

The Iowa Supreme Court has ruled that the elements necessary to prove a fraudulent misrepresentation should be taken into account in deciding whether to violate disclosure standards: some of these elements to be weighed are misrepresentation, falsity, intent to deceive and the resulting injury and damage.

But the judges also ruled that a seller might not be liable to pay damages if the problem was obvious to a buyer who made a cursory investigation.

Thus, in each case, the people involved in the sale have the choice: to conclude an agreement or to go to court.

Lee Rood’s Reader’s Watchdog column helps Iowa residents get answers and accounts from government officials, the justice system, businesses, and nonprofits. Reach her at [email protected], at 515-284-8549, on Twitter at @leerood or on Facebook at Facebook.com/readerswatchdog.

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