Real estate law omission of important disclosure

Question

Suppose that a person A bought a house in california three years ago. The last owner had lived in that house from the time it was built in 1964 until four years ago. When the owner passed on, the bank took ownership of the house (under a reverse mortgage) and hired an agent to sell it. The house was bought with an FHA loan.

After three years of living in the house, A discovered that, even though city sewer runs on the street, the house has a septic tank instead of being connected to the city sewer. The cost of connecting the house to the city sewer system is $25K. Emptying the septic tank will run about $3k to $4k since they have to dig up to reach the hatch.

All public websites such as Zillow and Redfin say that the house is connected to city sewer. A received no disclosure from the real estate agent that the house has a septic system. Perhaps the agent didn't know either. A paid for inspection when A bought the house. Inspection didn't mention anything about a septic tank.

In terms of real estate law, does A have a valid claim against the bank, the agent, the inspector, or anyone else for failure to disclose the use of a septic system instead of the listed sewer connection?

Answer 1

It depends on what state this is. In Washington state, there is a form that sellers must fill out, and section 3 addresses sewer connections. This matter could have been disclosed – the allowed answers are "yes; no; don't know" (or NA). These are sellers disclosures, and Zillow / Redfin are free to be unreliable (I personally know that they are wrong about square footage). A real estate agent also doesn't become liable for being misinformed. Assuming your state has this or analogous question, "No" means that you were told (doesn't matter if you didn't notice it), and "Don't know" means you're gambling.

Let's say that the answer was "Yes". Still, you can't necessarily sue (and win): you would have to prove misrepresentation (fraud or negligence) and not innocent error. You could do this by, for instance, proving that seller had the septic tank cleaned out some years earlier.

Perhaps an action against buyer's inspector is possible, since that's nominally what they might have been hired to find out. But that is only true if checking the sewer connection can reasonably be considered part of the deal, so you have to look at the contract with the inspector (and the inspector's report).