To disclose or downplay?
Selling a house is no easy feat. From getting the home presentable to the finances of the sale, there are plenty of reasons for stress. But what happens when sellers find hidden damage in the house that they now have to address? Do sellers take care of it themselves or leave it for the buyers to deal with?
Cinch Home Services surveyed both homebuyers and home sellers on the kinds of damage they have dealt with and how they remedied it. Our data shows that more sellers than you may think proceed with home sales with undisclosed damage, leaving buyers on the hook.
Buyers be aware
There are several safety nets in place for buyers to learn about existing damage before they close on a house—but sometimes they miss the mark. This leaves buyers blissfully unaware of the problems that await them until after they close and move into their home. Often, this means it's much too late to do anything about it.
Finding problems after closing is more common than one might assume. Our survey found 95% of buyers encounter a problem with their home after purchasing. And 94% of sellers corroborated the damage—meaning they were well aware of it at the time of the sale.
The majority of problems (74%) were unpermitted repairs and upgrades, which can lead to more issues down the line. The most common problems found after closing, however, were electrical (88%). The next most common were issues with fixtures, plumbing and exterior structures. These are also some of the most serious home repairs that homeowners should not ignore.
Encouraged to lie
In a seller's market, sellers have more power over buyers who are outbidding one another for scarce inventory. Well-priced homes have been flying off the market the last two years. In such a frenzy, it may be hard for buyers to consider that there may be problems with the home the seller isn't disclosing—which is against the law in most states.
Our survey found that 74% of sellers admitted to concealing issues, and 81% admitted to behavior they felt other people would consider unethical. Even more alarming, 77% of sellers said their real estate agent encouraged them to mislead the buyer. Misleading consumers is against the National Association of Realtors®' code of conduct. (However, not all real estate agents qualify as licensed Realtors®.)
Of the sellers surveyed, 67% said they'd be willing to withhold information from the buyer. While only 50% said they'd be willing to bend the rules, 94% said they'd be willing to engage in some sort of unethical behavior in their sale.
Burdening the buyers
Sellers' willingness to mislead buyers or not disclose damage has real impacts on buyers post-closing. Not only must they take time to fix the issues, the newly found damages can also be costly.
The overall cost of fixing undisclosed damages averages just under $3,000, according to the buyers surveyed. Some of the most expensive repairs include roof repair, foundation repair, termite damage and water damage.
These costs had real financial impacts for the buyers, many of whom were already struggling financially. Sixty-eight percent said they were struggling or failing to make ends meet after purchasing their home, and 77% said they had to cut expenses or supplement income after the purchase. The added costs of repairs can put buyers into even more financial trouble.
Of the buyers who found issues with their homes, 43% said the issues were highly consequential. Even worse, 41% of buyers said the problems they found caused regret for their purchase.
The future of undisclosed damage
Finding damage after closing can be a nightmare for buyers, and many of those surveyed (95%) reported encountering just such undisclosed issues post-closing. Both the stress and financial burdens of fixing sellers' mistakes can add to an already stressful and expensive home purchase. Moving forward, professional real estate agents should ensure their sellers are disclosing the true state of their homes as necessitated by seller disclosure laws.
Whether you're nervous about finding damage in your new home or problems arising well after closing, Cinch Home Services can help you with a home warranty plan. With over 40 years in business, Cinch can ensure a 180-day workmanship guarantee on covered repairs and discounts on new appliances. To find out how Cinch can help cover the cost of repairing or replacing essential systems when they break down, get a quote today.
Methodology
This study uses survey data of 494 homebuyers and 476 home sellers in the United States that bought or sold a home within the past year. The average age of homebuyers was 32 years old, with this cohort ranging from 23 to 69 years old. 49.1% of homebuyers were men, while 50.9% identified as women. Home sellers had an average age of 39 years old and ranged from 26 to 71. 52.8% of home sellers were men, while 47.2% identified as women. Self-reporting issues, such as telescoping, selective memory and exaggeration, are always a concern, however, and should be considered a research limitation.
Fair use statement
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