Discovery of Undisclosed Problems After Purchasing a Home on Land Contract

[merryann1]

My question involves real estate located in the State of: Michigan

My husband and I entered into a land contract on a home about a year ago. The land contract was drawn up by a licensed realtor and a title company. It was stipulated in the contract that we would apply for a traditional mortgage after a period of 18 months and the title would be transferred at that time.

We have discovered several problems with the home since living here the past year. Shortly after we moved in, the crawl space filled up with water and the sump pump stopped working. We had a plumbing specialist come out to the house and were told that the sump pump drainage line had not been buried below the frost line and it had frozen; the sump pump had continued to run but the water had nowhere to drain and so the pump motor eventually burned out.

We realized immediently that this was a preexisting problem. Prior to our purchase, the house had been nearly sold to four different parties and each time the sale fell through due to water in the crawl space (our realtor told us this). Days before we signed the sale agreement, the crawl space filled up with water and the seller sent out a plumber who replaced the sump pump and we were told that all was well and it was just a broken pump.

Because the drainage line is frozen in the winter, we had over a foot of water in the crawl space all winter and were forced to dump bleach into the crawl space to contain the mold growth. We have two children who are severe asthmatics and have allergies to mold so this is a urgent health concern.

We would like to back out of our land contract. We will be forced to pay for the drainage line to be rerouted and hooked up to the septic system if we stay and we can't afford that. What are our legal options regarding this case? If we stay, will any bank grant us a mortgage with this existing problem? Finally, if we can't get a mortage will that give us a way out of the land contract?

[Mr. Knowitall]

The fact that the seller (and you) knew of an existing problem prior to closing does not mean that the seller was aware that the problem was with anything but the sump pump or that the replacement of the sump pump would not remedy the problem. Do you have any evidence to suggest that the seller knew of a greater problem? Exactly what did they state on the seller disclosure form in relation to the problem? Did you have a home inspection before signing the land contract? If not, why not?

You are free to propose to the seller that you'll quit claim the property back to them in exchange for your release from the land contract.

We have no way of knowing if a bank would issue you a mortgage; talk to some banks. I don't see how it would be the seller's problem if you are unable to refinance the land contract. What's the issue - you have a balloon payment coming up?