Non disclosure of known material defect for residential property

[Anant Garg]

Not sure if this is right thread to post this question. Let me know if that is not.

This questions is related to residential property in california.  As per California laws, seller has to disclose any known material defect in the home before they sell it. What if they hide some facts which buyer comes to know about COE ? Can buyer go after it and ask for money to fix that defect ?

For example : Plumbing in the house is end of life and need to replace it. Result is low water pressure in faucets. One of pipe bursts right before sale and seller just repair that bursted pipe although plumbing company advise to change all piping of the house and provide estimates for same. Do seller has to disclose plumbing company's suggestion that plumbing of house need to be changed and associated cost to buyer in disclosure report.? 

if seller does not disclose it and buyer learns it later and get exact same estimates and suggestion from same plumbing company. Do buyer has a case for material defect not disclosed which seller knew and can ask for repairs ?

Thanks for taking time to answer my question.

[Frank Chin]

I am not an attorney and old plumbing is not a known defect, particularly a bursting pipe. When I started investing here in NYC in a hot market, I concentrated on below market MFR's, and usually these are older structures priced a little below, but not by much. Back in the early 80's, I bought properties built in the 1930's.

Yes, I had plumbing and electrical issues that had to be updated. My plumber advised me that all plumbing should be replaced once the building is over 50 years old. A tenant, whose dad is a real estate investor said his dad does not invest in buildings over 20 years old for that very reason.

Since these issues are well known, to investors, plumbers, and related to the age of the building, you cannot blame the seller for selling you a building with 50 year old plumbing. And furthermore, the 50 year old building I bought in the 80's, I held it for 25 years, sold it for 3 times what I paid for it, and cash flowed from the beginning. In other words, I was pleased with it. But at the end, the aged plumbing had to be replaced, which involved ripping pipes out of the walls, and while I'm at it, update all the bathrooms. At the time replacing all the plumbing in the walls for the triplex, and new bathrooms will run me over $50K. 

Now, I thought about keeping the building, spending form $75K and up rehabbing the building throughout, including the plumbing. If someone tells me, you have to upgrade the plumbing before selling it to me, then it makes more sense to put the $75K in, keeping the building, instead of taking a $400K profit.

I priced it slightly below market, the seller had it inspected by an engineer. I never mentioned anything about the old pipes or what my plumber mentioned to me. The record shows it was built in 1939, and permits on file will show if the plumbing was updated. So it's up to the knowledgeable investor to know what he's looking for and dig the records up. He can even ask if the plumbing was updated. So it's not my job to hold the buyer's hand.

It's sounds line one of these cases I hear on court TV, like Judge Judy. Someone buys a 195,000 mile 20 year old car complains about problems a month after he bought the car, and present as evidence the seller even had something fixed before he sold it but never mentioned it. Judge Judy would look at the buyer, yells at him, and says, "what do you expect from a 195,000 mile 20 year old car"?