Legal Question in Real Estate Law in California
Lender Liability for Defective Real Property
In a residential purchase transaction, can a lender or mortgage broker be held liable by the buyer for defects to the property (such as defective heating or cooling systems, plumbing, ect.)which are discovered after the close of escrow? Are there any cases on point?
4 Answers from Attorneys
Re: Lender Liability for Defective Real Property
No, they have no liability unless they were the seller of the property (such as a foreclosure). They are concerned with 2 things: your ability to pay and the value of the property (obtained by an appraisal). If the lender had to go out and check every property they made a loan for, the interest reates would be 2% higher!
The liability is with the Seller, possibly the real estate agents, and only if it was something they knew of or reasonably could be aware of, and failed to disclose.
Re: Lender Liability for Defective Real Property
no
Re: Lender Liability for Defective Real Property
No. Not unless the lender assumed some obligation to check these things out before making the loan. Unlikely. What about the seller and the seller's real estate broker?
Re: Lender Liability for Defective Real Property
Lenders generally need only be concerned about problems they may inherit if they have to foreclose, such as hazardous waste. Under CERCLA and other laws, anyone in the chain of title may be liable for cleanup. I think recent legislation may have reduced the impact on lenders with no knowledge and no culpability, but at one time it was a big deal for lenders to be very careful about checking for possible environmental hazards.
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