Buyer’s remorse is definitely nothing new in real estate.
When a crack appears in a wall or the roof starts to leak a new homeowner may want to seek some financial compensation. However, once the closing has taken place a buyer’s hands are tied. If they have carried out an inspection and done a walkthrough prior to closing, a seller has a strong defense. Even stronger if they signed a disclosure statement. Disclosures are required by New York law to prevent this kind of blowback post-closing. A buyer’s lack of rights is known as Caveat emptor — a legal phrase that translates to “let the buyers beware” or in other words, you pay for what you get.
Of course in NYC there are exceptions to every rule. If a buyer can prove that a seller purposely deceived them about defects in the home then they may have a case. But these cases are usually very hard to prove because of the aforementioned reasons. However, if the seller provides a disclosure and does not mention a known defect, the seller may be liable to the buyer for damages if the defect is material. If material defects are not disclosed in writing, then the buyer can sue under New York law.
Buying from a sponsor
When a buyer purchases directly from a developer/sponsor the caveat emptor is limited because sponsor-sold homes come under a special legal warranty called the warranty of fitness. The fact that developers also have to answer to the Attorney General means that their feet are held especially close to the fire. For that reason among others, inspections are always encouraged. They often protect the seller as much as the buyer. If the home is suddenly deteriorating after the sponsor sold it, the buyer can sue but any case is liable to be far from clean cut.
When a buyer feels they have paid too much for their home
If a buyer feels they have paid too much for their home and been misled by industry professionals — agents, appraisers and attorneys — looking to make a profit on the sale, there are grounds to sue.
Equally, when agents represent both buyers and sellers (dual agency) buyers may feel they have been defrauded. This is most likely to occur with all-cash buyers who did not use a bank’s appraisal as a fail-safe.
Square footage is another contentious issue in New York. When a home’s size is misrepresented there are grounds to sue those a buyer feels has inflated the numbers, which can even be their own agent.
Rescinding a mortgage after closing
Unlike buying a home, a buyer who has received bank financing for their purchase has 3 days after the house closes to rescind the financing and reject the mortgage. Why would a buyer do this? The most obvious reason is if they could get private financing or replace the mortgage with cash and so take the option to back out.
Rescinding their mortgage, however, does not give them the right to back out of homeownership. The result of not having a mortgage in place to pay for the home will, though, result in the buyer not being able to keep the property unless they provide alternative funds. If they cannot replace their mortgage the home will revert back to the seller and there may be legal ramifications for the buyer.