What Can a Homebuyer Do If a Seller Did Not Report All Defects?

To try to prevent this from happening, use a home inspection contingency (if available).

Definition: A home inspection contingency is a term in a real estate contract that lets the buyer have a professional check the property for any problems within a set time before completing the purchase.

If a buyer included a home inspection contingency in their purchase agreement and the inspection reveals issues, they may be able to:

• Renegotiate the purchase price
• Require the seller to make repairs
• Back out of the sale completely

If a buyer waives their home inspection, it may be harder to hold the seller responsible unless they can prove the seller lied on purpose.

The Real Estate Condition Report (RECR)

Most home sellers must give the buyer a Real Estate Condition Report (RECR), which is a legal document listing known issues with the property, within ten days of accepting an offer.

Caution: Foreclosure sales, estate sales, some new construction and some other sales (e.g. between spouses) may be exempt from providing this report, so it’s important for buyers to review their contract carefully.

• The RECR is a detailed checklist where sellers report various property issues, including:​
  Structural defects (e.g., foundation cracks)
• Roof problems​
• Plumbing or electrical system issues​
• Basement seepage
• Boundary disputes​
• Environmental hazards (e.g., radon levels)

Buyers can back out of the sale within two business days of receiving the RECR if the report lists an issue that the buyer was not aware of at the time they made the purchase offer.

Buyers can also cancel the sale if they receive an incomplete RECR or if the seller does not provide the report within the ten-day deadline. This cancellation must also happen within two business days of receiving the incomplete report or the ten-day deadline. 

What if you discover issues with the home that were not listed in the RECR?

Should you have known about it?

Homebuyers have some responsibility when buying a house. Even though they do not know as much about the home as the seller does, they cannot ignore obvious problems. For example, if the basement wall has a big crack in it, the seller might not mention it, but the buyer should have noticed it. In this case, the seller could argue that the buyer knew—or should have known—about the issue.

However, buyers may not be at fault if a problem is not easy to see or if they’re first-time buyers who do not have much experience with homes. Most buyers only visit a house a few times before they buy it—usually during a showing, a home inspection (if they choose to have one), and a final walk-through. That means they may only spend a few hours in the home before making a decision. Even experienced buyers can get overwhelmed while looking at a house and might miss small but important details, like a water stain on the ceiling. Because of this, it’s hard to blame buyers for not noticing a problem unless it’s really obvious.

Did the seller know about it?

In most cases, sellers can only be held responsible if it can be proven that they knew about a problem with the house but did not tell the buyer. Proving this can be difficult because sellers rarely admit they knew about an issue. Instead, buyers often have to look for clues, like signs that the seller tried to fix something before selling.

Sellers are allowed to rely on experts, like home inspectors or contractors. For example, if a seller is accused of lying about a basement's condition, they might not be held responsible if they can show that a professional inspected the basement the year before and said it was in good shape.

Things that may show that a seller lied in a RECR: 

• Previously attempted repairs
• Property insurance claims
• Attempts to conceal the defects (example: painting over black mold or water stains)
• Unfulfilled quotes from repair companies
• The issue was discovered within a month or two of purchase
• The problem occurs often 

Example: If a new home buyer experiences roof leaks once every two or three years, it may be difficult to prove that the sellers knew about it. If the new buyer experiences roof leaks during every heavy rain, there is a strong likelihood that the sellers were aware of it.

Potential Claims

If a seller gives false information about the property's condition, buyers may be able to bring the following legal claims:

Fraudulent Representations

If a buyer relies on the sellers’ disclosures in deciding whether to purchase the house, the buyer may have a claim for fraudulent representations (also known as false advertising) under Wisconsin Statute 100.18. With this claim, buyers can ask for double the damages and reasonable attorney fees if they can prove that the seller intentionally gave false information.

Civil Theft

Wisconsin Statute 895.446 allows for money damages for “theft by fraud” when the seller's dishonesty results in the buyer losing money. In real estate, this means a seller cannot get the buyer's money by lying to the buyer about the condition of the property. If the buyer can prove the seller did not list a defect they knew about, the buyer can claim triple damages (three times the amount of their actual damages) plus investigation costs, including attorney fees.

Breach of Contract

The sellers’ answers on the Real Estate Condition Report (RECR) become part of the offer to buy the home. This means that if a seller is not honest on the report, the buyer can claim the seller broke their agreement.

Negligent Misrepresentation

Even if the seller didn’t intentionally hide defects, they may still be held liable if they should have known about the issue.

Example: If the seller never lived in the home but failed to disclose previous water damage that was clearly visible in the basement, they may be found negligent.

Try to Negotiate with the Seller

If defects are discovered after the sale, the first step is to communicate with the seller to see if a resolution can be reached without legal action.

• Some sellers may agree to cover repair costs, offer a partial refund, or settle the matter informally.
• If the seller does not cooperate, think about sending a formal demand letter outlining the issue and requesting money or repairs.
• Mediation may also be an option before pursuing legal action.

Consult with a Real Estate Attorney

If the seller refuses to cooperate and legal action seems necessary, hiring a real estate attorney can help buyers:

• Assess whether they have a strong case for misrepresentation.
• File lawsuits or demand letters to seek compensation.
• Determine whether the buyer is entitled to rescission (cancellation of the sale) or financial damages.

File a Complaint With the Wisconsin Department of Safety and Professional Services (DSPS)

If a licensed real estate agent was involved in the sale and misrepresented the property, the buyer may file a complaint with the Wisconsin Department of Safety and Professional Services (DSPS).

• Real estate agents are required to report major problems they are aware of, even if the seller does not.
• DSPS has the power to investigate and discipline dishonest agents.

Conclusion

If a seller in Wisconsin fails to report a defect, buyers have options to ask for compensation or initiate a legal action. The best course of action depends on:

• The buyer’s contract and inspection contingencies
• If the defect was likely intentionally concealed

To fully protect their rights, homebuyers should review their purchase agreement, RECR, and inspection report, then consider negotiation, filing complaints, or taking legal action.