Litigation need not block a sale by Michael D. Dicks & Christopher J. Coglianese

Q: We own a home in a complex going through construction defect litigation.  Will it be possible to sell our home during the litigation?  Will the value of our home be reduced?
           
A: Certainly, construction defect litigation may affect the selling of your home.
Paradoxically, often it is the litigation itself that offers the best mechanism to repair the home and restore its original value.  Fortunately, the consequences of construction defect litigation are typically less dire than a would-be home seller may fear.

A foremost concern for a would-be sellers is the impact that this type of litigation will have on the resale value of their home.  In a case study of two projects that had been involved construction defect litigation, it was determined that the impact of litigation on home values was negligible.  In fact, the research illustrated that there was no discernible short- or long-term impact on the sale rates or values of homes within the projects studied.  Additionally, California home buyers have become more knowledgeable regarding defect litigation.  

This increased knowledge and acceptance of defect litigation as a reality has diminished the stigma that in the past had been associated with construction defect litigation.

To effectively sell a home, it must be priced at market, and to successfully arrive at a market price, there must be certainty as to the condition of the home -- from the time of purchase and going forward.  Owners, therefore, bear the responsibility of monitoring the status and outcome of litigation as it may affect the pricing and ultimate sale of the home.

How does the owner involved in defect litigation approach this issue of uncertain value?

There are many simple and effective answers.  First, the owner should select a real estate broker who possesses a clear picture of the litigation and its impact on the  potential sale.  Ideally, but not necessarily, the broker would have some background in construction defect litigation, and there are those brokers who specialize in marketing communities in construction defect litigation.

In addition, the construction defect firm involved should provide to the homeowners and association board of directors clear and definitive answers to questions that will affect the sale of the home.  

These questions include:

• What must be disclosed by law to potential buyers regarding the purchase of the home?"
• "What is the actual value or impact on value at this stage of the investigation?"
• "What is the projected outcome and time line for remedy to the claim?"
• "What are the positive aspects to this case?"

However, when a law firm responds quickly and thoroughly to all lender requests, the lenders are generally able to successfully complete the homeowner's transaction.

Our advice really boils down to a simple approach --  maintaining an ongoing dialogue with quality and informed professionals that are involved in the process of restoring the home's value.  If you are aware, if you choose counsel wisely, if you are diligent in your efforts to stay informed and keep others informed, you will be able to turn challenge into opportunity and make the second dream a reality -- the successful sale of your home.

Michael D. Dicks and Christopher J. Coglianese  are members of the San Diego Chapter of the Community Associations Institute (CAI) and principals with the construction defect litigation firm of Dicks & Coglianese.  Readers can visit the CAI website at http://www.cai-sd.org and can get their condominium or homeowners association questions answered by calling the Community Associations Institute at (619) 299-1376, e-mailing CAI at q&a@cai-sd.org or sending questions to: Condominiums, Homes, San Diego Union-Tribune, P.O. Box 120191, San Diego 92112-0191.

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