John Helm, an architect, designed and built a large home in 1989. Anne Marie Grossman was a co-owner of the home and property with Helm. Because the home was built on hilly terrain, Helm used a pier and grade-beam foundation. Helm and Grossman moved into the home in 1990 and listed it for sale with California Prudential Realty with Marti Gellens-Stubbs as the listing agent. When Ms

Question

Gellens-Stubbs inspected the property, she noticed hairline stucco cracks, which Helm assured her were only cosmetic. Ms. Gellens-Stubbs did not note the cracks on her portion of the disclosure statement, but did write, "property appears to be in good condition ... I see nothing to contradict what the seller has mentioned...." Later, Gellens-Stubbs noticed that the interior paint was peeling near a dining room window. Helm explained that the peeling had been caused by water infiltration during construction, but that the problem had been remedied. Gellens-Stubbs did not note this information either. Mark and Susan Robinson looked at the home several times in 1991 and noticed the stucco cracks. When they discussed the cracks with their agent, Gracinda Maier, she recommended that they have the home professionally inspected. Helm told the Robinsons that the cracks "were caused by the finish of the house, which is called a Santa Barbara finish, and there was a product called elastomeric that ... would alleviate the stucco cracks." Helm and Grossman accepted an offer of $653,750 from the Robinsons. The purchase contract of May 22, 1991, required Helm and Grossman to furnish the Robinsons with a geological report by Ninyo & Moore. The contract permitted the Robinsons to cancel the agreement if any of the geological reports or testing commissioned by the Robinsons revealed problems they would be unwilling or unable to correct. On May 24, 1991, Maier added the following to the disclosure statement: My visual inspection found numerous cracks in the house. Buyer's agent recommends buyer to have property inspected by a professional home inspector and have the land checked by a geologist. Gellens-Stubbs then added the following: Stucco cracks on home are cosmetic in nature according to the seller because of finish and type of stucco. The Robinsons hired Ameritec Home Inspection Service. Robert Brand, an employee, listed the "very old" water stain in the dining room and "normal settling cracking" of the stucco. Brand found no soils-related distress and the report concluded, "the house was very well built ... [and] was not going anyplace...." A few weeks after moving into the home, as they were attempting to have a swimming pool installed, the entire excavation around the house collapsed. The Robinsons sued Helm, Grossman, Gellens-Stubbs, Prudential, and others for professional negligence and negligent and intentional misrepresentation. ?What mistakes did the buyers make?
A) Failure to investigate the issues noted
B) Failure to retain inspectors to examine red flags
C) Not obtaining geological reports
D) All of the above

Answer 1

D