Listen to Season 2, Episode 1: Crack Kills – the Real Estate Case of Jackowski v. Borchelt
On this episode of Agents Unfiltered, we’re talking about a case in our home state of Washington from 2004. The purchasers of this property sued the agents because they believed not all the information about their waterfront home was disclosed prior to purchase. The form where they are suppose to disclose issues about the property had the answer “no” to many of the questions about slippage, cracks in the foundation, and landslide issues (although amendments were made later).
Were the agents or sellers at fault? Listen for our thoughts and what we would have done differently!
ABOUT US -🎙 Agents Unfiltered SEASON 2 is about a deep dive into some wild real estate cases and give our take! Get ready for some relatable and relevant information about “The Do’s, the Don’ts & the What The Fuck’s of Real Estate.”
Hey everyone, welcome to agents unfiltered, where we talk about the do’s, the don’ts, and the wet effects of real estate. I’m Ali. This is Danielle. And I’m Cassie.
Join the three of us every week as we deep dive into some wild real estate cases and give our take. We are not attorneys and want to make it clear that this podcast or any linked materials should not be construed as legal advice nor is this information a substitute for professional expertise. We’re not lawyers, doctors, financial advisors, and mortgage lenders. But we are your new BFFs here.
Cassie: Are you guys ready to dive into a case?
Ali: Let’s do it.
Cassie: Okay, you guys may have heard of this one. It’s back from like 2004. This is the case of Jackowski v. Borchelt. I think the hardest thing about doing this is going to be pronouncing names correctly, so I apologize in advance if I mispronounce anyone’s name. I’m just going to walk you guys through what happened and then we’ll talk about our thoughts.
Danielle: This is in Washington state?
Cassie: This is Washington state, which is our state, so it’s a great place to start. So in 2004, Timothy Jackowski and Eri Takase, a married couple, purchased a waterfront home in Mason County. They went under contract on May 13, 2004. They entered into a purchase and sale agreement, so they got turned around, they were under contract. Part of that in Washington state is form 17, which is our version of a seller disclosure. It’s where you disclose any pertinent information about the property. It’s long as there are a bunch of questions, but it’s very important, so this whole case kind of sits on that form 17. They answered no to the following questions, and these are going to be important later so pay attention. Has there been any settling, slippage, or sliding of the property or its improvements? Does the property contain filler material? Is there any material damage to the property from landslides? Are there any other existing material defects affecting the property that a prospective buyer should know about?
They sent that seller disclosure and they did end up amending it with more information. So it referred back to a Mason County Department of Community Development letter dated June 11, 2003, which signified the granting of a permit for a block wall as part of the revegetation project, indicating that the property was located within a landslide hazardous area. It also had a geotechnical report by a geologist, Harold Parks, which had been ordered in 2002, when they were contemplating putting an addition on the house. The Parks report said that a slope on the property was unstable within the first 25 feet of the shoreline, particularly within the first 10 feet, although the report indicated that in addition could be safely placed only to the west of the existing home. It was eventually built to the north of the home, so they added an addition.
Danielle: But the environmental study showed that it could only be done on the west side, but it was built on the north side?
Danielle: Okay, and do we know if the north side is towards the shoreline?
Cassie: I’m assuming and we can always look that up. So they provided the amended form 17, seller disclosure, with all of the above-mentioned documents to their agents, who then passed it on to the buyer’s agent, who then gave it to them over email. So it was given to them, and they closed on the home. They had their property inspection, but there was nothing about soil stability, and they didn’t get any additional inspections to look into it. So the closing was on June 30, 2004, and then in 2006, a landslide occurred that damaged the house. They were told to vacate immediately and they heard from the neighbors that the Borchelts had known about the issues with possible landslides. So the buyers ended up bringing a lawsuit against not only the sellers but also both the listing agent and the selling agent.
Danielle: Okay, so I do have a question. They answered no to all of those questions on the seller disclosure, right?
Cassie: They said no.
Danielle: Was it the landslide that caused the issue, or was it that there is a lot that caused the issue?
Cassie: I think multiple factors caused the issue because there was fill material used, and they had said that there wasn’t, and there were landslide issues. But they did clarify that with an amendment to form 17.
Ali: So they had an amendment to form 17?
Cassie: Yes. The amended form 17, including all of that documentation, was given to include all of the documentation.
Ali: So out of all the times I’ve heard this case, I have never heard about the amendment.
Cassie: The other thing that came up, in this case, was cracking on the floor of the basement, the concrete basement that was covered with a carpet that they did not see until they found out about it.
Ali: So they didn’t know about it? They filled it out truthfully?
Cassie: That was one of the big issues in their case, was that, okay, we got the information, but obviously per the amendment, the problems have been resolved and they were aware of the issues. So this is what the county gave us. This is the information that we have, we followed what they had told us to do but they ended up building out on the north side.
Danielle: Okay, I find this interesting and I’m curious as to why they brought a case against the agent. Maybe both agents, but specifically the buyer’s agent, because if all of that unless there’s they’re saying that it wasn’t forwarded.
Cassie: There is an email trail showing that it was given to the buyers, who knows, you know, when you send a buyer something, it’s the best practice to call them and say, hey, I just sent you this important information, it’s still within our timeframes, make sure you read it through. If it’s something like this, it may be conducive for you to get some additional inspections and make sure it’s not an issue, because in their lawsuit, their main concern was the fact that the addition was on the north side of the house and that was constructed on un-compacted fill material and the report had said that they could add to the west side of the house because that was stable. The sellers had chosen to then build on the north side of the house, so that was a main part. The other main part is the cracks on the concrete floor of that basement that was covered with the carpet.
Danielle: Which the sellers knew about, obviously, and did not disclose to the buyer.
Cassie: Yes. Do you have thoughts on it?
Ali: It’s just like hearing it in a different light, like everything I’ve thought about this case before, I’m like, Oh, interesting. I always thought that it just wasn’t disclosed and it was like the seller’s disclosure was poorly done or poorly explained, or there was some malpractice and there, but now I’m like, okay, they figured out they were wrong, or remember whatever happened, right? And then had an amendment and everything was forwarded.
Danielle: Here’s my issue with it, and this is like, I think where it may be headed, but this is my thoughts on it. I still would love to know more about the agent’s parts in this, but it sounds like, one, they only shared that additional information after the buyer did the inspection. Right?
Ali: It was the county doing inspections, not the buyers.
Cassie: The county had gotten all of that information and they had a 15-day inspection timeframe. I don’t know what happened first. I’m not sure the timeframe of when the amended form 17 was given to them, as opposed to when the inspection happened. They don’t clarify the timeframe.
Danielle: I mean, if it did come to light only because buyers are doing an inspection, then I feel like if that were the case, which we don’t know, you can feel like they’re kind of hiding something because then all of a sudden, they’re like, oh, now we have all this information, but let’s just assume that’s not what happened and they gave them the amended stuff before. Them stating that it was corrected when the information is not corrected, I think is their downfall. That would be my thoughts on it, and so I don’t know if the liability on the agents could have been because as an agent we owe a fiduciary duty to our clients right unless there’s a material defect, then we still have to disclose the material defects, if we know about them. So I don’t know if the Court said okay, as an agent, you should have read through all that information that was given to you, and if you saw that it wasn’t corrected.
Then for the listing agent, you still have to let your sellers know that they have to disclose it if they’re not going to where they need to disclose it. Like, that’s our job. That’s our only way out of fiduciary duty. Not out of it. But you know, like, the only thing we can do outside of that is if it’s a fact that’s material fact. For the buyer’s agent, I could see them maybe being at fault because they either didn’t read through or they just forwarded the information and we’re like, Here you go. Here’s the info, which to be fair, I think everyone’s guilty of at some point or another, like, you get a bunch of stuff and you’re like, you kind of glossed through it, but you’re not reading it. If you don’t know about it you don’t want to give advice that you don’t know anything about, but at that point, maybe they should have suggested that their buyers talk to an environmental engineer or somebody like that, who could then explain to them the severity or whatever. That’s where I could see maybe the agents having some culpability in it, but I don’t know. I feel like that’s a tough one, but I think the sellers are definitely in the wrong. Even with the amended thing, if they made it sound like it was corrected, and they knew it wasn’t corrected. They knew that they went fully against the advice of what they were told would work.
Ali: See, I missed that part. I was in Ali land when that happened. Listen, it’s a planet and I come in and out, so I think I am here enough to know what’s going on and then I hear a very important detail and I am like, shit I wasn’t here for that.
Danielle: Those are my thoughts on it. I’m curious how it settled.
Cassie: Yeah. So they ended up dismissing all the claims against the Borchelts with regards to fraud, except the only one they upheld was the fraudulent concealment of the cracks in the basement floor. They ended up dismissing them all on the economic loss rule, which is just stating that it shields the party from liability if the damages are just economic and not at all related to any sort of personal injury.
Danielle: That’s so interesting. So basically, the only thing that held up was the concealment of the cracks.
Danielle: So were they going after a personal injury?
Cassie: I’m not entirely sure, but that economic loss rule didn’t allow them to get any sort of us-like settlement. So then the Jackowski’s ended up taking it to the appellate court because they wanted it to go before a jury and they felt that they did have valid claims. The appellate court ended up upholding the original court decision.
Ali: Do I dare ask what an appellate court is?
Cassie: They appealed it. They ended up wanting to appeal to be appealed. The only thing that the appellant court allowed was that they could pursue the claim for rescission of the contract based on the alleged misrepresentation. So basically, it allowed them to make a civil suit, as opposed to it being in the courts. I looked up and tried to find any sort of civil suits and if they won. There’s not a lot of information out there. I think what probably happened based on what I’ve read, is they pursued a civil suit and then didn’t end up seeing it through, they probably ended up getting their insurance to cover the costs and I’m guessing that this was a very expensive endeavor for them with Attorney fees and they probably just ended up walking away because there’s no sort of ruling that I could find.
Ali: That you can find so interesting.
Cassie: They didn’t end up getting anything from the sounds of it.
Ali: Yeah. Well, hopefully, insurance money, because that’s such a shitty thing to deal with.
Cassie: I would guess insurance would have covered something like that. It was the economic loss rule that kind of screwed them.
Danielle: It’s also really interesting because hearing this case in this direction, I had not heard it this way. I’m like, it’s kind of one of those things, like, this is why you have insurance because I mean, they did amend it. The sellers did, and it is like, okay, they were upfront with information or pretty upfront with it, I guess, and things just happen sometimes. I feel like this is a case of like, you better make sure you have damn good insurance.
Cassie: Right. I could understand why they thought they had a pretty solid case, but it just wasn’t solid enough for the court.
Ali: Yeah, hearing it in this light, I’ve got a completely different opinion than I did before because I always thought that they were just being super sheisty and were just like, we don’t want to claim that this has happened, because we don’t want to have to worry about it, and now I’m like, oh, like, it wasn’t like a bunch of people trying to do the wrong thing. It was like sometimes you can try to do your best and it’s still not right and like you said it’s a good thing you have insurance.
Danielle: I also think it’s a really good lesson for us as agents to make sure that we are helping cover our clients, like specifically on the buyer side of this transaction, because like, I can just imagine getting all those documents sent to me, and like breezing through them and forwarding them to my client and being like, hey, did you get that stuff? And they’re like, Yep, okay, cool. Without anyone understanding that the addition was built on the wrong side of the home and not deep diving into it. We can’t take on that liability, but pointing our people in the right direction or telling them like, make sure you read this thoroughly. Even in the email, like so you have proof that you’ve let your clients know, but like, read through all of this and make sure you’re okay with all of it. If you have questions, let’s figure out who to talk to.
Cassie: I think emailing that all to them so you have it in writing, but then calling and saying, hey, you’ve got an email in your inbox from me. I think these documents are important. Please read through them. If you have questions, let me know, I just want to make sure you’re fully informed.
Danielle: Because then at that point, if they read through it all, and they feel comfortable with it, and then this happens, I mean, it kind of turns out the same way, but at least you know, you did your due diligence to help protect your client the best you could.
Cassie: They were still within their timeframe to have an additional inspection done, and could have if they had really understood the severity of what all of that documentation meant.
Ali: I’m probably reiterating something, but when they got the information back, does it specifically say that it was built on the wrong side of the house? Or did it just say that it was permitted for this and then separately, somewhere, say it was built here and so if it wasn’t right next to each other, you just wouldn’t even connect it?
Cassie: It was exactly that.
Danielle: That gives me anxiety!
Cassie: The report said that it needed to be built, I think, on the west side of the house, and they built it on the north.
Ali: Think about any of the reports we get from environmental engineers. Those words don’t pop out at you either.
Cassie: Well, because really, you’d have to like look at it as okay, an addition should be built on this side of the home and then you’d have to actually think okay, let me do is that the side of the home was built on which some people would catch it, but a lot of people will be like, okay, cool. It was approved for an addition.
Danielle: I’m not Carmen Sandiego.
Ali: There are so many details in there, how are you supposed to know which one is going to lead to your house sliding off its foundation? Unless you pick through it. It reminds me of the murder mysteries that we do where it’s like from one picture to another, there’s a shoe on the ground how are you supposed to know that’s what you’re looking for? I just feel like just really advising our clients to research and reiterating that and at the end of the day, sometimes stuff just gets missed.
Danielle: Sometimes stuff just happened you know, and unfortunate.
Cassie: I don’t think there was any ill intent from the sellers in this case minus the rug. Minus Concrete cracks. There was that.
Danielle: I feel like this is a really good one because it’s covered so many different things.
Cassie: I can’t tell you how hard hours I spent reading all of this because legal jargon like this is gonna be so much fun and also I feel like I’m gonna learn a lot.
Danielle: Yes, Ali’s eyes are glazing over.
Ali: Can we name this episode crack kills? I wasn’t glazing over, I was just sending my little mind palace.
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If you have any further info on this case, we would love to hear about it. If you know if there was a civil judgment against it, we would love to know.
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