In Puyallup, strongly recommend that you contact Shannon Jones at Campbell Dille. She is smart as can be about real estate law. In WA, sellers are required to fill out "Form 17" which is a disclosure sheet about the known defects with the house. Generally it is to try and suss out suspected issues, and it is absolutely not a place to lie about having a licensed and bonded contractor do work rather than the seller doing it themselves. That is disgraceful and as you note, very dangerous.
The appraisal and "special program" issues are Federal, come under Truth in Lending issues. Shannon can help you with this, too. Elizabeth Powell
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Based on the limited information that you provided, you may have claims against both the seller, and claims against the lender. Not much advice can be provided without: (1) reviewing your Purchase and Sale Agreement, (2) reviewing all applicable loan documents, and (3) discussing the exact facts of the situation. You should seek the advice or an attorney to determine what the best course of action is.
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I agree with both previous answers and it is important to get your documents to a lawyer at once. The statute allows for attorney's fees if form 17 is found to have knowing and willful misinformation.
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If you have homeowner's insurance or other coverage, you should report the loss to the insurer.
Works on major systems in a house (such as the electrical system) usually must be inspected and approved by the local government. You can check with the local government whether the work was inspected and approved. If the seller did not do that, perhaps the local government will fine or sue seller.