We bought a beautiful home and within days of moving in started noticing a horrific urine smell that got increasingly worse. We thought it was just one room but a black light revealed dog urine throughout the house not just on the carpet and padding but on the baseboards and walls. It had also permeated the cement and wood floors. We tried unsuccessfully to get rid of the smell but it kept coming back. We tried to remove the carpet in one room and treat the floors (the worst room) but it wouldn't go away. We finally had to replace the carpet, padding and treat the floors of the entire house. The old carpet had so many stains, new and old, throughout the house that was sickening. The sellers managed to cover up the smells during the selling process. We are out over $12k. Are they liable?
I assume you had an inspector inspect the property as part of the terms of your purchase. If not, if you were represented by an agent and did not agree not to inspect the house, you actually may have a claim against the agent. I strongly urge you to see the advice of a local real estate attorney who can advise you. Good luck.
I regret you are experiencing this issue at a time when you should be celebrating your new house. My firm has encountered this issue before; unfortunately it happens more often than you would think. To answer your question, yes -- you can sue the former owners. Whether you are successful or not in your suit will be fact-specific and the odds are not in your favor.
You may have a suit against the owners, your realtor, the owners' realtor, and/or the inspector. Most will claim "latent defect" in that the smell/stains/damage to the house was a defect that no one could have reasonably discovered by the performed inspections/walk throughs. There is no law from a current homeowner trying to make the house smell nice or even covering up animal smells. Further, they could argue they did not notice a smell because they lived with the dog(s) for so long that they were accustomed to it.
Most people blame the inspector, however if you read your inspection it will probably have disclaimer language that the inspector is not liable to discover every single thing potentially wrong with the house. (Mold is a common disclaimer topic). And, whether a house smells or not can be a subjective argument (as opposed to a hole in the roof is a clear defect in the house).
I suggest you first contact your realtor and discuss the issue. Then, contact your homeowner's insurance co with the idea that they may present a claim on your behalf to the former owner's homeowners insurance company. In the end, your realtor (and their agency) is probably the party most responsible...because their job is to protect your interest and negotiate the best deal possible for you and think about all of the details that result in a good deal for you. You rely on their expertise and advice to purchase the house. Moving into a house to immediately put up $12k in unexpected costs is not a good deal for you.
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