Statistics in the News: Chapter 2 (MINITAB edition) Learning About MINITAB

MINITAB Helps Homeowner Save $5,000

The following story, slightly edited here, appeared in the June 2002 issue of MINITAB News:

ACT I - No Good Deed Goes Unpunished. Anyone who has ever bought or sold a house knows that there are unseen forces that can drive the deal through the pearly gates or off a cliff. In indigenous cultures like urban America, these forces are known as the Gods of Real Estate. In May 2001, Jay Bronec and his wife, Katie, put their house near Chicago on the market, and by mid-summer they found a buyer: a buyer whose conduct was so far removed from the conduct of most buyers that for the purposes of this story he will henceforth be referred to as the Outlier. Now the Outlier was enthusiastic about the Bronecs' property but he also was a seller's nightmare-a hard-nosed negotiator who easily found fault with everything. But the Bronecs were anxious to move their family into their new home before the school year began, so they tried to be as generous as possible, persevered, and eventually the two parties signed a sales agreement.

The ink was hardly dry, however, when the Gods of Real Estate decided to step in and toy with the Bronecs by sending them an offer from another buyer for $11,000 more. Tempting though it was to find a way to accept it, the Bronecs resisted the sirens of profit, honored their contract with the Outlier, and closed the deal in early September.

That's when the Gods began to play hardball. In late October, an irate Outlier called the Bronecs and told them that heavy rains had caused the basement of the house to flood, and that when a contractor had removed a portion of the wall he saw indications of prior water damage. The Outlier hotly demanded that the Bronecs split the cost of the damage, claiming that the problem was present while they owned the house, that they therefore must have known about it, and were thus responsible for a share of it.

Both Jay and Katie were stunned to learn the basement leaked. Even with a heavy rain during their final month in the house, they never experienced any problems; and neither the Outlier, nor his home inspector, nor his real estate agent who joined him on the final walk-through, noted any damage before closing. Also, as they explained to the mulish Outlier, they had no way of knowing there had been an existing problem because the wall that concealed the previous damage had been in place when they bought the house, and given that they had sold the house for $11,000 less than they could have, they simply couldn't agree to pay for damages.

Needless to say, the Bronecs' decision infuriated the Outlier, and in March 2002 he filed a notice to sue them. He wanted $5,000 in damages, charging that they "had prior knowledge of recurring leaking and/or flooding."

For the Bronecs, proving that they had no knowledge of previous damage was fairly simple. Jay was able to obtain from the owner who preceded him pictures of the basement wall which clearly showed that it was this owner, not Jay, who had covered the walls. Proving that they never experienced any leaking while they lived there, however, was more difficult, and after exhausting every angle they could think of, both the Bronecs and their attorney were wishing they had some hard evidence to strengthen their case. And the Gods smiled slyly as the court date neared.

ACT II - Just the Facts, M'am or Statistics Don't Lie. Enter MINITAB. As president of QualiFine, Inc., an authorized MINITAB reseller, Bronec had always been a big fan of the statistical software and a friend and close associate of J.P. Mulley, Minitab's Product Manager. Bronec mentioned his predicament to Mulley, who happened to know that the National Oceanic and Atmospheric Administration tracks data on precipitation and makes it available to the public for free. Mulley suggested that Bronec collect data on the amount of rain that fell in the area during the entire time they lived in the house and enter it in MINITAB, then run a control chart to determine if the amount that occurred around the time they were selling it was significantly greater than what they had experienced in the years preceding it. If it was, they could show that they wouldn't have known about a problem with leaking or flooding because they would never have encountered it, and that the heavy rains that occurred after closing had probably caused an entirely new structural problem and the resulting damage.

Bronec took Mulley's advice and analyzed the monthly rainfall from August 1995 through December 2001 and sure enough, the data points for August and October 2001-the months immediately preceding and following the sale of their home-were out of control. Rainfall those months were 12.25 and 8.54 inches respectively, between three and four times the mean for the entire 65-month period they had owned the house. See Exhibit A.

Exhibit A: MINITAB Balances the Scales of Justice

Note: Exhibit A was copied from http://www.minitab.com/virtualpressroom/articles/ExhibitA.

Clearly the Bronecs had no occasion to experience flooding in their basement for most of their tenure in the house. And, if the heavy rains in August hadn't resulted in damage or flooding that was evident at closing, chances were good that a new structural problem occurred because of the rains in October-after the house belonged to the Outlier.

This MINITAB control chart quickly became the key to the Bronecs' defense, and on May 7, 2002, Judge John W. Demling of the DuPage County Small Claims Court ruled in the Bronecs' favor, dismissing the Outlier's claim that they had concealed prior knowledge of the problem and saving them $5,000. The Outlier was rebuked, the Bronecs were vindicated, and the Gods of Real Estate bowed to the truth of statistics.

Sources: Adapted from Minitab News, June 2002 (Minitab News is a monthly electronic newsletter that provides the latest updates and information about MINITAB's products and supporting services. To read Minitab News online visit http://www.minitab.com/resources/maillist/minitabnews.)