This article was fact checked by Imran Khan, Principal Attorney and Partner at ARK Attorneys.
Being an agent comes with risks, but you can reduce them by being proactive. And one of the things you should always do is to be upfront about property defects and document the way they have been disclosed. And it is equally important to get all defects from your client before you list their property on the MLS or privately.
Making sure buyers know the defects in the house can help to prevent them from suing you and your client after they purchase the house. Because once the deal is done, you’re ready for the next sale, not stress and legal headaches. And this starts with knowing what to disclose.
House defects that you should disclose include:
- Problems from flooding including pipes, natural floods, leaks, etc…
- Covenants that restrict how the property can be used
- Construction disclosures including when local construction codes were not followed or the correct materials were not used
- Improvements made without a permit like adding a bathroom
- Foundation cracks and crumbles, sinks and shifts, sloping, leaning chimneys and other structural problems
- The home’s age
- Type of flooring used
- Road noise
- Condition of the roof
- Termites or other pests
- Structural problems
- Anything else that could involve expensive repairs, upkeep, or safety hazards.
Your client may not tell you everything wrong with the property because they think it will lower the sale price or they’re embarrassed, so you need to be proactive. Take detailed notes after you ask them about home defects and send a follow up email.
In the email thank them for sharing the defects and list everything disclosed for them to see. Then ask them if you missed anything. Although it is not full proof, you have been proactive and that goes a long way to showing you tried to do the right thing. But don’t stop there.
As potential buyers tour the property, keep notes about what they asked and your responses. There’s always a way to acknowledge the defect without killing the deal. You could say that although there are cracks in the basement, the plumbing and kitchen are brand new, and share a few recommended contractors that specialize in the specific issue. Most important, make sure to include a note about their concern to show you disclosed the defect within the email.
Another way to help protect yourself from being sued for not disclosing property defects is to have them listed both in writing and be visible in property listings. If there is a cracked foundation for example, make sure at least one of the photos has it visible. Don’t hide it under a rug during staging. You can also include it in the notes on the listing page.
If you’re being sued right now, talk to a licensed real estate lawyer or firm like our friends at ARK Attorneys immediately. Then gather the documents together that they ask for and create an action plan with them. Many of the things you learned above will be what they ask for. If you gather these, and any printed materials that have the above before you reach out, you’ll be a step ahead in getting an action plan together to mitigate the risk of actually going to court.
Disclosing defects is not a deal breaker, it is a headache saver. Set your client’s expectations from the start and make sure they know the risk of not disclosing is much greater than the slightly higher sale price. It will help to keep both of you out of the hot seat and celebrate a seamless transaction.