Avoiding Potential Lawsuits When Selling Your Home

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I’ve been in real estate for about fourteen years and sold hundreds of homes (and in three states) so I feel fortunate that I haven’t been to court or mediation for a transaction I was involved in. But as a managing broker for several large real estate firms I was involved in mediation, arbitration and litigation with other agents and their clients. It’s not a fun process and even the side that wins the decision is usually unhappy when it’s all said and done, because they’ve had to go through the frustration of the hearings and all the claims against them and the other party. It’s not fun…

When it comes time to sell your home you’ll have quite a few chores to take care of. You’ll need to clean and get ready for sale, perhaps some fix-ups and staging will be in order, you’ll have packing and de-cluttering to do, and you’ll have a host of relocation items such as finding your next home, learning about schools and utilities and where you’ll be shopping and the list goes on.

Your Realtor should help prepare you properly to make sure you are not exposed to risk of lawsuit, but here are a few things to keep in mind.

1- Disclosure, or lack of disclosure, is the biggest cause of lawsuits in real estate transactions. When you sell property you need to disclose all material facts about it, including any defects you know of. If there was a leak in the roof, but you fixed it- no problem, just disclose all the facts about it. If you think the back fence may be a little off from the property line, bring it up on the disclosure statement as a possibility. Whether it is or is not- this gives the buyers a chance to investigate the issue if it’s important to them.

2- There’s a difference between things looking right and being right. If you cover up defects you’re opening yourself to lawsuits. There’s nothing wrong with making your home look its very best for the sale, in fact you should be doing that. Just make sure if you paint over water spots or place a rug over worn out hardwood floors that you disclose those things so the buyer knows about them before their inspection deadlines are up.

3- Don’t lie about the square footage. The MLS has a disclaimer (as does most websites) that says “information deemed reliable but not guaranteed” and that’s good, but that doesn’t always protect you, especially if you have reason to believe the square footage is different than what you are stating.

4- Talk is cheap. This is one of the biggest causes of FSBO’s going to court- buyers and sellers talking directly to one another and things are said, implied, promised…. and then there’s trouble because it wasn’t written on paper and signed. If you’re selling and you happen to meet potential buyers, don’t promise you’ll do things- let your agent handle those talks. Politely say that your agent has advised you to allow them to do the negotiating for you. This way it’s clear what you do/don’t intend to do because it’s all in writing.

5- Don’t judge. Remember, when you are selling your home you can’t determine who gets to buy it for any reason other than what’s in the contract. If you start judging the buyers by their appearance or other factors you open yourself to discrimination lawsuits. Another reason it’s best to not be around when the home is being shown.

6- Have integrity. If a buyer writes an offer figuring they can always cancel if they change their minds- there is no integrity in that. And sellers need to have integrity when selling their home. Let’s all realize that we all have the same goal- we want to sell a certain home to a certain buyer. If everyone has integrity and treats each other with that respect and honesty then things go smoothly. And with all the other stuff you need to worry about when moving- that peace of mind can go a long way…

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12 thoughts on “Avoiding Potential Lawsuits When Selling Your Home

  1. Good Advice – the hardest part for sellers and new agents is learning how to control the compulsion to gab. Learning how to say just enough is an art.

    As you know, this is the major reason to get the seller out of the home for an open house.

    Also, I can’t tell you how many times my eyebrows almost shot off my face at some of the things agents say during an open house,

  2. That was me at my last house. My agent was inside walking some people through and a couple drives up so I figured I would talk to them while she was with the other people. As they were asking me about the house I told them we planned on finishing a room in the basement that had a small window, but because the window was so small we really should also make it larger. Wanting to sell I casually said that of course we would still do this.

    Well, they made us an offer and guess what was in the offer? You guessed it. They asked us to finish the room and make the window larger. So we did, and to cut into the foundation to make the window larger cost an extra $400 (not even including the window). The whole project cost us about $2400 and the buyers told us at the closing that they were going to use the new room as a storage room! I wanted to cry. I learned my lesson to be quiet. We are selling another house now and I will not be around when she does the open houses this time.

    -Embarrassed seller

  3. Pingback: - FSBO’s How to Avoid a Lawsuit - Harper Team Blog

  4. John:

    Sellers who say the “wrong thing” are far less to blame than agents who might say or imply inaccuracies to make a sale.

    Seperating the sellers from the buyers is so 1970’s– and a lame attempt at justifying a huge commission.

  5. Pingback: Real Central VA - Tracking the Charlottesville and Central VA real estate market and more » Dual Agency, selling advice and how to avoid getting sued

  6. You are oh so right about disclosures. You can’t disclose too much. If you think it’s not important, the neighbors are sure to tell the buyers all about it and you have then opened yourself up to a passel of trouble. Keep the buyer and seller apart is sometimes hard though. I had a buyer inform me that they had become good buddies with the seller and had arranged the key exchange for before the time the property was recorded! I quickly interveened and told them about liablity issues and the like and they realized it wasn’t such a good idea. But, had I not talked to them, I hate to think about what might have happened.

  7. Pingback: FSBO Friday « The Gardyn

  8. I’m actually a little surprised that we don’t see more lawsuits. With the market as tough as it is, I think we may see more. Thanks for the information. I’m going to add it to my list of items for my sellers.

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