A real estate agent listed a 4,000 square foot brick colonial on several acres of land for a couple who were relocating. The 35-year-old home boasted numerous features, including fireplaces in the kitchen, living room, and master bedroom. The property soon went under contract, eventually leading to an uneventful closing.
The Problem
The fireplaces were in very poor condition. The sellers brought this problem to the attention of the agent while completing the documents required for the property's listing.
The Mistake
To expedite the process, the agent filled out the property condition disclosure statement, and the sellers signed it.
The Result
Hours after closing escrow, the new owner made arrangements to have satellite TV installed. While the technician searched the roof for an ideal location to place the dish, he noticed loose and crumbling bricks in all three chimneys.
The owner immediately called the agent to ask why the property condition disclosure statement didn’t note this issue. The agent admitted his knowledge of the problem, and he claimed it was properly disclosed.
A few days later, the agent received a letter from the owner’s attorney alleging “fraudulent or negligent conveyance,” as well as a board complaint filed with the local regulatory authority. After reviewing the disclosure statement, the agent realized his error. The sellers, who were copied on the attorney’s letter, came to the same conclusion.
The matter was quickly settled. The sellers also contributed, because they shared culpability for signing the disclosure without properly reviewing it. Despite the settlement, the regulatory body briefly suspended the agent from practicing real estate.
The Solution
Many real estate errors & omissions claims can be avoided by exercising ordinary care and judgment, warding off costly attorney fees and settlements. In this case, the agent created a disclosure obligation by completing the property disclosure for the sellers, resulting in a probable jury finding that he was making first-hand representations.
Help protect yourself and your clients by making sure all documents are properly completed and reviewed. This will increase your chances of experiencing a straightforward, legally binding transaction.
This article was produced in conjunction with XL Catlin.