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It is imperative to double-check your work and confirm everything on the Sellers Property Disclosure Statement with the sellers. Otherwise, you and the sellers might be exposed to unwanted litigation. 

Situation

A real estate agent listed a 4,000 square foot brick colonial home seated on several acres of land for a couple who was relocating to another part of the country. The 35-year-old home had numerous features, including fireplaces in the kitchen, living room, and master bedroom. It wasn’t long before the property went under contract that lead to an otherwise uneventful closing.

Problem

Turns out that the fireplaces were all in very poor condition. The sellers failed to bring this subject to the agent’s attention when they sat down to complete the requisite documents in preparation of the property’s listing. 

Mistake

In an effort to expedite the process, the real estate agent filled out the property condition disclosure statement and had the sellers sign it.

Result

Hours after closing escrow, the new owner arranged to have a satellite television installed. But when the technician was on the roof searching for an ideal location to place the satellite dish, he noticed that the bricks in all three chimneys were loose and crumbling. The owner immediately contacted the real estate agent to ask why this damage was not noted on the property condition disclosure statement. During their conversation, the agent admitted that he was aware of the problem and was sure 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. The agent rereviewed the disclosure statement and realized his error. The sellers, who were copied on the attorney’s letter, came to the same conclusion. The matter was quickly settled with the sellers also contributing since they, too, shared culpability for signing the disclosure without reviewing it properly. However, despite the settlement, the regulatory body briefly suspended the agent from practicing real estate. 

Prevention

Properly completing all documents will always help protect you and your clients while assuring the transaction will proceed in a straightforward and legally binding fashion. 

In this case, the agent created a disclosure obligation by completing the property disclosure instead of the sellers, resulting in a probable jury finding that he was making first-hand representations. Many real estate errors and omissions claims can be avoided by simply exercising ordinary care and judgment, warding off costly attorney fees and settlement.