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Bernice Ross
A critical reason every buyer needs a competent agent with excellent negotiation skills is to prevent lawsuits, especially when post-closing problems occur. The question is how to avoid post-closing problems in the first place, and when one does occur, how to handle it to avoid litigation.
Here’s a classic example I experienced. A close friend asked me to handle her showings while she was out of town. While she was away, a property came on the market that was a perfect fit for a couple she had been working with for over six months. I showed them the property, they made an offer, and the property went under contract.
The seller was a charming 78-year-old widow who invited the buyers over for tea and cookies. At that meeting, she offered to leave the twin beds in the downstairs bedroom for the buyers’ two little girls.
After the deal closed, the buyers stripped off the wallpaper in the hallway in back of the fireplace. They discovered one-inch-wide cracks running up both sides of the fireplace. They also discovered that the twin beds downstairs were bolted to the wall, disguising a one-inch gap between the wall and the foundation.
My buyers were so angry they sued both the seller and her agent. Because I immediately had my manager become involved and worked hard to address the issues the buyers were facing, we weren’t named in their lawsuit.
This really angered the listing broker was ticked off that we weren’t being sued. He decided to file cross-complaint against our company which brought us into the litigation. Even though the suit settled three years later, I still was stuck with a $4,000 bill for the deductible on my errors and omissions insurance.
Four Questions to Remember
You can take steps to avoid post-closing disclosure problems. Begin by asking the following questions of the seller:
- During the time you have owned the property, what repairs and maintenance have you done to the property?
- Have you remodeled or made structural changes to any part of the property?
- Are aware of any cracking, shifting or separation of the walls on any part of the property? If so, have they been patched or repaired?
- Was all the work you did to the property done to code and the required permits obtained?
In addition to asking the questions above, it’s important you take steps to make sure you disclose the property condition properly to your clients.
First, avoid diagnosing what may be wrong with the property. Describe the issues instead. For example, “Brown stain noted on dining room ceiling,” not “Roof leak noted on dining room ceiling.” You should also encourage buyers to obtain their own inspections.
If the buyers want to do a major remodel or make other significant changes to the property, have them conduct a survey so they know the exact lot size plus the location of any easements or encroachments. When buyers plan on doing major alterations to the property, advise them to contact the local municipal building department to check the zoning, what permits will be needed, plus any other requirements for building on the property.
Keep Calm and Carry On
If a problem does occur post-closing and you’re working with someone who is extremely upset, stay calm. Take copious notes on what they say and repeat your notes back to them to make sure you have recorded what they said correctly. This actually defuses their anger.
You should also avoid taking sides. Instead, gather as much information as possible and see if you can figure out a work-around that will meet the needs of all parties. Take extensive notes throughout the process to help your memory and to defend yourself if legal action enters the picture.
Two final points to always keep in mind: First, never try to force a client to close a transaction if the client has concerns about disclosure items. Instead, obtain additional inspections if needed. Second, if the buyers are still uncertain about proceeding, a cancellation is better than buying a lawsuit. Your role is to facilitate the sale – not to decide whether or not to purchase.
Most importantly, always consult your manager and legal advisor as soon as any problem occurs. The sooner you enlist help, the easier it will be to find a potential workaround for the issue and to avoid litigation.
Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.
