Pre-Sale Warning on Home Defects May Prevent Suit
You are selling your home. Your real estate agent is doing a great job. A purchase offer is obtained at close to your asking price. After a little negotiation back and forth, a sales contract is signed by buyer and seller. The sale closes. You receive your money. That is the end of the sale.
But don’t be so sure.
Most home buyers expect the home they purchase, especially at today’s high prices, to be in close to perfect condition. But the truth is no home is without defects.
Home buyers will usually overlook minor problems. When the problem is major, unhappy buyers often rush to the nearest lawyer’s office to sue the home seller and the real estate agent.
If you are a home seller, here is how you and your agent can guard against litigious home buyers:
1--Disclose, disclose, disclose. The best offense is a strong defense. To avoid future surprises, smart home sellers disclose in writing to buyers all known property defects.
Only California and Maine require sellers to disclose home defects in writing. But the National Assn. of Realtors is wisely urging every state to adopt similar laws requiring written home defect disclosures to buyers. Why? Because a buyer who knows about drawbacks of a home has no cause for a lawsuit.
Even in states without mandatory disclosure laws, the best real estate agents ask their sellers to answer written questions about the home, so the buyer will have no surprises. The result is the seller and the agent can sleep better, knowing the buyer was fully aware of any known home defects.
2--Have the home professionally inspected when it is listed for sale. Many sellers are not aware of all the defects in their homes. For example, I recently talked with an elderly home owner who knows his old home is not level. But he doesn’t consider that to be a defect. A buyer who discovers this problem after purchase may feel the seller should pay the expensive cost of correcting this defect.
A professional inspection of the house at the time it is put on the market for sale will usually discover defects that should be disclosed to prospective buyers. Most home buyers welcome the reports of professional inspectors, even if defects are listed. When a real estate agent shows a prospective buyer an inspection report on the house, that is a sign of an extremely competent agent. Such an agent also is using a sales technique, called “removing buyer objections.”
3--Be sure customary inspections are completed. In addition to a voluntary professional inspection report on the home, most communities have customary or mandatory inspections, such as for termites and energy efficiency. Experienced real estate agents usually counsel their sellers to obtain these reports before putting the house on the market for sale.
Then the seller can either complete any essential repairs or give the buyer a credit for the cost of such work. Many mortgage lenders insist on these reports, so it will save time for the seller to obtain the reports before a buyer makes a purchase offer.
4--Give the buyer a one-year home warranty. No matter how well a home is maintained, something usually goes wrong within a month or two after the home is sold. For example, shortly after I moved into my home all the toilets malfunctioned. I suspect the problem was the house had been vacant for several months and the valves became rusted. Then, shortly after the toilets were repaired the water heater began hissing steam and had to be replaced.
Fortunately, this repair work was covered by the one-year home warranty the real estate agent thoughtfully purchased for me. Most realty agents and home sellers offer these policies that pay for repairs to the plumbing, wiring, furnace, and built-in appliances. However, as I quickly learned, they do not include coverage for plumbing outside the house perimeter, roof, pool, foundations or air conditioning, except at additional cost.
5--Be sure the realty agent has errors and omissions insurance. Smart home sellers ask their real estate agent, at the time of listing the home for sale, for the name of the agent’s errors and omissions insurance company. This coverage protects realty agents who negligently make mistakes that harm home buyers or sellers. The most important part of this coverage is paying for the agent’s legal defense, even for groundless lawsuits by buyers.
Home sellers should avoid doing business with realty agents who cannot provide the name of their E&O; insurer and the policy number. These agents are said to be “naked,” meaning they self-insure against lawsuits. Such a situation can be very dangerous for home sellers and buyers unless the agent has mega-assets, which few agents have.
6--Sell the home ‘as is.’ A final precaution for home sellers is to consider selling the home “as is” if it is in poor condition with many defects. This means the seller and the realty agent have disclosed all known defects, but the seller refuses to pay for the repair costs. For further details, please consult a local real estate attorney.
Distributed by Tribune Media Services Inc.
