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Legal risks for Sellers in a hot market

In our recent hot seller’s market there’s been a trend to require waiving of inspections in competing offer dynamics. An interesting sub-point on this trend is that corporate fund managers buying residential properties as portfolio assets may be the source of this dynamic, as disclosed recently in a Clubhouse discussion.

👉🏽 Replay of Clubhouse discussion, fast forward to Leigh Brown’s input (click on icon on bottom with face to skip to speakers). Leigh Brown adds insights on corporate fund manager’s acquisition strategy of above asking price offers, waiving inspections.

However tempting that may be, it actually puts seller and seller’s agent at risk for potential law suits post settlement. It’s not the corporate fund managers who would sue, it’s the individual home owners who have been pushed into this offer dynamic by corporate competition. In fact, in Pennsylvania there’s been a huge uptick in lawsuits in 2022, as cited by Lisa Scoble of Pearl Insurance (E&O Insurance Carrier) in a recent webinar:

“You can do everything right in the transaction, but it’s the perception of the other person, if they think you made the mistake. Attorney fees and court costs add up. About half of claims are closed without any settlement or judgement, but there is still cost in settling them. The average claim costs $40,000,” she said.

One of the top reasons Realtors® receive complaints is the misrepresentation of property, making up about 70% of claims, and the majority of those have to do with water issues, like water infiltration, mold and leaks, she said. Additionally, sewer and septic represent a large number of claims. Zoning issues and square footage are also common claims, she said.

Misrepresentation of Property is the Top Claim Filed Against Realtors, PA Association of Realtors

Disclose, Disclose, Disclose

Traditional real estate coaching and training by top litigators have historically echoed this sentiment with disclosure, or lack of, being the top risk for sellers (and their agents) in any market. When a home buyer isn’t allowed a reasonable opportunity for due diligence, it can backfire later after property conditions are discovered post settlement. Of the current lawsuits in Pennsylvania;

  • 70% have to do with condition – something’s not working
  • 72% are related to water issues; infiltration, mold, leaks
  • Sewer vs Septic is another hot issue. In some cases what was disclosed was incorrect (some of the largest $ amount in settlements)
  • Zoning and Boundaries; In our suburban markets, having a survey is always advisable. However, sellers have been unwilling to allow that due diligence

How can you prevent exposure to law suits?

  • Have a home inspection done prior to listing the property. Fix items you’re willing to fix in advance and add those receipts to your sellers disclosure. Make the home inspection report available to buyers.
  • Have a survey done in advance of selling and provide it as part of your disclosures. Surveys are critical, and can take some time to complete. Providing current information to the buyer will help remove this as a need for their due diligence, streamlining your contract process while reducing your risks. Serious issues can arise, which you may not be aware of such as who owns the retaining walls, shared driveways, encroachments by neighbors, etc.
  • Allow a home inspection period for buyers. The fact that there is competition isn’t going to be defensible if asked in a court proceeding why you didn’t allow the buyer to have a home inspection. If there is that much interest, should the buyer cancel you have many back-up offer opportunities. There are creative terms that can minimize your exposure while allowing the buyer an opportunity for thorough due diligence.

If you’re considering options to sell, please feel free to use my instant valuation, then let’s talk! We’ll go over market conditions, pricing in today’s market, and create a customized strategy to meet your goals.


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Susanna Kunkel

Susanna Kunkel brings her skills from a career in the executive offices of major corporations to her real estate business - treating each client like a VIP. With 18 years of experience as a real estate advisor, you can be confident in knowledgeable, personalized, confidential service. Hear what her clients say -

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