Home Brokers Need to be More Careful about Disclosures

Home brokers need to be more careful about disclosures, buyer representation and closing costs as these are the most common causes of disputes among brokers, buyers and sellers and other agents, based on the biennial Legal Scan survey conducted by the National Association of Realtors this year.

According to the survey, majority of residential real estate transactions handled by brokers and agents since 2007 were completed without problems and most lawsuits were settled in favor of brokers and realtors.

But there are issues that need to be looked at by brokers and realtors because these were the most common causes of disputes that occurred in the past two years. The three most common legal disputes cited in the survey involved the disclosure of the condition of the home sold, the representation of a buyer in a home purchase transaction and the overcharging of buyers at closing.

The survey found that the number of lawsuits filed involving the three issues increased during the two-year period since 2007. More survey respondents also believed that more lawsuits involving the three issues will increase in the coming months.

About 33 percent of home brokers who participated in the survey said that inadequate disclosure has been the main reason for their clients’ complaints. They claimed that their brokers did not tell them that the homes they sold had problems such as water intrusion, molds, structural defects and sewer and septic problems. They also claimed that their brokers misstated square footage and that they did not explain the as-is clause in the contracts.

About 45 percent of the respondents believed that the three issues will worsen in the next few years.

The survey also found that many disputes arose when the seller was a bank. Most often bank-repossessed properties are not being maintained by banks and have been sitting vacant for many months or years.

In Connecticut, almost 75 percent of lawsuits against real estate agents in the past two years were due to inadequate disclosures about septic tanks and sewage disposal.

Some people in the real estate industry say that there are agents who have not been trained properly. They said that these agents do not understand material defects and the need to disclose material defects to the buyer.

Lastly, other major issues that have challenged home brokers in the past two years were the claims that they have been charging high closing costs and that they were representing both seller and buyer in the same real estate transaction.