Quick Skim
One in five real estate practitioners will be involved in a lawsuit during their career, says real estate broker Barbara Nichols in The No-Lawsuit Guide to Real Estate Transactions (McGraw-Hill, 2007). The effects can be just as damaging to your reputation as it is to your pocketbook. So how do you make sure you don’t end up in court? There are some obvious lines you know to never cross, but there are far more gray areas that can land you in trouble for nondisclosure, steering, or even false advertising. Nichols gives advice on navigating these potentially risky situations.
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From the Book: 5 Ways You Could End Up in Court
Real estate lawsuits often stem from what you say — or don’t say — to your client. Bottom line: You’re obligated to report any property information, both onsite and offsite, that could impact the property’s price or a buyer’s decision to buy. Nichols outlines these common legal mishaps for practitioners:
1. Not disclosing property stigmas. Prospective buyers need to be told if a anything in a home’s past could potentially scare off future buyers or hurt the property’s resale value. What counts as a stigma? It could be a murder that once occurred in the home, a rumored haunting, or a history of foundation problems (even if the seller spent thousands of dollars fixing the foundation, future buyers could be hesitant to make an offer). If you don’t disclose any potential stigmas, you could be held liable when the clients find out. So do your research and be sure you know the home’s history.
2. Using risky words. How closely do you proofread your advertising copy? No matter how well-intentioned you are, you could be sued for discrimination or unlawful steering if you use terms such as “perfect for young married couple,” or “no children under age 10.” You’re obligated to provide fair access to properties to everyone, unless the development has been classified as a restricted age community or a “senior citizen residence.” In addition, you shouldn’t talk about the racial or ethnic diversity of a neighborhood even if your clients ask you. However, you can provide general information that would be found in a community profile, such as the average price ranges of properties, education and income levels, and religious facilities.
3. Overlooking a property defect. While you’re not expected to have the expertise of a property inspector, you are required to disclose “any known or readily observable property
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