Silicon Valley Real Estate Guide

It always seems that with a softening in our local real estate market, there is an increase in real estate related lawsuits.  When the real estate market is good (and appreciating), buyers are happy.  But when it softens, buyers are looking for someone to bail them out.  According to four prominant Silicon Valley real estate attorneys, we are seeing an increase in litigation surrounding homes purchased within the last few years. 

On Monday I sat through a 2+ hour legal forum put on by out local real estate board that featured Stan Smith, attorney for Alain Pinel Realtors, Bill Jansen attorney for Cashin Company, Ron Rossi, attorney for Intero Real Estate and Victoria Naidorf, Attorney for Coldwell Banker.  The topic was Risk Management and how to protect one’s client and oneself from lawsuits. 

One issue that seller’s rarely think about when they are selling their home is Risk Management.  Usually a seller’s focus is on the money and/or how soon they will get it.   Disclosure law rarely factors into the equation.  Unfortunately, incomplete or inaccurate real estate disclosure increases a seller’s liability which can lead to costly and unnecessary lawsuits.

For those of you who are attempting to sell your property yourself (for sale by owner) and not employing the services of an experienced real estate professional, be aware!  Given that I have found that many real estate professionals don’t understand the disclosure process, it is less likely that you will.  The liability for full disclosure falls solely on your shoulders.  Do it incorrectly and it might be a very expensive lesson.

Many uninformed sellers (and short sighted real estate agents) look at disclosure documents as marketing pieces used to make the property more saleable.  Adjectives like “minor ponding,” “hairline cracks,” and “slight traffic noise,” are used to describe a garage that floods annually, a shifting foundation, and a house backs up to a major freeway.  In good times, these adjectives are sometimes overlooked.  Today, they are the foundation (pun intended) of an expensive lawsuit.

Now, I am not a real estate attorney, nor do I play one on T.V.  However, I do have 15+ years experience in selling homes and making sure that I don’t put my clients in a situation that might cost them down the line.  These are some of the steps that I use to make sure that my client is protected:  Note: you should check with your own real estate agent for their recommendations.  For those going it alone, I would strongly recommend talking with a real estate attorney (not your brother’s room mate who is a Trust and Wills attorney).

• Disclose everything.  As a seller, if you are questioning whether or not an issue should be disclosed, the fact that you’re questioning it, probably means that you should disclose it.
• If you have any reports, inspections (regardless of age) on the property, included them as part of your disclosure.
• Don’t leave any questions on the disclosure documents blank.  It makes a buyer wonder what you are hiding.
• Complete the documents legibly and with the same pen (same ink color).  Illegible writing makes a buyer wonder what you are hiding.  Different colored inks could indicate that the disclosure information was changed or added after the fact.
• If there is a change or update to a disclosure, make sure it is put in writing.  Have it dated and acknowledged by the other side (e-mail works great for this).
• Complete all of the disclosure documents at the same time and give them to any potential buyer prior to a buyer writing an offer.

Your real estate professional should review the disclosure documents with you in order to get clarification on the issues contained in the disclosure documents.  If he/she doesn’t, ask him/her why.  If he/she hasn’t read your disclosures, how can he/she intelligently answer questions about your property.  Remember your agent has a fiduciary responsibility to maximize your sales price.  Your agent must do the things necessary to allow you to keep all proceeds from the sale of your home.  In addition to having a good marketing plan, web presence, experience, etc, a good real estate agent must do all the things necessary to keep you out of any future legal problems.