Property Disclosure Ranks High Among Real Estate Legal Disputes

When it comes to lawsuits, real estate agents and brokers tangle mostly among themselves. But a good number of cases are brought by disgruntled buyers or sellers.

In the latest edition of “Legal Scan,” a biennial research report by the National Association of Realtors (NAR), it’s clear that agents, brokers and their clients either don’t fully know all the laws, or choose not to follow them.

Perhaps the biggest source of disputes involves disclosure issues. Property condition disclosures, for example, are a significant source of disputes, particularly when the house involved is either a foreclosure being resold by the bank or a short sale in which the seller owes more than the place is worth.

Disclosure problems involving underwater owners were deemed the most significant of all legal issues discussed in the 63-page report. Two-thirds of the respondents expect the level of disputes to rise, if only because short sales are not expected to go away any time soon.

Often, according to the report, the upside-down seller “sees no benefit” in giving up any information about the property. And sometimes, because the short-sale process takes so long, the property’s condition changes while the contract is pending.

Lenders are blamed for much of the tumult because, as one respondent put it, “they are unresponsive and do not approve transactions in a timely manner.”

But real estate agents take it on the chin too. Said another respondent: “Too many agents are dabbling in short sales without training and are not properly advising sellers of options and recommending legal counsel.”