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Are Agents Liable for Seller Disclosure Forms?

Both the seller and the listing agent may be responsible for disclosing and required information to the home buyer prior to the sale. Disclosure forms vary by state and there are also some federal requirements surrounding lead paint in homes built before 1978. This results in multiple forms that must be filled out, filed, and sent to prospective buyers. 

But as a real estate agent who primarily uses the seller as a source of information on the property, what kind of legal liability do you face? In many cases, it depends on the state in which you work.

Understanding the law and your ethical responsibilities can help you avoid potential legal action from buyers further down the road.

Know Your State Codes

Each state has its own seller disclosure forms and in many of them, the licensed real estate agent is equally liable to disclose any adverse property conditions. Generally, this includes things like:

  • Anything that would adversely affect property values (such as nearby construction projects)
  • Any structural integrity issues
  • Any potential health risks

Of course you’re not the owner but if you do have any awareness of these issues, it may be your responsibility to disclose them. In other states, real estate agents may expressly have no liability when it comes to sellers disclosures. In California, real estate agents aren’t even allowed to advise sellers on how to fill out the forms. It’s an important distinction to understand at any point in your career.

No matter where you live, at a minimum it’s your responsibility to facilitate the disclosure process. Make sure you understand the timing requirements so you don’t inadvertently breach your duties. Also stay on top of your state’s laws in this area in case any changes in disclosure requirements are implemented. Being active in professional associations is a great way to get any relevant legislative updates.

Present the Most Recent Disclosure Forms

States may change seller disclosure forms and the information required on them. While this isn’t something that’s likely to change every year, it’s still crucial to always provide your clients with the most up-do-date information.

However, changes in the property itself may also impact the relevance of the disclosure form, especially if the seller filled out the paperwork at the time of listing. 

While this step is often completed in order to circumvent an early termination right from the buyer, it’s not always the best solution for an accurate process in the long-term. 

For instance, an updated disclosure should be signed upon finalizing an offer with a buyer, even if one has already been filled out before. This helps to account for new discoveries and changes in condition of the home, particularly if the house has sat on the market since the initial disclosure was signed.

Keep Accurate Records

It’s not unheard of to see a story of a seller’s agent who sent the buyers the wrong version of the disclosure form. As a real estate agent, you may be fielding disclosure forms from multiple sellers at once, with different versions signed in person, sent over email, or faxed to your office.

Get organized with your record keeping to avoid any potential litigation simply because you mixed up your paperwork. Also make sure you keep everything dated properly, especially when there are multiple versions of the same document floating around with different stages of completed signatures.

An easy way to achieve this is by using a disclosure-specific platform like Sellers Shield. It eliminates details from falling through the cracks by giving you an update on disclosure form statuses for each of your clients. It also saves the most recent version on your dashboard. You don’t have to worry about paper copies or multiple electronic files in varying forms of completion. It’s also easy to maintain records for the required time period. For instance, Texas real estate agents must keep records for four years.

Be Aware of Your State’s Statute of Limitations

If a buyer has an issue with the home after the purchase, states vary in how long they have to bring suit to the seller, the listing agent, or both. Some states have a limit of just one year, while others can go up to 10 years.

Even with time limitations in place, buyers can still bring suit against a seller and potentially the listing agent, but it should be dismissed in court because of the age of the contract. Being active in real estate networking groups and professional associations is a great way to stay on top of the rules and regulations of your state.

Bottom Line

In most cases, it’s very difficult for a litigious buyer to prove that a listing agent had prior knowledge of major defects of a home. At the same time, it’s best to avoid the potential for a lawsuit by staying up to date on the most current state and federal disclosure requirements. Even if you win the trial, the time, money, and stress involved with a lawsuit is best to be avoided at all costs.

A hugely effective step in protecting yourself is to be accurate and organized with your record keeping, even years after a purchase is finalized. There’s no way to remember the details of every house you’ve sold over the years, so a good system of records makes a strong defense.

While liability insurance is certainly a wise investment either for yourself or as a member of a larger firm, it doesn’t replace executing proper due diligence when it comes to facilitating the seller disclosure process.

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