Anatomy of a Real Estate Lawsuit: Disclosure Notice

The seller’s disclosure notice is almost always Exhibit A in lawsuits against sellers and listing brokers.

To understand why, we need to examine the normal factual background and the legal basis for misrepresentation claims.

Factual Background and Cast of Characters 

The buyer and seller close on the sale of the property and, at some point after closing the buyer discovers a problem with the property, and they claim it was not properly disclosed to them.  Some common examples of material defects that lead to lawsuits are water leaks in the roof and/or windows and foundation movement.

You may wonder how a buyer knows whether the seller was aware of the material defect?  Good question.  Buyers frequently talk to their new neighbors and sometimes they are told the defective condition was also a problem for the seller before they sold.  The buyers feel as if they have been deceived, so they retain a lawyer to sue the seller, the listing agent, their own agent and the inspector.

Legal Claims

Buyers can bring many different legal claims including fraud, negligent representation, and violations of the Deceptive Trade Practices Act.  In fact, the Texas Legislature drafted a statute specifically designed to help buyers who find themselves in this position, called the Fraud in a Real Estate Transaction. These claims, while separate, all share a common concept — misrepresentation.  In other words, for the buyer to prevail, they must prove the seller and/or listing broker made a material statement that was false.

Therefore, we know most residential real estate lawsuits stem from a representation regarding a defective property condition that was not true.  The disclosure notice is the document that contains the most, if not all, the seller’s representations about the property’s condition and it’s material defects.  In fact, the disclosure notice contains over 100 representations about the property.  Due to the sheer number of representations on the disclosure notice the fact that some of the questions on the disclosure notice are not exactly clear or easy to understand, sellers frequently make mistakes…which leads to inaccurate disclosure and cause serious issues for both buyers and themselves.

With some commonsense guidance these mistakes can be easily avoided. This is exactly why Sellers Shield™ was founded. Our free interactive seller tools guide home sellers through the disclosure process to help them to avoid making critical mistakes when disclosing the condition of their home.

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