Anatomy of A Real Estate Lawsuit: Disclosure Statement

The Seller’s Disclosure Statement Is Almost Always Exhibit A in Lawsuits Against Sellers, Listing Agents and Brokers.

In recent years, post-home sale disputes, mediations and lawsuits have been steadily increasing, and it’s crucial for Realtors® to be prepared.

Research by PAR’s partner, Sellers Shield™, indicates a significant national uptick in post-home sale claims due to changing real estate market conditions. In 2023, Sellers Shield™ recorded a 38% increase in claims in all the states they operate in, compared to the previous year, primarily for homes built between 2000 and 2010.

In Pennsylvania, Sellers Shield™ experienced an astounding 75% increase in claims during the same period. Remarkably, all claims from Pennsylvania were associated with homes built between 1920 and 1998.

The root cause of most of these claims is typically a perceived misrepresentation during the disclosure process. The statement is the document that contains most, if not all, of the seller’s representations about the property’s condition and its material defects. In fact, the Pennsylvania Association of Realtors® Seller’s Property Disclosure Statement contains over 100 representations about the property. Due to the sheer number of representations on the disclosure statement and the fact that some of the questions on the disclosure statement are not always easy to understand, sellers frequently make mistakes… which leads to inaccurate disclosures and causes serious issues for both buyers and themselves.

These simple mistakes can then create potential legal exposure for the seller and lead to post-sale disputes. Buyers can bring different legal claims including fraud, negligent representation and violations of the Unfair Trade Practices and Consumer Protection Law. Some common examples of material defects that lead to lawsuits are water leaks in the roof and/or windows, foundation movement and mold. These claims, while separate, all share a common concept — misrepresentation. In other words, for the buyer to prevail, they must prove that the seller and/or listing broker made a material statement that was false.

That’s why the Pennsylvania Association of Realtors® stresses the importance of providing accurate, complete and honest disclosures. Here are some tips for sellers in providing an accurate disclosure statement:

1. Disclose what you know and should know – Always remember that honesty is the best protection against lawsuits. Most homes have defects; it’s not a deal-breaker.
2. Be honest and accurate – Be clear and detailed about the problem and any repairs made.
3. Use Sellers Shield™’s Gold Standard Disclosure Process™ to help prevent seller mistakes, limit agent liability and save a ton of time.

Your membership with the Pennsylvania Association of Realtors® provides you with FREE access to Sellers Shield™’s Gold Standard Disclosure Process™. It guides you through the disclosure process, helps prevent common mistakes and ensures the preparation of complete and accurate disclosure forms. Sellers Shield™ also provides an optional product called Home Sale Legal Protection™ to sellers. When sellers have this protection, they can contact Sellers Shield™ at the first sign of trouble, even just a verbal threat from the buyer. Sellers Shield™ will then gather all the information about the issue, hire a local, expert real estate attorney and pay up to $75,000 of the legal fees!

You can join an exclusive Sellers Shield™’s Anatomy of a Lawsuit webinar for the Pennsylvania Association of Realtors®. Led by Bo Blackburn, co-founder of Sellers Shield™ and an experienced residential real estate attorney, the webinar offers in-depth insights into real estate lawsuits and effective strategies to avoid them.

Stay prepared, stay informed and keep providing the top-tier service your clients expect from a member of the Pennsylvania Association of Realtors®.