When Do Past Repairs Become Defects To Be Disclosed?

A seller contacted a real estate agent to act as the seller’s agent in a residential home sale. At various times over the years, the seller would notice water intrusion in the front door area. The seller would make repairs himself by re-caulking the front door and window area.

The leaking and repair cycle occurred three or four times in total, but the problem never completely went away. The seller viewed the repairs as simply a home maintenance issue. The seller never hired a contractor to investigate and fix the problem. One month after closing on the sale of the home, a fierce rainstorm produced significant leaking in the front door and front window area of the home.

Disclose a “Fixed” Problem?

The seller’s disclosure notice asks if the seller is aware of any defects in the roof or windows, among many other areas of the property. The seller asked the real estate agent whether the past leaking and repairs needed to be disclosed, telling the agent that the leaking had last occurred about two years ago but had been fixed. The agent advised the seller that if the past leaking was fixed, then it did not need to be disclosed. The buyer sued the seller, and the seller filed a third-party complaint against the real estate agent alleging that the agent had instructed the seller on how to complete the disclosure form.

Don’t Weigh In on Disclosure Issues

The seller’s disclosure notice says the seller acknowledges that the statements in the notice are true to the best of the seller’s belief and that no person, including a broker, has instructed or influenced the seller to provide inaccurate information or omit any material information.

In this case, the agent gave an opinion, implicitly if not explicitly, to the seller about what qualified as a defect. This opinion was given in good faith with no intent to hide information or trick the buyer. Nevertheless, the agent did not think clearly about what was being said and whether a repeated problem that has been “fixed” is close enough to a defect or whether to advise the seller to seek specific legal or a contractor’s advice.

After lengthy litigation, the seller settled with the plaintiff-buyer for a substantial sum. The real estate agent made a modest contribution to the settlement via the agent’s insurance carrier after their deductible was exhausted on legal fees.

Consider Your Options

Ideally, you should not get involved at all in the seller’s completion of the seller’s disclosure notice unless you know of an undisclosed defect. It is the seller’s responsibility to complete the document.

The Texas Real Estate Commission says to review the seller’s disclosure notice to make sure the seller has answered all questions and has filled in relevant information. If the seller has left some items undisclosed, you should ask the seller to complete the missing disclosure items. If the seller is unwilling to disclose known defects, you and your broker should decide whether this is a listing you wish to market, as this likely violates the law.

Source: Texas REALTOR® Magazine