Real Estate

What To Do When The Other Real Estate Agent Fails To Disclose Issues

When you’re first starting out, you sometimes find yourself with questions that you’re a little embarrassed to ask. Other times, you don’t really know who to ask since you haven’t really found your footing at your new brokerage. We want to make sure you always have somewhere to turn and someone to talk to when the going gets tough. This is New Agent Lifesaver, here to help you navigate your first years as an agent.

All’s well that ends well? Maybe not in this case. One of our readers wrote in asking the big question: What do you do when you find out another agent failed to disclose major issues with the home being sold? It’s a touchy legal issue for sure, but what about ethics?

Dear Inman Basics Team,
An agent of mine has an accepted offer on a property with an outside agency. This home has a well on the property. The inspection period has passed; however, the buyers have found out that the well water recently tested poorly (non-drinkable), and the property will need a new well.

They then were given documentation stating that the current seller (who is also a Realtor) was made aware of this problem in November of 2021. The buyers obviously want to deduct the price of a new well ($20,000) from the purchase price. 

The seller is saying sorry, not going to happen but we’ll gladly cancel this agreement and refund your earnest money. I know this is more of a legal issue now, but I am interested to hear your thoughts.  

PS. The seller’s disclosure of property condition state no known well issues and no other issues concerning the water were disclosed throughout the transaction. When she was made aware of the information that we obtained her response was, oh yeah I forgot about that.

Broker with broken well

Unfortunately, these issues happen more often than we care for in this business. I’d like to say it’s a rarity, but this is why the importance of inspection process is critical to protect consumers, as we can never assume the seller of the property fully discloses (whether known or not known) potential issues with the home.

What do your clients want?

First and foremost you need to listen to your clients and what they wish to pursue. If they truly still want the property, then you will need to bring an attorney on board to your team to help them achieve their goals for closing on this property. Be very careful not to give legal advice and to have a curated list of local attorneys to refer your clients to.

The real estate attorney will be able to let them know what actions they can take legally and give them an estimate of costs and their chances of being successful. I would also suggest creating a well-documented timeline with evidence of this entire transaction so that if for whatever reason the seller decided to get legal advice, you and the consumer are prepared to explain your side of the story concisely.

Proving that the agent truly “did not remember” could be a very long frustrating and potentially expensive experience.

What can be done?

Now the big question of what can be done. It sounds like a full refund is in play, and that may be the path of least resistance without knowing your local and state laws. Remember sometimes the best deal you ever did is the deal you never closed. Also if the seller has forgotten about a $20,000 repair on the home, I would also question what else they are not telling your clients about the property.

As a former homeowner of an 1800s historical property that had a well-go-dry and many other unplanned upkeep and repairs, my personal advice (not legal) would be unless your clients have deep pockets for unexpected repairs, a home in questionable repair is not the best place to invest at the moment.

Water quality issues can be ongoing depending on water tables, rainfall and bacterial growth in the water sources. You could also have the additional expenses of water softening units, purifiers and purchasing drinking water.

Your state and local health department should have a wealth of information about water quality in the area that you can refer your clients to for their research. I learned the hard way that older homes are not romantic, efficient, or budget-friendly to own, and despite being experienced and thinking I was prepared, that home taught me otherwise.

Move forward with caution

The real estate associations you belong to should offer some type of legal hotline or services that you can call for some general advice about how to proceed. You can also explore filing some type of grievance against the agent selling the property, but use this route with caution as it often just creates drama, a slap on the wrist and bad feelings for any future transactions you will have together if they are a top producer with a large market share.

Whichever adventure you choose, we hope you have a positive outcome, and it sounds like you are doing a great job helping your client avoid making a costly mistake. Let’s hope that the agent in question now fully discloses the property’s issues in the future and that everyone involved can take a sigh of relief that they are perhaps $20,000 wiser moving forward.

Disclosure: I am not an attorney, broker, or agent, and this is personal advice, not legal advice. Lean on your state and local associations for legal issues in your transactions. 

Rachael Hite sold real estate in Virginia and West Virginia for seven years with a specialization in short sales and foreclosures. She has been an office manager, an agent, mortgage marketing consultant and continuing education trainer for agents since 2012. She currently specializes in private business development and digital marketing services for top producing agents and businesses in the housing industry.

Calling all new agents: We want to help solve your problems

Problems, issues and awkward situations are going to come up in real estate, and they’re not always easy to solve. Sometimes you don’t know where to turn, but please know, we’re all ears. Please send us your questions here. It can be completely anonymous (just let us know) and we’ll report back with sound advice.

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