Minimize Your Risk

Protect yourself as a professional when listing a defective home

On Behalf of | Sep 23, 2020 | Real Estate Law |

At first glance, listing a home with serious defects might seem like a questionable decision. Sellers can often make back any money they invest in repairs by commanding a higher asking price. Many buyers seeking a residential property are looking for a turnkey property that is basically ready to move into after closing.

However, there are plenty of people living in homes with significant defects that need to sell their property and other people who are happy to buy homes in fixer-upper condition. There is nothing wrong with taking a new listing for a property with known defects as a real estate professional.

The seller can move on from a property that they don’t have the time, health or money to repair, while the buyer can potentially get a property at a discounted value with the potential for accrued value through sweat equity. If you intend to represent a seller listing a property with known and substantial defects, you need to protect yourself and the sellers through proper documentation.

You and the sellers should disclose the defects

The sellers have an obligation to honestly report the condition of the property when they fill out the disclosure provided to potential buyers. This document includes sections to note all known defects to different parts of the home.

You will most likely upload that document for easy access by other real estate professionals when creating a digital listing. However, you may want to acknowledge significant defects in the marketing copy for the property.

For example, noting that the property is a bargain because it needs to have foundation repair done or that the roof would need to be replaced for it to qualify for traditional mortgages will help ensure that no one wastes anyone’s time in the transaction. Additionally, it will protect you from claims that the buyer somehow didn’t know about the defect at the time of the purchase.

Some people want to buy a property in need of work

Including information about what work the property needs and the potential costs involved in a listing or marketing materials, as well as in the seller’s disclosure, can benefit both you and the buyer through transparency and by helping you reach the perfect buyers.

Real estate investors are eager to snap up properties at reasonable prices that require financial investment or significant labor. So long as the right disclosures take place, there is nothing particularly risky or problematic about representing a seller with a home in need of a little TLC.