There is certain information that real estate brokers are legally required to disclose to buyers and sellers. Full disclosure provides parties with the information needed to properly negotiate the price and assess the property’s suitability for their needs. Agents must disclose all identified hazards on a property along with any factors that may impact the property’s price. With the risk involved, professional liability insurance for real estate brokers is a must.
What Information Must be Disclosed?
Full disclosure is based on the seller’s obligation to disclose any property defects and any other important information that could have an effect on a party’s decision to enter into the deal.
The presence of known hazards and defects must be disclosed. You do not have to search for unknown defects. It varies upon state but typically real estate brokers must disclose the following:
- Lead-based paint if the house was built before 1978
- Termite, pest, and mold issues,
- Structural defects (such as roof and foundation issues),
- Sewer and plumbing issues,
- Natural hazard risks (such as being located within a flood or seismic zone),
- The presence of convicted sex offenders in the neighborhood (under Megan’s Law), and
- Any other relevant issues.
It’s in your best interest to disclose all known and suspected hazards and secure professional liability insurance for real estate brokers. Failure to disclose can result in a failed sales transaction and litigation. Disclosures should typically be in writing. The state may be able to provide a standard form to complete and give to prospective buyers. Real estate brokers should provide the property disclosure form to the seller and assist in its completion.
Real estate brokers also have a fiduciary duty to disclose other information that would impact the value of a sale, such as:
- All offers made on a piece of property,
- The buyer’s willingness to increase an offer,
- The seller’s willingness to accept a lower price,
- Whether the seller has an urgent need to sell the property,
- Whether the broker has any conflicts of interest,
- How long the property has been on the market,
- Estimates of the property’s value, and
- Updates on offers and counteroffers that are made.
Consequences of the Failure to Fully Disclose
Both the seller and the real estate brokers have duties to disclose. If information is withheld, the buyer or seller may be entitled to damages including:
- Compensation for lost profits, repairs, and other out-of-pocket expenses,
- Compensation for your pain and suffering, and
- Compensation that punishes the agent for intentional and very serious non-disclosures.
About Bozzuto & Co. Insurance Services, Inc.
Bozzuto & Company Insurance Services has provided business and personal insurance solutions to clients throughout California since its founding in 1981. Our experienced staff understands the unique needs that each person has when insuring their lives and their businesses, and we pride ourselves on our deeply personal customer service. We are happy to help you through every step of the insurance selection process. Contact us today at (800) 400-6394 to learn more about what we can do for you.