Clients choose a real estate agent based on a number of factors, but one is their knowledge of the area. If you’re selling property in an unfamiliar area, you may miss critical information that could have an impact on a sale or even lead to a lawsuit. If you’re called to sell in an unfamiliar area, make sure you’re aware of your risks and take all the necessary steps to protect yourself.
Potential Pitfalls of Selling Property in an Unfamiliar Area
Clients turn to you for advice. They want to know things about the neighborhood, noise, crime, the schools, upcoming changes in the area. Do you know what you’re talking about?
What’s the neighborhood like?
You need to do your homework on the area, so you can support clients. Some neighborhood issues need to be disclosed. You need to know when to disclose and when to refer clients to local data about crimes or schools, for example. And if you don’t know the answer to a question, it’s better to say so than provide the wrong information.
Are you up on local regulations?
Real estate law differs between states, but there can also be differences between counties or municipalities that affect you. For example, Colorado has county-specific septic system permitting and inspection regulations. If you’re selling in different counties, you’d need to be up-to-date on all locations. Not being aware of statutes and regulations could land you in hot water.
Will key features and the value of the property last?
While you can’t answer either part of this question for sure, you should know about imminent changes and activity that may cause a drop in value. For example, if you sell buyers on a view, but planned new construction is going to take away that view, you’re likely to see a lawsuit.
Home buyers tend to shy away from homes near fracking sites. If fracking is nearby or being considered, your buyers are going to want to know this. If you’re unfamiliar with the area, you may be unaware, but buyers will expect you to know.
What are the major risks to property in the area?
If you know an area, you’re more likely to be up on things like environmental conditions or natural disasters common in the area, such as:
- Flooding
- Hurricanes or other major storms
- Wildfires
- Earthquakes
You may need to disclose that the property is in a high risk zone, which may cover part of the state or even certain addresses within a municipality.
These are some key issues you should consider when working to sell property in an unfamiliar area.
How to Protect Yourself When Selling Property in an Unfamiliar Area
Do your homework. Make sure you’re aware of any state requirements and county or local codes. Learn about the area, especially related to any issues that could raise a red flag for buyers.
Get necessary disclosures in writing. State law varies significantly, and some states have very specific disclosure regulations. Consult with your state’s real estate commission for additional information about disclosures.
If in question, disclose. Sometimes sellers ask if they should disclose something. The answer is yes. If you know about a potential problem and advise your client not to disclose, you can be held liable.
Do not fill out disclosure forms for clients or any misinformation can be traced back to you. Make sure sellers fill them out. You should review the completed forms carefully and ask your clients about any common risks they have not commented on. You can also ask them to expand on any issues they’ve documented. Have clients document in writing that they have disclosed all property issues to you.
Check your real estate E&O insurance coverage and get legal advice if necessary. If your clients get sued, you probably will too. Do you have real estate Errors and Omissions insurance to protect yourself and your business?
With CRES E&O, you can also give your clients Seller’s E&O insurance to help protect them if a buyer decides to sue. CRES clients can call CRES ClaimPrevent® Legal Services 7 days a week to receive advice from an experienced attorney. If you’re wondering if you need to disclose something about property in an unfamiliar area, you’re worried about the information you have or haven’t shared, or you’ve heard back from an unhappy buyer, wouldn’t you like to know where to turn?
Contact CRES at 800.880.2747 for the real estate E&O policy that’s right for you. Put the resources of one of the largest insurance brokers in the world to work for you!
What challenges have you faced selling property in an unfamiliar area?
