I know that may sound like a silly question since a real estate agent should not be responsible for items that break following the closing. That is exactly why people buy home warranties. Recently, however, we have been inundated with calls from real estate agents who have clients trying to claim against them for home repairs that take place post-closing. Some of these problems occur as many as two years after closing.
Today’s post is in part a legal tip and part just to say that Blair Cato feels your pain as a real estate agent and understands what you may face each day.
Last week one of the top agents in Columbia contacted me concerning this type of claim. The agent represented a buyer in 2016. Almost two years after the closing, the HVAC unit broke. The buyer-client contacted the agent saying she should pay for the repair since it should not have broken and because he did not conduct an HVAC inspection prior to closing. The buyer is of the belief that she did not tell him to do an inspection. This agent always advises buyer-clients to conduct full inspections, but she did not have evidence of this in writing.
Unfortunately, this seems to be a more frequent occurrence in our industry these days. While most clients are reasonable and understanding, it seems to be a growing trend that some clients are just unwilling to accept the fact that sometimes things just break. Even when no one is at fault, some clients nevertheless seek to find a scapegoat.
Luckily for the agent I think several factors protect her in this situation. First, SC Code §40-57-350(B) changed the standard for disclosing material adverse facts from “knew or should have known” to the more stringent standard of “actually known.” So, in order to place liability on the real estate agent, the buyer will have to show the real estate agent actually knew the HVAC unit was broken. It is unlikely the buyer will have any evidence of such. In cases where the house and HVAC units were inspected prior to closing, the buyer would have to prove that the real estate agent, who never inspected the unit and is neither licensed nor trained to do so, actually knew the problem with the unit existed even though a licensed HVAC inspector and home inspector could not find the issue. That is an awfully high hurdle.
Secondly, Paragraph 33 and 34 of the Central Carolina REALTOR Association contract and Paragraph 26 of the South Carolina Association of REALTORS contract clearly state that the agent gives no warranties or representations of any kind expressed or implied as to the condition of the property. Both contracts also have extensive provisions discussing the buyer’s right to conduct inspections under the due diligence provision.
Lastly, suppose the buyer somehow did not know he could and should conduct inspections. He still has to show that had he done an HVAC inspection in 2016 the issue today in 2018 would have been found. I think that is extremely unlikely an HVAC company would say that the item that broke today would have been discovered almost two years ago.
Our advice to real estate agents is to not forget to also protect yourself, not just your clients. Strongly advise your client to have inspections done and have them purchase a home warranty to help cover these types of issues. Never make any representations about the quality of any component of the house. Instead, reference the inspection reports. You may want to consider creating a form the client signs prior to signing a contract that discusses all of the things you recommend such as surveys, warranties and inspections. If your client does not want to conduct any inspection or only some inspections, have the buyer sign a form that you strongly advised them to conduct all inspections but they have decided against your advice not to do the inspections. Absent the form, send the client an email confirming same. Today it is more important than ever to protect yourself.
IF YOU ENJOY READING BLAIR CATO’S FREE LEGAL TIPS, TRY US FOR A CLOSING!
Photo by sodai gomi 