Conflict resolution in real estate

How to handle sellers who refuse to disclose defects

Editor’s note: This is the first of a two-part series.

When you find yourself in a confrontational situation, your success in resolving the conflict depends upon the approach you use. The key to success is identifying which approaches are the most effective.

A number of years ago Eric Berne wrote a book called "The Games People Play." Berne’s theory of transactional analysis has powerful implications for how you conduct your real estate business, especially when it comes to resolving conflict.

Berne identified three different strategies that describe how most people deal with conflict. The three ways you can approach the conflict were based upon what he called the "Child," "Adult" and "Parent." Here’s an example of how Berne’s approach plays out:

Assume that you show one of your listings immediately following a major rainstorm. During the showing, you notice three different leaks in the upstairs bedroom that is currently not in use. After the showing, you contact the seller to inquire about how she wants to handle the leaks.

Adult-Adult
In Berne’s model, the best way to resolve issues is to have an Adult-to-Adult transaction. The example below illustrates an Adult-Adult transaction.

Sally Agent: "Hi, Donna. This is Sally Agent. We just had a showing. When we went upstairs into the empty fifth bedroom, there were three different places on the ceiling where there were moisture marks. One of them was actually dripping. I can’t diagnose the cause — it could be a water pipe, a roof leak, or perhaps something else."

Donna: "Sally, thanks for letting me know. We had a roofer out about six months ago to repair that part of the roof. This is the first time it has leaked that I’m aware of. I will contact the roofer immediately to see if he can locate the problem and get it repaired as soon as possible."

Sally Agent: "Donna, you will have to amend the disclosure statement to show that there was a leak. Would you like to continue to show the house and let people know that you are getting the property repaired or would you prefer to wait until the work is done?"

Donna: "Since we have to make the disclosure anyway, let’s continue to market the property. The roofing company gave us a warranty, so we can attach that to the disclosure as well as the receipt for the repair. I will take care of this right away."

Sally: "Thank you. I will email you a new disclosure statement so you can update it right way."

In this example, both parties work toward a solution using what Berne described as an "Adult-Adult" transaction. Compare the next example to see how the interaction changes when you have a Child-Adult transaction.

Child-Adult
A common source of transaction-related issues results when the agent attempts to stay in the "Adult" mode and the client moves to "Child." Here’s the same scenario except the seller moves from "Adult" to "Child." Once Sally describes the issue, notice how Donna responds:

Donna: "Sally, we don’t have any money for a new roof. Besides, once it dries out, we can just take a little bleach to the ceiling to remove the stains and no one will know any differently."

Sally Agent (still in adult role): "Donna, the law in our state requires both of us to disclose any issue with the roof. If you don’t have the money to fix the roof, then a different alternative is to get some bids for the repair so the buyers have an idea about how much it will cost to fix the issue."

Donna: "OK, I can look into getting it fixed. There’s no need to change the disclosure statement because the problem will be taken care of."

Sally Agent: "Donna, I have to disclose this even if you don’t."

Donna: "If that’s the case, then we just won’t sell."

Sally Agent: "Donna, before you take the property off the market, please be aware that if you list with another agent, you are still required to disclose this issue. If you hide the problem, you can end up in court."

Donna: "I’m taking it off the market."

Sally Agent: "If that’s the case, I will need to obtain a release from my broker. I will have that for you tomorrow."

This interaction illustrates the "Child" response. The first impulse is to cover up the problem or deny that it’s an issue. The client makes the judgment based upon the probability of getting caught. Chances are she will bleach the ceiling and not disclose the issue to the next agent who takes the listing.

Here’s an example of how dangerous a situation like this can be: Some sellers in Southern California sold their hillside property. The buyers did a geological inspection and were advised that the property could collapse in a major earthquake. The buyers canceled. The sellers relisted the property and failed to disclose that there was a geological report citing the serious issues with the property. A few months after the property closed, it collapsed during the Northridge earthquake and two of the owners were killed.

The key takeaway here is to always stay focused on being the "Adult." If a client tries to persuade you to avoid making a disclosure, outline the potential consequences. If the client refuses to be persuaded, terminate your relationship. The risks are simply too costly in terms of both liability as well as your reputation in your community.

Would you like to know more about Berne’s theory and how it applies to your real estate business? If so, don’t miss Part 2.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of Realtors’ No. 1 best-seller, "Real Estate Dough: Your Recipe for Real Estate Success." Hear Bernice’s five-minute daily real estate show, just named "new and notable" by iTunes, at www.RealEstateCoachRadio.com. You can contact her at Bernice@RealEstateCoach.com or @BRoss on Twitter.

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