In my experience, the problems most likely to place real estate agents and their clients at risk are rarely exotic. They often begin with an issue at the property that was known, partly known or visible before the home ever reached the market.
- A seller may believe an old leak was repaired and no longer matters.
- Work may have been completed without permits years earlier.
- A drainage problem may appear only after a heavy rain.
- There may be a question about a boundary, an addition, a structural condition or a building system that has never been fully resolved.
None of these circumstances automatically tells an agent what must legally be disclosed.
The ins and outs of real estate disclosure
Disclosure requirements vary by jurisdiction, and agents should not make legal or technical determinations outside their expertise. Some situations require guidance from brokerage leadership, legal counsel, an inspector, an engineer or another qualified professional. But they should cause a good agent to slow down and ask more questions.
Too often, that conversation does not happen until the property is under contract. By then, the issue has become more than a condition at the home. It may threaten the transaction, undermine the buyer’s confidence and create potential exposure for the seller, the agent and the brokerage. What could have been addressed methodically before the listing is now being managed under pressure.
The limits of real estate disclosure training
After nearly three decades in real estate, I have seen enough variations of this problem to believe that disclosure deserves more attention than it receives in conventional agent training. The difficulty is not simply knowing what a disclosure form says. It is recognizing an issue early, understanding the limits of one’s own expertise and guiding the client toward the right advice before the sales process begins.
This can be a difficult conversation. Sellers understandably worry that investigating an issue will create a record of a problem, delay the listing or lead to an expensive repair. They may genuinely believe that a past condition was resolved. Some will resist raising a question they would prefer not to revisit.
An agent’s role is not to frighten the seller or diagnose the property. It is to explain the practical risk of allowing an unresolved question to follow the home into the market. Addressing an issue before listing usually gives the seller more time, better information and a wider range of choices. Discovering it during a buyer’s inspection — or after closing — does the opposite.
I have also found that buyers react differently to a condition that is presented clearly than to one they believe was concealed or minimized. The physical issue may be the same, but the loss of trust changes the transaction. Once buyers begin to wonder what else they have not been told, a manageable property question can become a much larger negotiation problem.
That is why good disclosure practice involves more than handing a seller a form and waiting for it to be returned. An experienced agent knows how to conduct a thoughtful listing conversation: asking about prior repairs, insurance claims, additions, permits, water intrusion, structural concerns, disputes and other matters that may warrant closer attention. The agent also knows when to stop asking questions as a salesperson and recommend that the client seek qualified advice.
No checklist can replace judgment, and no agent will identify every possible issue. Homes are complicated, sellers do not always remember events accurately, and some problems remain hidden until an inspection or later failure reveals them. The standard cannot be perfection.
The standard should be whether the agent approached the property and the client’s representations with appropriate care.
This is where brokerage leadership becomes important. When a disclosure dispute occurs, the immediate priorities are protecting the client, managing the transaction and obtaining appropriate legal or technical guidance. Once the matter is resolved, however, most firms do what our industry tends to do: complete the file and move on.
The agents involved may never make the same mistake again. The problem is that everyone else can.
A brokerage that participates in thousands of transactions encounters an enormous range of difficult situations. Within those transactions is a body of practical knowledge that cannot be reproduced in a licensing course. Yet much of it remains with the individual agent and manager who happened to handle the matter.
We should find better ways to learn from those experiences.
What brokerages can do to improve disclosure
This does not require a large committee or a new bureaucracy. Brokerages could periodically select an anonymized transaction for a structured discussion among agents and managers. The most useful cases would not necessarily be the most dramatic. A closing delayed by a permit question, an inspection that revealed evidence of an older problem or a disagreement over what the seller knew may offer more practical value than an unusual legal dispute.
The discussion should be straightforward. What was known before the property was listed? What questions were asked? Was there a point when the agent should have involved a manager or outside professional? How did the timing of the disclosure affect the buyer’s response? What could another agent do differently in a similar situation?
Near misses deserve attention as well. A transaction may close successfully because an experienced agent recognized a problem before it became a crisis. That outcome is worth studying. If we examine only deals that fail, we miss the decisions that prevented other deals from failing.
Any review process must be designed carefully. Client confidentiality, legal privilege, document-retention requirements, insurance obligations and pending disputes all matter. Brokerage counsel and risk-management professionals should help determine which cases are appropriate for discussion and how lessons can be shared. A casual conversation that exposes a client or creates additional risk serves no one.
Agents must also believe that the purpose is improvement rather than embarrassment. That does not mean excusing misconduct or repeated negligence. Those situations require accountability. But a firm that treats every mistake or near miss as grounds for punishment will discourage the candor required to learn from either.
Our industry is exceptionally good at measuring production. We track transaction sides, sales volume, market share, days on market and almost every other quantifiable result. These figures tell us a great deal about performance, but very little about how judgment develops inside a brokerage.
That matters because judgment is one of the principal things clients hire us to provide. The ability to recognize a potential problem, ask an uncomfortable question and bring in the right professional at the right time cannot be reduced to a script. It develops through experience — but experience is more valuable when it is shared.
Real estate will never eliminate disclosure disputes or unexpected property conditions. Nor should agents be expected to act as attorneys, inspectors or engineers. We can, however, become more disciplined about preparing sellers, identifying uncertainty and learning from the cases that expose weaknesses in our practices.
A closing should not be the point at which we stop thinking about a transaction. Sometimes it should be the point at which the rest of the brokerage begins learning from it.
David DeSantis is Chief Executive Officer of TTR Sotheby’s International Realty. Get connected on LinkedIn.
