Full-Disclosure: Managing Risk and Winning Referrals on Disclosure Claims

Written by Columnist:

Samuel Doncaster

“Within every adversity is an equal or greater benefit.
Within every problem is an opportunity.
Even in the knocks of life, we can find great gifts.”

–Napoleon Hill

Most brokers I know have an initial instinct to treat buyer disclosure inquiries as a risk management problem. But if it’s handled correctly, you can alleviate the risk and help the buyer become a raving fan who gives multiple referrals back to the brokerage.

First, keep in mind that most buyers are good people simply looking to make sure they got fair value in their real estate purchase. A disclosure dispute is unfamiliar territory for them. But with good leadership, you can let them know what to expect, and guide them through the process. If they feel you’re taking care of them, they aren’t likely to make a claim against the brokerage. So, a good broker can turn this dispute into a chance to wow a client with service after the sale. Here’s five things a consumer will likely appreciate:

1. Explain the mediation process. Most buyers haven’t been through a real estate mediation, so they don’t know what to expect. But it’s actually pretty simple. The Arizona Association of Realtors publishes a packet that helps consumers start mediations. Have a copy handy, and be prepared walk your buyer through it. Explain that once mediation occurs, the mediator is someone who helps the parties negotiate and try to find an outcome. In addition, settlements are very common. When a mediation is handled properly, sellers routinely do the right thing.
2. Help them organize their file. Many buyers don’t keep good copies of their files handy. Even the ones that do often don’t understand which documents are important. Depending on the nature of the dispute, the following may be helpful: a) Full AAR contract with all amendments or addenda, b) SPDS, c) BINSR and response, d) All inspection reports, e) Any appraisal reports, f) Estimates to repair non-disclosed conditions, if available, g) Invoices, estimates, and scopes of work associated with prior repairs, h) Title policy, including schedule B, i) Any prior correspondence related to the disclosure dispute. Gather these documents for your customer, and offer to provide a copy of the entire file directly to their lawyer.
3. Reassure them. Often, the most important thing for peace of mind in a situation like this is re-assurance. Even something as simple as letting them know that their problem is so common that the contract has a standard mediation clause to resolve it often goes a long way.
4. Offer to attend the mediation. Many mediations end in a few hours or less. And, if your client has counsel, you wouldn’t even need to stay the whole time. But showing up and telling the mediator a few good things about the client and case can make a world of difference.
5. Be ready with a good referral. You’ve already expanded your network to include contractors, inspectors, and all sorts of trades. In this day and age, disclosure disputes are becoming common enough that you want a good attorney to refer the client to as well. Not only will clients feel like that’s great service, but, getting the client to an attorney early shifts responsibility for pursuing the non-disclosure action from your brokerage to another business that’s set up to handle that type of risk. And, if you actively give the client a warm hand off, you’ll still be a hero.

By the time you finish all five steps, you’ll have done everything you can to mitigate risk for your business. And the most important thing is that you showed the client you care. On top of protecting the brokerage, that generates referrals and future business.

Samuel Doncaster is a trial lawyer who’s very active in real estate fraud cases. He routinely helps people get their money back when they’ve been cheated in real estate deals. If you have a client who needs help with a disclosure issue, you can help them set an appointment by calling 480-666-4054 for a strategy session. That strategy session comes with a risk-free, 100% money-back guarantee.