Full Disclosure: Is a Non-Disclosure Mediation Worth It?
July 2, 2021
One of the most common questions I get from Buyers dealing with disclosure problems is whether it’s worth it to pursue the Seller. In most cases, the answer is resoundingly yes, because it comes with benefits that most Buyers don’t know about.
First, Buyers considering a false, misleading, or incomplete SPDS need to know how effective the Arizona Association of Realtors dispute resolution process is. The first step in the process is mediation, and those mediations are overwhelmingly successful. Well over 90% of mediations result in settlement. So, Buyers have an overwhelming chance of receiving compensation if they pursue it.
And most Buyers are entitled to far more compensation than they realize. Typically, Buyers are fixated on the cost of correcting the undisclosed feature. But if they’re well-represented, we can find them compensation they didn’t realize they were entitled to receive.
For Buyers who want to keep the house and just receive money damages, compensation can include:
- Diminished Use—While the property is in disrepair, Buyers don’t have the full ability to enjoy it. In other words, if the property were offered for rent, would someone pay less for it because of the defect? If that is the case, the Buyer is entitled to compensation for that. Significant problems may render the property unrentable, in which case damages can escalate fast. Even minor problems can be significant. For instance, if one bathroom is unusable, that can drastically reduce rental values, even if it’s only a small portion of the space. Many Buyers leave money on the table by failing to quantify and claim this compensation.
- Mental or Emotional Distress—Dealing with a significant problem in your home is distressing. It distracts you from the rest of your life. I have spoken to Buyers who lose over 40 hours per week worrying about how Real Estate Fraud will affect their property value, their retirement, or their quality of life. As long as you’re dealing with a primary home, that stress is compensable.
- Alternate Housing—Depending on the defect, some Buyers may need to stay in a hotel while repairs are completed. These costs are compensable.
- Stigma Value—Some problems alienate potential Buyers even if they’re repaired. Even if the problem is repaired, it will still need to be disclosed to future Buyers. If that disclosure would dissuade potential Buyers, then there’s a stigma damage that the Buyer can recover.
- Lost Value at Time of Purchase—Often, an undisclosed defect affects the value of the property in excess of the cost of repair. And the diminished property value is available as a measure of damages. The more significant the undisclosed defect is, the more likely it will be that diminished value yields additional damages.
Is mediation worth it? Buyers almost always recover enough to be made whole. It really just comes down to whether the Buyer values his house. If his home is important to him, then mediation is generally worth it.
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.