8 Common Legal Issues That Home Buyers and Sellers Could Face

More than 5 million homes were sold in 2019 with mostly smooth transactions. Generally, real estate dealings aren’t cause for legal action or concern. But problems can arise and you might need a lawyer.

Before you begin the buying or selling process, it’s helpful to know some of the common legal issues that come up so you can do your best to avoid them. When you know what’s expected you can double-check along the way that things are being done properly.

Here’s a list of the top eight legal problems that come up in real estate deals.

1. Incomplete Disclosure Statements

If you were to look at all of the current legal issues in the real estate industry, one of the more common complaints would be incomplete disclosure statements.

A disclosure statement is a list of all of the issues a home has that could negatively impact its value. This would include structural problems, issues with home systems (plumbing or HVAC), or pest problems. Each state has different requirements for what has to be included and your real estate agent should help with that.

When a disclosure statement is incomplete, the buyer may have a case to bring to court for compensation.

2. Missing Paperwork

When you buy or sell a house there is a large amount of paperwork that has to be completed in order for the transaction to be legal. Occasionally, there are overlooked documents that make the sale illegitimate.

Most professionals who have experience in real estate have a very clear process in place to make sure this doesn’t happen.

Missing paperwork and illegitimate sales happen more often when the buyer or seller (or both) are working without an agent. If they overlook something the other party may have grounds to dismiss the sale altogether and not be held responsible for the property at all.

3. Other Claims on the Property

A very common legal issues example is when there are other claims or leans on a property that is sold. Essentially, this means that the seller doesn’t actually have the right to sell them the right way.

Claims or leans are put on properties to cover financial problems in other areas and to protect lenders. If that’s the case, the seller must resolve the issue with the lender before they can move forward with the sale of the property.

When those who have the claim or lean learn about the sale, they can take action to get the property back or take the earnings from the seller.

4. Lack of Legal Action

Legal issues in business come up all the time and need to be dealt with as quickly as possible. But sometimes you don’t even know that there’s a problem out there. If you wait too long it can make the problem even bigger and prevent your sale or purchase from going through at all.

It’s important that the real estate company you’re working with has a registered agent on board to keep up with any legal claims. You can search “registered agent in my area” to get in contact with one today.

5. Switching Real Estate Agents

Just because you start the home buying or selling process with one real estate agent doesn’t mean that you have to stay with them throughout. You can switch if the relationship isn’t working out or you just want something different.

Be aware that just because you switch doesn’t mean that the real estate agent isn’t entitled to some of the commission from the sale.

This is rare but on occasion, a real estate agent can take a buyer or seller to court to get some of the money earned from the sale if they feel like they had a significant contribution to the deal.

6. Agent Compensation Disputes

Most people who work with a real estate agent to either buy or purchase a property understand how the agent will be compensated. That’s generally through a commission on the sale.

But occasionally there are other fees and charges added on for additional services. If those haven’t been communicated clearly and agreed upon by all parties, there can often be grounds for legal action.

These additional fees can add up and cost a significant amount of money. So many choose to dispute those charges and try to not have to pay them by taking the real estate agent or company to court to get them dropped.

7. Rental Agreements

Adding in renters to the mix of the sale of a property can open up a whole new realm of potential legal and ethical issues. There are more than 48 million rental properties across the country, so these legal issues are a common occurrence in real estate.

One of the most common involves late payments that come after a sale has been finalized. Many landlords will fight with the previous landlords over who that money actually belongs to.

There are many potential legal issues like this that can arise, so it’s important to have a lawyer look over any agreements made prior to closing.

8. Defective Financial Backing

The key to a successful real estate transaction is the financial backing of the buyer. Without that financial coverage, most aren’t able to finalize the purchase.

If problems arise with the financial approval and funding of the purchase because of an error on the buyer’s part, the seller could take the complaint to court. This is especially plausible if they dismissed other legitimate offers based on information provided by the buyer only to have that sale fall through as well.

Common Legal Issues in Real Estate

Buying or selling a home is already a stressful situation, the stakes are normally very high and parties are very invested in a positive outcome. Adding a legal issue that needs to be resolved in court will take that stress to the next level.

Luckily, most issues can be avoided with some diligence on your part to make sure things are going according to plan. This little bit of extra effort will help ensure that you have a positive experience!

If you’re interested in learning more about real estate and the best ways to buy or sell a home, check out our other articles today!