What to do when a vendor doesn’t want to disclose issues about their property

As we all know, selling a property can be highly stressful and emotional for vendors. Extra factors such as selling because of a marital split or selling because an offer has already been accepted on a new home, add extra pressure but do not excuse vendors from hiding issues about their property.

REA qualitative research shows that real estate professionals play a highly influential role in whether a vendor discloses a problem with their home.

The sellers we spoke to had these justifications for not disclosing issues with their property:

• The onus is on the buyer or agent to find out information about the property – rather than the onus being on the vendor to disclose.
• Vendors don’t have to disclose anything they are not directly asked about.
• Vendors can get away with it and it is okay to do so.
• It couldn’t be proved that the vendor knew there was an issue.
• The issue is too minor to need to be disclosed.
• Achieving the sale is so important to the vendor that they can rationalise not disclosing.

As a licensee, your knowledge and expertise are crucial to the successful sale of a property. While most licensees adhere to their own disclosure obligations, we understand that an agent or salesperson can only disclose issues the vendor has made known to them. This is why it’s essential to take thorough steps to encourage full disclosure from your vendor clients.

When talking to vendors who chose not to disclose, we asked them what the licensee could have done differently to encourage them to reveal the issue. Here’s what they told us.

Be clear about the consequences

Most vendors surveyed knew little or were completely unaware of any potential consequences of not revealing a problem with their home. Licensees should make their clients aware of the very real consequences and how these might affect them and their family. It’s a good idea to provide past examples of vendors being held to account for failing to share important information.

Probe the vendor and ask specific questions

Simply asking “Are you aware of any issues with this property?” is too broad. Licensees should dig deeper and ask direct, specific questions. Ask about things like minor or major renovations, past leaks or water damage or problems with the land such as drainage issues or erosion. We have seen some agencies put together a checklist of topics and questions to cover off with vendors, which can be effective. Vendors who did not disclose told us they (incorrectly) believed that if they weren’t asked directly, it was "OK not to bring it up". Our research shows that sellers who are asked direct questions are more likely to answer honestly.

Lower the bar

“Tell me, even if you don’t think it matters.” Actively encouraging full disclosure means encouraging vendors to reveal small issues they don’t believe are a "big deal". One vendor, who knew their back lawn flooded a bit in high rain, chose not to disclose, saying, “We thought it might impact the sale and we didn’t think it was that big of an issue.”

Use a litmus test

“If you were the buyer, would you want to know?” Many of our research participants agreed that the issue they didn’t disclose when selling is something they would have liked to have been told if they were the buyer. One vendor, when asked to reflect on their sale and the issues they did not disclose, said, “Yeah you have me quite conflicted there, like as if I was doing something dishonest.”

Another outcome of the research that’s worth noting is very few vendors say their lawyer spoke to them about disclosure. Sellers told us they relied almost entirely on their real estate agent making them aware of their disclosure obligations and potential consequences, which further highlights the important role played by licensees.

Actively seeking disclosure from vendors means you’re less likely to be caught up in a complaint or other proceedings. Even when a licensee hasn’t been made aware of an issue with a property, the buyer may still make a complaint. We know this can be a highly stressful process for the licensee, regardless of the outcome, which is why we encourage you to have robust processes in place to encourage full disclosure from your vendors. We’ve also seen licensees caught up in a civil action between buyers and sellers when an issue wasn’t disclosed about a property. As they say, honesty is the best policy and will help ensure a smooth and happy sale for your buyers and vendors – and yourself.