6 Pitfalls When Selling Homes That Need to be Demolished

blue crane knocking down building

Selling homes that need to be demolished can be challenging for real estate agents. There are safety issues and other potential risks to consider.

If you want to minimize your chance of facing a lawsuit, here are 6 pitfalls real estate professionals should watch out for when selling homes that need to be demolished. 

1. Not Fully Understanding What’s Wrong with the Property

Some homes need to be demolished because they don’t meet building code, permitting or zoning issues. Others have serious structural problems, sinking foundations, pest infestations, extensive water damage, black mold, or other uninhabitable conditions. 

When you’re selling a home that needs to be demolished, what’s wrong with the home may not be immediately obvious. And even you, as the real estate agent, might not be able to inspect the home if it’s unsafe and internal access is not available. That’s why you’ll need access to property reports or previous building inspections to ensure you have a good understanding of all property issues. This is important so you can answer any questions from prospective buyers. 

2. Being Unaware About Orders On the Property

As the selling agent, you need to be aware of the specifics in terms of orders on the property to demolish. This includes the timeframe to demolish the property. Awareness of these critical details is essential so you can provide accurate information to prospective buyers. Then they can make an informed decision about whether or not to purchase the property.

It’s also important to know what parts of the property need to be condemned. Is it just the home? Or do the garages and other structures on the land also need to be removed under the order? 

3. Not Being Clear in Your Marketing & Communications

When selling a home that needs to be demolished, your marketing and communications need to be crystal clear. Important information about the property, such as orders to be demolished and timeframes for the works to be completed, must be stated upfront and disclosed to potential buyers. Purchasers won’t be happy if there are surprises post-purchase. And, you don’t want a buyer suing you, because they thought they could potentially renovate the home to bring it up to code and avoid demolition!

Typically, the price of a condemned property is less, because it takes into account the costs the buyer will incur for demolition. But it’s important to be upfront about who needs to pay for the cost of demolition, so there’s no confusion. 

4. Allowing Inspections When It Isn’t Safe

Allowing inspections for potentially hazardous property is dangerous and could cause injury to yourself or others. It will likely depend on the nature of the property issues as to whether internal access would be allowed. However, no internal inspections should be done on a property that has been deemed too unsafe to occupy

If the property is condemned and too unsafe to access, it should be fenced off for safety reasons. If it isn’t, you might recommend to the seller that this should be done before showing the property. 

5. Providing Advice Outside of the Scope of Your Expertise

Many lawsuits have resulted from real estate professionals providing advice outside of the scope of their expertise. When dealing with a home that needs to be demolished:

  • Don’t be tempted to estimate the costs of demolition if the prospective buyer asks you for your opinion. The cost range for demolition is vast, and you should recommend the buyer seek independent advice about the costs.
  • Don’t provide advice on permits. Refer the buyer to the local government rules for demolitions. If the home has dangerous materials, such as asbestos, there will likely be additional regulations that need to be followed. 
  • Don’t recommend trades or companies to do the demolition work in case something goes wrong and the buyer holds you responsible.
  • Don’t provide advice or suggestions about possible developments on the land after the home is demolished. You don’t want a buyer being disappointed that they can’t build 12 townhouses on the block like you suggested —because the local council won’t allow it. Suggest the buyer seek advice from the local authorities about any building or zoning restrictions. 

6. Not Protecting Your Business Against a Potential Lawsuit 

Sometimes, even with the best of intentions, real estate agents can find themselves facing a lawsuit. To ensure you’re protected if a claim is made against you, it’s critical you have the right insurance coverage for yourself and your business. 

CRES’s extensive real estate E&O insurance packages can be tailored specifically to suit your needs. CRES E&O Insurance + ClaimPrevent® policies also provide you with access to legal advice from qualified attorneys 7 days a week. We’re the #1 claim prevention company because we’re so focused on your risk reduction.

Contact the team at CRES at 800-880-2747 for a confidential discussion today.

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

Originally Published August 11, 2021

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