Selling a Home Where There’s an Active Neighbor Dispute

looking through white picket fence toward neighbors house

Neighbor disputes are relatively common. From boundary disputes to barking dogs, relationships between neighbors aren’t always on friendly terms. While living with neighbor disputes is problematic for many homeowners, trying to sell their home when there’s an active neighbor dispute can be extremely difficult. 

For the real estate agent, selling a home where there’s a dispute can consume a great deal of your time and effort. It can also make you vulnerable to potential lawsuits if important neighborhood issues are not disclosed to the buyer as they should be. 

Common Neighbor Disputes

The most common neighbor disputes relate to:

  • Arguments about boundaries, which may require a professional survey to resolve
  • Fencing issues, for example, when a neighbor puts up a fence which the neighbors haven’t agreed to, or they don’t like
  • Noise complaints ranging from wild parties to barking dogs
  • Invasions of privacy, such as the use of CCTV systems and drones
  • Tree encroachments
  • Parking issues
  • Unkempt yards
  • Anti-social behavior 

Sometimes disputes can be simple misunderstandings, which can be remedied through communication. However, other issues can escalate into major problems which can significantly affect the potential to sell the home.

Issues Affecting the Sale of a Property With An Active Neighbor Dispute

Bad neighbors or an active neighbor dispute is considered a form of “external obsolescence”. External obsolescence means the depreciation of a property due to external factors which are not fixable by the property owner, landlord or tenant. 

Research suggests that home values can be significantly affected by bad neighbor behavior. According to the Appraisal Institute, it can lower property values by more than 5 to 10 per cent. 

Depending on the dispute in question, dealing with difficult neighbors can become problematic for the real estate agent. If a prospect visits the property and is subject to argumentative neighbors, loud music or incessant barking, this will present a significant challenge to the sale. 

Managing Open Houses

Obviously, as a real estate professional, you want to present the home in the best possible light. This means working with your client to determine the best possible time for open houses and showings. If the neighbor dispute is regarding a noisy pet who is worse first thing in the morning when their owner leaves for work, mornings are probably not a good choice for Open Houses. Likewise, if abusive neighbors are likely to cause issues over the fence to sabotage a showing, try to choose a time that they’re not likely to be home. 

However, keep in mind that all issues that can materially affect the value and desirability of a home must be disclosed — this includes any major neighbor disputes. Issues cannot simply be swept under the rug and hidden from prospective buyers. If you try to do this, your client could be facing a lawsuit, and so could you!

Disclosures About Neighbor Disputes — What’s Required?

Most states require disclosure about any known major nuisances. This would include neighbor disputes, boundary issues, excessive noise issues or other problems that may influence a buyer’s decision to purchase the home.

In some cases, this is relatively subjective, as your client may be so used to a barking dog next door that they don’t  see it as an issue, while the same thing could drive the new owners crazy.

Nevertheless, it’s better to disclose than withhold information from prospective buyers to prevent lawsuits in the future. Penalties for failure to disclose are harsh. Case in point is Shapiro v Sutherland (1998). In this case, the seller failed to disclose a neighbor dispute when selling the property. The issues with the neighbor were ongoing and had even resulted in the homeowner calling the police on occasion. The buyer learned about the situation with the previous owner following a similar experience with the neighbor. The buyer then sued for rescission of the sale and was successful. 

Agents and sellers need to keep in mind, it’s not enough to simply check the box that there’s a nuisance issue. Sellers must explain in detail what the issues are to fulfill their disclosure obligations. It’s imperative that buyers have this information, so they can make an informed decision before purchasing. 

Disclosing a neighbor dispute or nuisance doesn’t mean a property won’t sell. But, it does give the prospective buyer some power to negotiate on price and terms if they wish to go ahead with the purchase. 

How to Resolve Neighbor Disputes BEFORE Putting a Property On The Market

It’s not your role as the real estate agent to resolve neighborhood issues, but there are several avenues that your client can take:

  • Many disputes can be resolved through talking face-to-face
  • Formal mediation is appropriate where more informal communication has not resolved the issue 
  • For illegal activity, homeowners should call the police for assistance
  • For boundary disputes, a new survey may be required to resolve the issue. 
  • For tree encroachment issues, if a tree is dangerous or puts a seller’s home at risk, local government will often intervene, if the neighbor won’t agree to remove it. 

Dealing with neighbor disputes BEFORE a property is placed on the market is beneficial, but it’s not always possible. Legal action is usually a last resort but may be required for major disputes.

Protecting Yourself and Your Real Estate Business

With CRES Real Estate E&O + ClaimPrevent®, you can protect yourself and your real estate business. CRES specializes in extensive coverage and insurance protection for the real estate industry. You also have access to the CRES ClaimPrevent® Legal Hotline for Pre-Claim Legal Advice. So, if you need advice about disclosures relating to neighbor disputes, you can speak to a fully qualified real estate attorney.
Contact CRES at 800-880-2747 to find out how you can get protected 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 November 11, 2020

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