Most seller property disclosure mistakes are self-inflicted. The seller knew about the leak, fixed it, said nothing, and handed the buyer a written document that a lawyer can later hold up in court as a misrepresentation. The fix costs nothing: disclose everything that has ever gone wrong, say how and when you fixed it, and attach the invoice.
Leslie Margolies has spent 40 years as a civil litigator in Pennsylvania, and she is also a licensed agent. Her real estate case flow came overwhelmingly from buyers suing sellers, deposits stuck in dispute, and deals blown apart after inspection. She has reverse-engineered where those cases start.
This guide covers what belongs on the disclosure form, why hiring an attorney at closing buys you almost nothing, what mediation actually costs and how it works, and the SOPs that keep rental portfolios out of court in the first place.
Key takeaways
- Over-disclose rather than under-disclose: list every defect that has ever existed, how it was repaired, when, and attach the paid invoice as proof.
- Pennsylvania requires sellers to disclose past defects, not only current ones. Confirm your own state’s standard before you assume present-condition disclosure is enough.
- An attorney brought in at settlement can do little beyond drafting an escrow agreement and escrowing funds. The pre-contract and pre-inspection windows are where advice changes the outcome.
- In litigation, the party who can afford to last the longest usually wins, and most cases settle anyway, meaning compromise and no emotional satisfaction for either side.
- Write a standard operating procedure for every known risk in your portfolio \u2014 snow removal response time, how you handle a claim, how you create a paper trail \u2014 and use AI to produce the first draft.
From the Real Estate Pros Show
This article draws on an interview with Leslie Margolies of DealGuard on the Real Estate Pros Show, hosted by Issa Hanna.
Where Buyer Lawsuits Against Sellers Actually Come From
They come from three places, and all three cluster in the same 30-day stretch of a transaction: misrepresentation claims brought by buyers against sellers, fights over the good-faith deposit when a deal collapses, and fallout from the home inspection.
Margolies did not go looking for that work. Once she got her real estate license, the agents in her brokerage started sending her their broken deals. “All of these realtors were throwing clients at me who were having disputes over good faith deposits and inspections and all these things,” she said. “Before I knew it, I was overwhelmed.”
That pattern is worth sitting with if you sell houses for a living. The disputes are not random. They concentrate at two pressure points where a seller creates a permanent written record and then acts on it.
The first is the seller’s property disclosure form. It is a document you sign, it survives closing, and a buyer’s attorney can read it line by line against what an inspector or a contractor later finds. Nothing else you produce in a transaction carries that much downstream liability for so little effort.
The second is the inspection period. This is where a buyer either walks, renegotiates, or demands the deposit back, and where a seller’s response \u2014 what you agree to repair, what you refuse, what you put in writing about condition \u2014 either closes the file or opens one.
Her point about who is advising you at those two moments is uncomfortable but fair: in Pennsylvania, a real estate license requires only a high school diploma. That is a thin standard of care for the largest transaction most people ever sign.
The Seller Property Disclosure Mistakes That Create Claims
The rule is one sentence: over-disclose rather than under-disclose. Every defect the property has ever had, how you fixed it, when you fixed it, and the invoice attached as proof.
Margolies frames it as the single most preventable liability in a sale. “Anything that’s ever gone wrong with the property, how you fixed it, when you fixed it, here’s an attached invoice showing that I fixed it,” she said, “rather than trying to hide things and paint over things and conceal them, because that’s what gets you into trouble.”
That last clause describes the behavior that generates most misrepresentation claims. Painting over a stain is not a repair, it is evidence of concealment, and it converts a $600 plumbing issue into a lawsuit about intent.
Investors make a specific version of this mistake. You bought the house distressed, you know exactly what was wrong with it because you paid to fix it, and you have the receipts sitting in a folder. Leaving that history off the form to keep the file clean is the worst possible trade: you have maximum knowledge and maximum documentation, which is precisely what makes an omission look deliberate.
Disclosure standards vary by state, and this is where investors get caught operating across state lines. In Pennsylvania, Margolies notes, sellers must disclose all defects, including past ones that have already been corrected \u2014 not just what is currently broken. Do not assume a present-condition standard applies where you sell. Confirm the requirement in your state before you fill out your next form, especially if you are a licensee filling it out for a seller.
A disclosed and documented repair is a selling point. An undisclosed one is a claim.
If you come to me after you signed a contract, we’re already behind the eight ball. A lot of people mistakenly think they only need a lawyer for settlement. There’s very little I can do at settlement other than draft an escrow agreement and escrow funds.
— Leslie Margolies, real estate attorney and mediator, founder of DealGuard
Why Hiring a Lawyer at Closing Is Too Late
By settlement, the useful decisions have already been made. “There’s very little I can do at settlement other than draft an escrow agreement and escrow funds if necessary,” Margolies said. If your only legal spend in a transaction is a closing attendance fee, you bought paperwork, not protection.
She is blunter about the contract stage: “If you come to me after you signed a contract, we’re already behind the eight ball.” Terms, contingencies, deposit conditions, and the disclosure you signed are all locked by then. Advice after that point is damage control.
There are two windows where counsel actually changes outcomes, and both sit before the moments discussed above:
- Before you sign the contract, and specifically before you complete the seller’s property disclosure form. This is the cheapest legal hour you will ever buy.
- Before and immediately after the home inspection, when you are deciding what to repair, what to credit, what to refuse, and how to put that in writing.
One substitute investors rely on does not hold up. When a brokerage calls its legal hotline, Margolies notes, someone gets offhand advice over the phone \u2014 nobody has read the agreement of sale, the disclosure, the inspection report, or the addenda. General guidance on a fact pattern nobody reviewed is not a document review, and it will not be much help if a buyer sues after closing.
Her own model reflects this timing argument: DealGuard is a flat-fee arrangement where the agent stays the pilot and the attorney works as co-pilot from the start of the deal, giving risk-management advice before the disclosure form and around the inspection rather than showing up at the settlement table.
Mediation Before Litigation: The Cost and Mechanics
Margolies inverts the usual framing. “In my view, litigation should be the alternative and mediation should be the primary first step” \u2014 not the reverse, despite the fact that the industry calls mediation “alternative” dispute resolution.
Her reasoning is arithmetic, not idealism. Most cases settle, and settlement means compromise, so nobody gets the emotional satisfaction they walked in expecting. And the court process itself is not neutral in effect: “Typically, it’s the one who can afford to last the longest wins.” If your counterparty has deeper pockets and more patience than you, the merits of your earnest money dispute matter less than your burn rate.
The mechanics are simple enough to explain in four points:
- A neutral runs it. A true neutral is not landlord-friendly, tenant-friendly, investor-friendly, or consumer-friendly \u2014 they listen to both sides and work toward a resolution both can sign.
- Both parties must be willing. Mediation is voluntary; you cannot drag someone into it.
- The cost is split between the parties, which Margolies describes as a drop in the bucket next to hiring a lawyer to go to court.
- The resolution is signed and done. Everyone goes home with an agreement instead of a docket number.
Compare that to the timeline of a real fight. Show host and investor Issa Hanna spent three years in court proving he had not sold a property to a man who forged a quitclaim deed \u2014 a case with mismatched signatures and no evidence on the other side. Three years, on a claim that was baseless from day one.
For an earnest money dispute or a post-closing disclosure argument, mediation is usually the cheaper path to the same compromise you would reach anyway.
Build an SOP for Every Known Risk in Your Portfolio
Asked for one piece of advice for operators building a business, Margolies skipped networking entirely and went to standard operating procedures. “There should be a standard operating procedure for every known risk” in the business, she said \u2014 because an SOP is how you anticipate and prevent the events that turn into claims.
Her analogy is McDonald’s, the case study every business school uses for standardized operations. The company does not rely on a cook’s judgment about when a patty is done. A button goes on when the patty hits the grill and goes off when it comes off. Same result every time, no surprises, no human error to litigate.
Applied to a rental portfolio, that means writing down the things you currently improvise:
- Snow and ice. How fast does your contractor reach the walkway a tenant or a pedestrian will use? Name the hours, and log each visit.
- Claims. What happens in the first 24 hours after someone alleges an injury or a habitability problem \u2014 who is notified, who inspects, what gets photographed.
- Paper trail. How every notice, request, repair, and response gets recorded so it exists a year later when someone’s memory conveniently differs from yours.
The excuse for not having SOPs used to be the writing time. Margolies points out that is gone: describe your business, your assets, and what you manage to an AI tool, and you get a workable first-pass procedure in minutes. It still needs your judgment and, where the stakes are real, a lawyer’s read. But the blank page is no longer the obstacle.
Her framing of risk management is deliberately unglamorous. Taking the long way home to avoid rush hour is risk management. Parking at the back of the lot so nobody dings your car is risk management. You already do it; write it down.
Landlord Liability: Knowing the Rules Before You Take on Tenants
Owning property is not the same skill as being a landlord, and Margolies built a program around the gap. “A lot of people think, well, if I owned a property before, then I know how to be a landlord. And that’s not true.”
The body of rules a landlord operates under is broader than most new operators expect, and each piece carries its own exposure:
- Fair housing law
- Consumer protection law
- Landlord-tenant law
- Municipal regulations and licensing
- Health and property maintenance codes
Her view of why this matters is not sentimental. Housing sits alongside food and water as a survival need. “If a landlord is responsible for one of those and has no idea what they’re doing, it’s a dangerous situation. And they’re exposed.” Her experience is that owners in that position get into trouble precisely because they believe they already know the rules.
The cost comparison she draws is the part investors should run themselves. She would rather have an owner spend a few hundred dollars learning the rules up front than ten thousand on litigation afterward \u2014 and she has been open about how hard that is to sell, because landlords resist paying for education and pay for lawyers instead. Property management companies, in her experience, do the same thing at scale: budget large sums for legal fees rather than train staff to operate correctly.
If you are adding units, adding a market, or taking over management in-house, price the education against one contested fair housing complaint. The math is not close.
Frequently asked questions
Should I disclose a defect I already repaired?
In Pennsylvania, yes \u2014 sellers there are required to disclose all defects, including past ones that have already been corrected, not just current problems. Margolies’ practical rule is to disclose it, state how and when it was fixed, and attach the repair invoice as proof.
Disclosure standards vary by state, so confirm what yours requires before you assume a present-condition form is enough. A documented repair rarely kills a deal. An undisclosed one that a buyer discovers later is what misrepresentation claims are built from.
Does a real estate attorney at closing actually protect me?
Not much. By settlement, the contract is signed, the disclosure is signed, and the inspection response is already on the record. As Margolies puts it, there is very little an attorney can do at that table beyond drafting an escrow agreement and escrowing funds if a holdback is needed.
Some states require an attorney at closing, and that requirement is worth satisfying properly. But treat it as a procedural step, not as protection against a post-closing claim.
When in a transaction should I bring in legal counsel?
Before you sign the agreement of sale, and specifically before you complete the seller’s property disclosure form. Those are the two documents that create most of your downstream liability, and they are both cheap to get right and impossible to unwind later.
The second useful window is around the home inspection, when you are deciding what to repair, what to credit, and what to refuse in writing. A brokerage legal hotline is not a substitute here \u2014 that advice is given without anyone reading your actual documents.
Is mediation worth it for an earnest money or misrepresentation dispute?
Usually, yes. Mediation requires a neutral and both parties’ willingness, the cost is split between them, and a successful outcome is a signed agreement that ends the matter. Margolies describes it as a drop in the bucket next to funding a court case.
The comparison that decides it: most litigation settles anyway, meaning compromise, and the party who can afford to last the longest tends to prevail. If you are going to end up compromising, doing it in weeks for split costs beats doing it in years on billable hours.
What should be in a landlord’s standard operating procedure?
One written procedure for every known risk in the business. Margolies’ examples: snow and ice removal with a defined response time for walkways tenants and pedestrians use, a set sequence for what happens when someone makes a claim, and a defined method for creating a paper trail on every notice, request, and repair.
Write them for consistency rather than elegance \u2014 the McDonald’s standard, where the same input produces the same output regardless of who is on shift. An AI tool can produce a usable first draft from a description of your portfolio and operations.
The bottom line
Pull the disclosure form you plan to use on your next sale, sit down with the repair file for that property, and list every defect it has ever had with the date, the fix, and the invoice \u2014 then have someone who reads these documents for a living look at it before you sign, because that hour is the cheapest protection available in the entire transaction.
