“If you stay in real estate long enough, one day you’ll learn the truth: you’re one signature, one misunderstanding, or one bad assumption away from a lawsuit — even when you did everything right.”
“Every real estate investor has a story they don’t brag about — the deal that went sideways, the contract that didn’t hold, or the buyer who saw dollar signs in a courtroom instead of a closing table.”
If you’ve never been sued over a real estate deal, congratulations — enjoy the peace while it lasts. Because the truth is simple and a little uncomfortable:
If you stay in this business long enough, a lawsuit will eventually find you. It won’t always be your fault. In fact, most of the time, it isn’t. Real estate is a world built on contracts, expectations, pressure, money, and emotion — a perfect recipe for misunderstandings that somehow get upgraded into legal battles.
Every investor who lasts long enough has a scar or two. The deal that went sideways at the last second. The buyer who thought the contract meant something it didn’t. The seller who “forgot” to disclose the thing that suddenly became your problem. The contractor who promised the moon and delivered a crater. Sometimes you resolve it with a handshake… and sometimes you resolve it with a lawyer.
But here’s the part no one tells new investors: being sued doesn’t mean you failed. It means you’re playing the game at a level most people will never reach. It means you took risks, made moves, and stepped into an industry where paperwork matters as much as profit. What you learn from those moments — and how you protect yourself moving forward — will shape your entire investing career.
In this article, we’re going to talk about the reality behind lawsuits, the mistakes most investors make without even realizing it, and the steps you can take to reduce your risk while still growing your portfolio. Whether you’ve been sued, expect to be someday, or just want to stay one step ahead, this is the conversation experienced investors wish someone had with them sooner.
I’m going to talk about one particular deal we had that went as planned, until it didn’t.
We had purchased a 3-bedroom, 2 bath, 2 car garage in a modest neighborhood.
We knew the seller somewhat, made a deal to purchase the house, and went to closing. Everyone knew the terms of the deal and how it would work.
To give you some background on this deal.
It had been placed into a trust; it had a trustee and a beneficiary. All terms were discussed with both in attendance. This house was used as a storage building but was still livable minus the many rooms of furniture.
It needed a full remodel, the only thing that it did have in its favor was a new roof. The rest of it, not so good.
It needed everything. Plus, there were no actual floors in it, anywhere. Concrete, that was the floor. Windows, a hot water heater, air conditioning, all of the costly stuff that needed to be worked on.
The prices in the area were roughly 175,000 for a nice clean ready to move into home, but this one needed about 80,000 in work before it reached that level. The condition that it was in was just about the same as it had been the day it was built, some 25 years before.
We set a price of 90,000 to purchase.
This one worked out in our favor well, as the beneficiary wanted to have some monthly income, so owner financing was the option that was chosen to purchase this house.
We began making the repairs to this one as we could because we had other properties to work on before this one.
All went well for about 8 or 9 months. Then we get a call from a detective that wants to see us.
What the hell is going on now?
I made an appointment with him and visited him at his office; he said that a complaint had been filed against us that we didn’t make the seller a good enough deal and they were looking into how this had been purchased.
What we also found out was that the trustee of this trust that we were making payments to, was having money problems. The beneficiary was fine, the monthly payments suited them just fine. But the trustee thought they needed money for themselves.
The original complaint was that we didn’t pay them enough, even though they were shown Zillow and other online sources of information of what houses were selling for, minus the repairs are what this house was sold for.
With the 8 or 9 months after, homes were rising in price in this area. This is when the detective also looked at the Zillow price estimates. He saw prices that were also higher, which is why he questioned this purchase.
For reference, Zillow has this slide way down in their website home value section, which is mostly historical prices, and you can move the slide back and forth to see what homes were valued at over time.
Now do you remember me saying that move-in-condition homes were selling for about 175,000. In that time, prices had been going up some. The reason the detective was questioning this was that he wasn’t actually told that this property needed all the repairs. He was going by the complaint that it was in perfect condition when we bought it. Then with him using Zillow for a price guide, gave him the idea that it was us that did something wrong.
He even printed the page that showed the prices for the date we were being questioned.
Once we told him to go back to his computer and check prices for when we purchased it, he would see a different number, and then he could subtract the repairs. Plus, I detailed the repairs and the costs to him.
Well, apparently, he did just that after this meeting, but he didn’t believe it, so he wanted to see the house himself. A couple of days later we get a knock on the door, guess who, the detective.
He brought someone else with him, also law enforcement, and wanted to see this house on the inside too. They both asked if they could come in and see what the condition of this property really was. They both went room by room to inspect this place.
Now they had a good visual to go by. They saw that we were correct in pricing the home, from when we bought it, then the repairs that had been done and what still needed to be done was a far more accurate estimate than just being told that we didn’t pay enough to purchase it.
The detective told me as he was leaving that I “might” be hearing from him again. I never did. I did however tell him to check Zillow again.
I didn’t just write this post to scare anyone out of investing. I was told by my mentor in the beginning that if you never get a lawsuit against you for a property, you are not doing enough deals.
He also had said that if you stay in real estate investing long enough that you will one day face a lawsuit.
🏡 Moral of the Story / Lessons Learned
- Documentation is your shield: Never assume that “everyone understands the deal.” Put every detail in writing, from property condition to repair estimates, so you’re protected when memories or motives shift.
- Perception matters as much as reality: Even when you’re right, someone else’s misunderstanding — or Zillow’s algorithm — can paint a different picture. Be ready to prove your side with facts, receipts, and transparency.
- Lawsuits are not a badge of failure: Facing legal scrutiny means you’re operating at a level where real money and real risk are involved. It’s part of the territory, not a sign you did something wrong.
- Stay professional under pressure: When questioned, don’t panic or get defensive. Walk through the numbers, show the work, and let the truth stand on its own.
- Protect yourself before problems arise: Build habits of clear contracts, honest disclosures, and meticulous records. These are the tools that turn potential lawsuits into closed cases.
👉 The takeaway: In real estate, lawsuits aren’t the end of the road — they’re proof you’re on it. What defines your career isn’t whether you face one, but how you handle it when you do.