The Rigorous Practice of Real Estate Sales: The Need for Regular Reminders By Ann L. Johnston, Esq.
Does this even need to be said? Real estate sales is incredibly hard work. It’s a 24/7 life, always on call and available to clients for everything from hand-holding to baby-sitting, counseling, chauffeuring, scheduling, managing, coordinating, guiding, doing battle, taking the hits and knocks in negotiations while protecting the client (where does it end?), and then additionally we have to stay on top of the market, changes in financing, forms, practice standards and inventory; and if that’s not enough, there are all the laws, ethics, rules and regulations that govern us. It’s simply mind-numbing. So is it any wonder that REALTORS® sometimes make mistakes? Doing the work of sales requires its own focus, energy, and commitment. And sometimes in the throes of drawing in business and pulling transactions together, we lose track of certain required or important details (e.g., and where is that earnest money deposit? What was the deadline on that last repair request exchange? Or what happened to our counteroffer?). And when you look at the basis for licensing board disciplinary actions as well as claims and lawsuits over a period of years, with some exceptions, certain error problems consistently appear.* *(See Top 10 Legal Issues Facing Brokers” by Laurie K. Janik, REALTOR® Magazine, March 2000; “The Riskiest Business,” G.M. Filisko, REALTOR® Magazine, October 2011; See also NAR Legal Scans 2007, 2009 & 2011).
never be made in the MLS (direct other agents to contact the listing broker on certain matters---other disclosures however should be made in writing in the brochure---know the proper way to disclose! 3) All advertising and listing information must be true and accurate. Be sure that copy concerning your listings (and advertising) is accurate, updated (includes MLS listings, brochures, flyers, anything on a website, Facebook, Twitter, etc.) and contains the disclosures required by the applicable licensing laws, the EHO and REALTOR® logos. 4) Never engage in discriminatory behavior. Treat all prospects and clients alike. Develop your own systems for the way you treat them and be consistent. Be prepared to walk away from any client if s/he insists on engaging in any discriminatory behavior. 5) Don’t make representations about what an HOA/COA, zoning department or other authority having any legal bearing on a property will decide about the use of the property. Always direct the buyers or sellers to and/or obtain a letter or some other writing directly from those authorities regarding the question. 6) Always represent the best interests of your client and be honest in all of your dealings. 7) Always make the appropriate written agency disclosures to all prospects, clients and customers.
Generally, the top areas of liability through 2011 based upon NAR’s Legal Scans 2007, 2009 & 2011, suggest the following, in varying order depending on the report: 1) Agency disclosure, esp. Buyer representation 2) Disclosure/Misrepresentation/Fraud & Unfair and Deceptive Trade Practices Act 3) Breach of fiduciary duties 4) Fair housing violations 5) Failing to handle earnest money deposits properly (Regular basis for disciplinary actions) 6) RESPA violations and affiliated business disclosures 7) Improper contract formation and/or management 8) Ethics violations/procuring cause and claims for commission 9) Conflicts of interest and attempting to play lawyer 10) Advertising violations 11) Trying to be all things to a client, including especially getting and giving clients information on use of a property under relevant HOA/Condo and/or zoning regulations
8) Make sure the person signing any contract or legal document has the authority to sign it! Don’t lose your commission or a contract just because you failed to find out what person or persons needed to sign the listing agreement, sales contract etc. When in doubt, ask your favorite title attorney to run an ownership search (especially in estate or suspected bankruptcy situations).
In many cases, the errors giving rise to claims might have been prevented with just a simple “reminder.”
11) Don’t jump the gun and admit liability before discussing a problem situation with your manager and/or claims attorney. Although stepping up to the plate is a noble approach, before doing so, discuss the matter with your manager or corporate attorney. Admitting legal liability when you have none can expose all to unnecessary expenses, etc.
With the foregoing in mind, what follows is a list of suggested best practices served up as “reminders” (so named “REALTOR® Caveats”) in the hopes that these might help prevent even one claim. Although the list has been edited several times over the years, the general thrust of the advisories have remained the same.
REALTOR® CAVEATS
1) Promptly and accurately handle all client funds. Never “hold” earnest money deposits unless the parties have so specified in the contract (except in Maryland where MREC rules prohibit Brokers from withholding deposit of emd longer than the licensing law allows—in which case, the EMD should be held by a title company) 2) Always disclose material facts regarding the condition of a property; but don’t “over-disclose” and provide information that turns out to be incorrect or misleading. Also, handle the disclosure in accordance with the rules of discretion: some disclosures should
Capital Area Realtor®
9) Document all significant conversations or communications. Keep a running communications log for each client/transaction file from the very first significant conversation to post-closing. Significant conversations or comments would include the client’s stated objectives; their directives to you for handling certain matters (some of which should be in the listing agreement, contract terms etc) and any special information you receive. 10) Be careful what you put in writing—including especially emails, faxes, instant messages, websites, Facebook, Twitter. Never put in writing what you don’t want to have read in a court of law.
12) DON’T play lawyer, accountant, engineer, home inspector, etc. Refer your clients to appropriately-licensed professionals. If special terms need to be added to a contract, have your clients write them in themselves if they won’t see an attorney! Or if they need special tax advice, have him/her/them see an accountant. Same with engineers, home inspectors, etc. Ann Johnston is an attorney licensed in Virginia, the District of Columbia and North Carolina and Director of Professional Development at Monarch Title, Inc. Nothing contained herein is intended to be legal and/or tax advice and is offered solely for instruction. Any legal and/or tax questions should always be addressed to licensed legal and/or tax professionals. Further, nothing herein is designed to replace or modify, in any way, the policies, procedures and instructions of any licensee’s managing broker and/or brokerage firm.
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