QUESTION: One of our Agents represented a divorcing couple in the sale of their home last year as part of a contested divorce. The wife’s attorney has now asked our Agent to sign a Declaration prepared by the Attorney regarding the husband’s lack of cooperation in the sale. Our Agent wants to help and is willing to sign the Declaration even though it is not accurate; I have some concerns about what could happen if the Agent signs the document and/or if she refuses to sign the document. What should we do?
ANSWER: No Agent should ever sign any type of official court documentation prepared by someone else’s attorney without the Broker’s approval; the Broker’s approval should only be given after the Broker has first had the documentation or the attorney’s request for information reviewed by the Broker’s attorney.
Attorneys who represent the Broker’s clients (Buyers, Tenants, Sellers, Landlords) or third parties are not obligated to protect the interests of the Broker or the Agent. When attorneys request that an Agent sign a Declaration or an Affidavit, they are trying to get the Agent to swear, under penalty of perjury, that the Agent knows all of the detailed facts that will benefit the Attorney’s client. Those facts may not be true and/or may not be in the best interests of the Agent. Agents should never sign any statement that is not 100% accurate.
Some attorneys try to use Agents as unpaid appraisal experts. This puts Agents in a potentially dangerous position because if they are able to serve as an appraiser in a legal dispute, then they cannot claim they lack that expertise when they are involved in any other transactions. The attorney’s efforts to save time and money for their client is actually a potential trap for the well-meaning Agent.
Agents are often told that if they agree to sign the statement “as written,” then the Agent will not need to be called as a witness in a subsequent hearing or trial. Generally, that is also not true – the Attorney who prepared the statement may not subpoena the Agent to testify but once the other Attorney(s) in the case are made aware of that Agent’s statement, the Agent is practically guaranteed to be on the witness stand where the other Attorney(s) will cross-examine the Agent about every word in that signed statement.
In their zeal to help their own clients, attorneys often make glaring mistakes in preparing Agent’s Declarations and Affidavits, the documents must be carefully scrutinized for legal and factual errors. Typical examples of mistakes that have been found in Agent’s Declarations include the following:
- “I was the licensed Realtor who handled the buy-side of the transaction.” Agents are licensed as Brokers or Salespersons, not as a “trade name.” When a real estate licensee uses the term REALTOR®, that word needs to be written in all caps with the trademark insignia added; the Agent must also be a member of NAR to use that term. Colloquially, Agents “handle” one or both sides of the transaction, but the proper agency terminology to use should be, “I was the Buyer’s Agent.”
- “The Seller’s husband would not let her make the repairs that I had recommended.” (This may be the information that the Seller provided to the Agent, but unless the Agent was personally present when the Seller’s husband prevented the repairs from being made, the Agent can only say, “I was told by the Seller that her husband would not let her make the repairs …”)
- “Had the Seller’s wife not interfered with my efforts to show the Property, the Property would have sold for $150,000 more than the Buyer paid.” (This may seem true but it is speculation and a conclusion that should only be made by an appraiser who is specially trained to assess that type of issue).
- “As the Buyer’s Agent, I relied exclusively on the information supplied by the Seller.” Sadly, Buyer’s Agents are not allowed to rely on the Seller’s information; they must either verify that information or explain to the Buyer that it was not verified. Signing this type of statement effectively constitutes an admission that the Buyer’s Agent breached their fiduciary duty to the Buyer.
It only takes a few minutes of review time for the Broker’s attorney to determine whether or not an Agent should sign an Affidavit or Declaration. The Broker’s attorney cannot provide effective counsel if the documentation has already been signed and sent to the other party’s attorney.
Most real estate Agents want to be helpful to their clients and thus they see no harm in agreeing to cooperate with the clients’ attorneys. The cliché, “No good deed goes unpunished” is a truism when it comes to the well-intentioned efforts to help the clients’ attorney. The results can be disastrous.
BEST PRACTICE TIPS:
- If an Agent receives a call, email or any other form of communication from an attorney representing a past, current or potential Buyer, Seller or other third party, then the Agent should not discuss anything with that attorney; the Agent should politely indicate that the Agent must first discuss the matter with their Broker (who should then immediately seek guidance from risk management counsel).
- Agents should not agree to help past, present or potential Buyers, Sellers or other third parties in connection with legal matters including, but not limited to, signing any type of court documents, meeting with the Attorney or appearing at any type of hearing, including mediation and arbitration, without first reviewing the matter with their Broker (who should then immediately seek guidance from risk management counsel).
- Remember that the client’s attorney is not the Agent’s attorney; Agents should not provide any documents (especially any documents from the Broker or Agent file related to the transaction), summaries or other information to the client’s attorney without first reviewing everything with their Broker (who should then immediately seek guidance from risk management counsel).
- Agreeing to cooperate with an attorney’s request for a meeting or to sign documents does not eliminate the possibility of receiving a subpoena to testify; it is ok to say “No.” Remember that your agency and your fiduciary duty to the client end at the close of escrow. If the Agent receives a subpoena to testify, then the Agent can be represented by an attorney who is paid to protect the Agent.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2019 10/11/19