BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
WHAT AGENTS WILL, AND WILL NOT, DO
Many claims and lawsuits start with a difference between what the client expects and what is delivered. Many clients have unrealistic expectations of their agents, their role and their duties.
Broker defense litigation attorneys often confront plaintiffs (buyers or sellers) who express wildly unrealistic expectations of what their agent should have done for them; and, if only the agent had done the expected thing, there wouldn’t be a lawsuit.
The best way to head off this unfortunate series of events, which culminate in a claim and lawsuit, is to set the client’s expectations of your role as agent in the beginning.
Real estate licensees are in the service business. It is often tempting to try to do, or to promise, too much for fear that the client will think that we are not meeting their needs – however unreasonable. The best cure is to properly set the client’s expectations up front.
PRACTICE TIPS: Have a discussion with your clients at the beginning of your relationship with them that:
1. You are licensed to sell real estate. You are not licensed to:
A. Practice law.
B. Give tax or accounting advice.
C. Advise on how to take title.
D. Give an opinion on the construction of the property, the foundation or the soils.
E. Advise whether there are environmental hazards on the property.
(e.g. “Do you think that ceiling has asbestos?”)
F. Advise on what can be built on the property, or determine if what a buyer wants to build is feasible or not.
2. You are the facilitator of the transaction. You are the center of a team of professionals including the title company, the escrow officer, the lender, the home inspector, the pest inspector, and many other professionals who are in a better position than you, the real estate licensee, to assist and guide the buyers in making the critical decisions during escrow. Clients must be advised to expect that they will have to hire, and pay for, these experts.
3. You cannot give legal advice or draft legal documents. When a seller or buyer is asking a question such as, “Is the buyer in default?” or “Can I cancel the contract and keep buyer’s deposit?,” be careful not to give a legal opinion because such questions require a legal conclusion. Instead, use the language in the Weekly Practice Tip, “How NOT to Practice Law.”
Or the client may expect you to draft a long and complicated addendum, counter-offer or other document that may cross into the area of practice law. In these instances, consult with your manager or broker and refer your client to a qualified California real estate attorney to draft the language or, at a minimum, to approve a document labeled “Draft” that you prepared and recommend in writing that it be reviewed by their attorney.
4. Clients should expect that they may have to hire an attorney. Because California transactions use escrows instead of closing attorneys, as is done in many Eastern U.S. states, clients often want to rely on the agent to do everything. They do not want to spend money on an attorney. But there is a limit as to what an agent can do without crossing over into the unauthorized practice of law. When in doubt, consult with your manager or broker and refer the client to a qualified California real estate attorney.
See Weekly Practice Tips: “Unauthorized Practice of Law,” “Attorneys and Legal Advice” and “How NOT to Practice Law”
5. You are not the guarantor of the property. Sellers and buyers need to understand:
A. You have an obligation (unless an exemption applies) to conduct a diligent, visual inspection of the property and disclose any conditions or defects that affect the value or desirability of the property.
B. This does not mean that buyer is guaranteed a defect-free house. Something that works today might not work tomorrow.
6. You are not a mind-reader. You are there to answer questions, or get professionals to help buyers get answers – but clients have to ask. Tell them that if something is important to them, or if they are concerned about something that they see or read, they need to bring it to your attention.
7. You will be bringing information to your client – but it is the client who has to make, and be responsible for, the decisions made throughout the transaction. We often hear an agent say, “We are not going to agree to that.” Who is the “we” in that sentence? The appropriate response is: “I have discussed that with the seller and seller does not agree to buyer’s proposal.” Don’t own opinions or statements unless they are your own.
See Weekly Practice Tip: “Attribute and Disclaim”
8. If you don’t know the answer, you will say so, and help the client get the answers.
REMEMBER: IT IS ALWAYS BETTER TO UNDER-PROMISE AND OVER-DELIVER THAN TO OVER-PROMISE AND UNDER-DELIVER.
This Weekly Practice Tip is an Attorney-Client Privileged communication and for the exclusive use of clients of Broker Risk Management. 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 2016 06/10/16