WEEKLY PRACTICE TIP
BROKER RISK MANAGEMENT
SCENARIO NO. 1: I am a listing agent and use a transaction coordinator (“TC”) who is out of state. I gave the TC my AVID and asked her to send it to the buyers’ agent. A week later, the buyers wanted to cancel, but had removed their contingencies. I advised the sellers that I did not believe the buyers could cancel and recover their deposit. I have since learned that the TC had never sent my AVID, so the buyers had the right to cancel the contract and recover their deposit. The seller is looking to me to pay them the amount of the deposit. Am I responsible and do I have recourse against the TC?
RESPONSE: Yes, you are liable for the acts of the TC. Both the courts and Department of Real Estate (“DRE”) will hold you responsible for the acts of any TC to whom you delegate your duties. You have an obligation to your clients to ensure the transaction is handled properly. Therefore, it is important to properly supervise your TC.
Whether you can hold your TC liable depends on the terms of your agreement with the TC. However, in most instances, it is unlikely that you will recover any damages from a TC.
SCENARIO NO. 2: I was listing a house and an adjacent vacant lot. I received an offer to purchase the house, but not the lot. My TC prepared the disclosures for delivery, but did not provide the buyers with the Vacant Land Questionnaire as she did not think it was relevant given that only the house was being sold. The VLQ had a number of disclosures affecting the house. The buyers subsequently learned of the non-disclosures and sued me for non-disclosure. Am I liable?
RESPONSE: Yes. As indicated above, you are responsible for the acts of your TC and you are independently obligated to ensure that buyers receive all relevant disclosures.
SCENARIO NO. 3: I am a listing agent. I forgot to include a deadline for termination of a listing agreement. My TC, without consulting me, inserted a date after the sellers had signed it. I was not aware of this. The sellers subsequently requested a copy of the listing agreement and saw the inserted date. They filed a complaint with the DRE. Will the DRE prosecute me for this?
RESPONSE: The DRE may prosecute you for your TC’s insertion of a date on a listing agreement without obtaining the sellers’ permission. As indicated above, you are responsible for your TCs acts.
DISCUSSION:
Transaction Coordinators have become an important asset to many agents. They handle many of the routine tasks required of agents making them more efficient. They remind agents of critical dates. When agents are extremely productive, TC’s can assist in ensuring agents are aware of deadlines, checking documents for signatures and dates, etc. As transactions have become more complex, TCs are becoming more valuable.
TWO TYPES OF TRANSACTION COORDINATORS: There are basically two types of TC’s:
- Those who may NOT engage in licensed activity. That is, unlicensed TC’s and any TC working independently or for a TC firm whether licensed or not. These TC’s are in many ways similar to unlicensed assistants. There is a fairly clear line between licensed and unlicensed activity. A number of years ago, CAR and DRE collaborated to make clear to agents how far an unlicensed assistant or TC can go without crossing the line into licensed activity. Those guidelines are contained in the CAR Legal Memo entitled “Unlicensed Assistants” which can be read and downloaded at:
http://new.car.org/riskmanagement/qa/licensing-folder/unlicensed-assistants/
- Those who may engage in licensed activities: This is a TC who has a license and is licensed to your brokerage. If a TC has a license but is not licensed to your brokerage, then that TC may NOT engage in licensed activity on your file. Check with your broker or manager regarding any company policies regarding limitations on licensed TCs engaging in licensed activity.
There seems to be an increasing tendency for agents to “dump” a lot of their work on TC’s. Maybe because agents are busy; maybe some agents misunderstand the proper role of the TC; or maybe it is just easier to do so. However, agents are responsible for the transaction and ensure their legal obligations are fulfilled throughout the transaction to the close of escrow. Failure to do so can expose the agent to both legal liability and license sanction by the DRE.
PRACTICE TIPS:
- The agents are responsible for the file, the documents, the accuracy of communications, written and verbal, and ensuring all duties owed to clients are fulfilled.
- If an error is made, you and your broker will be held liable. It is unlikely that there will be any recourse against the TC.
- Do not ask TC’s to draft or complete documents or forms without specific instructions.
- Never transmit, nor allow a TC to transmit, a document or form which was prepared by a TC pursuant to your instructions unless you have first READ AND APPROVED each document and form. Agents are responsible for content, accuracy and completeness of each document and form.
- It is unfair to ask escrow officers to draft amended escrow instructions for the parties to sign based simply on an instruction from the agent. The proper procedure is for the agents to first draft CONTRACT addenda, have the parties sign them, and then send them to the escrow officer to draft corresponding escrow instructions. Again, blaming the escrow officer for erroneous escrow instructions is not the answer.
- Treat your TC with respect.
ATTORNEY-CLIENT PRIVILEGED COMMUNICATION. Do not forward to sellers, buyers or third parties. 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.