Strategies to Avoid Litigation for Realtors (Part 1)

Last year I became an affiliate member of the local realtor’s board to help make relationships to build my business. At the end of last year, I was honored to be asked to be speak about risk management at the new realtor orientations that are held every other month. I also decided to sponsor the Young Entrepreneurs Network (“YPN”) of the same local realtor’s board for the 2018 year. As a sponsor for YPN, I was asked to speak on a panel and give legal strategies to avoid litigation. It was an honor and privilege to do so. Today’s blog is a few of the talking points I spoke about with respect to disclosures and dual agency.

• The number one best strategy for all realtors and brokers to avoid litigation is to stay on top of all the recent changes in regulations, be truthful and disclose, disclose, disclose.
• 75% of litigation related to the sale of real property is based on misrepresentations or omissions of material fact about the condition of the property.
• A misrepresentation or omission of facts can be innocent, based on ignorance of the facts or on purpose (fraud).
• Disclosures are mandatory and are not waived by just selling it as is. There are a handful of instances were a Transfer Disclosure Statement (“TDS”) is not required such as a sale after foreclosures or sale in a probate. Even if the TDS is not required the seller still has an obligation to disclose material facts about the property. If the seller knows of a material defect in the property, an issue with the title to the property, or other material matter that would affect the buyer’s decision it needs to be disclosed.
• How big of an issue does it need to be before it is disclosed? If you think that it could be material to a decision to purchase the property and your gut is telling you it should be disclosed, then disclose it. If you have to think about it, then you should probably disclose it.
• A reator’s duty is to disclose what they know and what they can see by a visual inspection of the property. I recommend that the realtor talk to your seller and do a walk through with the seller using the TDS as a guide and make notations as you do a walkthrough.
• When you know something or see something that needs to be disclosed do not provide an opinion on the issue that you are disclosing or add editorial. For example, do not state: There is a water spot on the ceiling in the west corner of the master bedroom but it looks like it is old and no longer an active leak. Instead, say something like: “There is a discoloration on the ceiling in the west corner of the master bedroom. Then recommend that the buyer contact a professional to inspect. DO NOT MAKE PREDICTIONS instead RECOMMEND PROFESSIONALS.
• A great realtor has reliable and knowledgeable resources on hand to refer to their clients.
• Representing Buyers and Sellers – dual agency.
• Best legal strategy is to avoid a dual agency situation. Dual agency puts the agent in a very difficult position. As the agent for the seller he has a duty to get the highest price but as the agent for the buyer the obligation is to get the lowest selling price. How do you reconcile that when making offers? This puts the realtor at risk to violating his fiduciary duty to both of his clients.
• A dual agency situation can happen within a brokerage when there are two agents that are employed by the same broker on a transaction. Because the two agents are employees of the same broker their actions are the actions of the one broker. In this situation the broker must disclose the dual agency to the parties to the transaction.
• If you still chose to act as a dual agent you must disclose it in writing to both parties. There is a form that can be used. I would also suggest that you stay educated on all the regulations and factual scenarios relating to dual agency concerns and how to reconcile the issues that can arise within the dual agency.

I will be speaking again on 5/9/18! My next post will talk about risks in advertising.

For consultations or information on having Mrs. Kendall present for your agents contact us at Kendall Law, [email protected]