My work tends to be through referrals - I really don't advertise - so, often, I encounter consumers after they have already experienced a negative encounter with another agent, and quite often, I'm consulting with them at this point because they have made some mistakes when it comes to hiring representation. Â Sometimes those mistakes have cost, or nearly cost them their homes. Â Â
I decided to write this blog post because, sadly, there seem to be some recurring themes in the stories that I hear from consumers regarding their previous dealings with real estate agents who were offering to help them with their distressed property situation. Â I realized that many, perhaps, most home sellers have no idea what is "supposed" to happen during a listing appointment, or what an agent should, or should not be doing at this point. Â I'm hoping to shed a little light on the subject to help home sellers make better choices with their representation. Â
1. Â PRESSURE when talking with an agent about your foreclosure options
: Â Â When in a distressed property situation, while time is certainly of the essence, and action needs to be taken, it's vitally important to take a moment to step back, read EVERYTHING you've been asked to sign, and get more than one opinion. Â If an agent pressures you into making a very sudden decision, or the ONLY option they provide is the one that gets them the biggest commission, or perhaps they indicate a need for signature and commitment urgently, even when you felt that you had plenty of time... these are dangerous signs. Â RUN to speak with another agent... choose an agent with good reviews, perhaps one found on Trulia who contributes a lot of very logical, helpful and intelligent answers and posts. Â Do some homework here - your financial future may depend on it. Â
2. Â You are presented with contracts you don't understand, and they aren't explained, in depth.
Â This is a Biggie. Â If I had a dollar for every time I heard "I didn't understand what I was signing"....well, you know -Â
Here's the bottom line: Â An agent has a duty to sit down with you and review the documents that you are being asked to sign to ascertain whether or not you have a reasonable grasp of what you are agreeing to. Â This is key. Â It's required in license law. Â Too many agents just plop down contracts before a potential client, rush them through the process, and run out of the door with the signatures. Â Do NOT sign anything that an agent asks you to unless you have had a chance to read it, unless you understand what you are signing, and do not ever, under any circumstances, let them walk out the door without leaving you a copy of what you have signed or leave with a contract that has unfilled blanks that they are supposed to fill in later. Â Â This is NOT normal. Â This is NOT proper business procedure. Â Â
I cannot stress enough - when you sign a listing agreement, or a contract of any kind, you are entering into a binding legal contract that will have consequences for you. Â Saying, "I didn't understand" later may not save you. Â You are expected, in a court of law, to have acted reasonably, in your own interests, and not to have acted recklessly, regardless of whether or not you felt pressured. Â Â The agent, if found to have exerted undue pressure may, or may not have consequences regarding that - but you must, must, must be first and foremost, your own best advocate in these situations. Â Â If you are pressured to sign, and don't feel comfortable, simply say this: Â "I'll review this overnight, and we'll talk tomorrow." Â There are no penalties for doing this, and it's never in your best interests to sign something that you don't understand. Â Â Better yet, if the agent refuses to, fails to, or doesn't seem to understand how to explain the document or how to walk you through the provisions he or she expects you to sign...walk away, and find an agent who will take the time to properly present a contract to you. Â
3. Â Agents that skip steps in the listing process: Â
The general public doesn't necessarily know what an agent is "supposed to" do when listing a house, so I'm going to list the key items below so you can spot the difference: Â Please note that these items apply in California specifically. Â If you are in another state, you should consult an agent from your state for specific information. Â
- Â An agent needs to present to you a form called an Agency Disclosure. Â This form describes an agent/client relationship, and their duties to you under the law in different circumstances. Â It is illegal for an agent to take a listing in California without first doing this.Â
- Â An agent should meet you, at your property, and physically walk through the property in order to be able to represent and disclose features of your property and any visible defects that an agent, using reasonable care, should be able to spot to a potential buyer. Â We use a form called the AVID or Agent's Visual Inspection Disclosure for that purpose. Â "Internet Agents" who presume to list your home as a short sale without ever seeing it are doing so in violation of California law. Â An assistant, or subcontractor cannot do this. Â A licensed agent needs to see your home.Â
- Â A listing agreement needs to be presented to you in writing, and needs to be complete, including a starting and ending date for the contract, the compensation that will be due and payable - the different options regarding signage, internet advertising, MLS inclusion all need to be considered and decided upon. Â There is no, one, standard way to complete a listing contract. Â You, as the seller have options that are negotiable. Â You need to read this carefully, and understand what you are signing. Â If this will be a short sale, you also need to have a short sale information disclosure presented to you that details the potential risks and various scenarios that you need to be aware of where short sales are concerned. Â It should specify that the broker is willing to accept the compensation offered by the short sale lender as payment in full of the obligation in the listing agreement. Â Often, banks will reduce the commission. Â Your written agreement should make it clear that you aren't expected to make up the difference out of pocket if this happens. Â
- Seller disclosures should be completed. Â These are the representations that you, as a seller, are making to potential buyers concerning the things you know about your property and are required by law to disclose. Â These should be done upfront, prior to the listing being included on the MLS. Â If the agent doesn't know what you are disclosing about the features of your home, and condition, how can he, or she make adequate disclosures to other agents or buyers? Â These should not be rushed over. Â You need to make careful disclosures and err on the side of too much information, rather than not enough. Â Lawsuits happen, and sellers lose cases because a buyer feels that the seller didn't properly disclose something that they should have known about. Â Your agent should emphasize this, and help you understand how to complete the disclosures properly and in a complete manner.Â
- Â IMPORTANT: Â Entering into a listing contract is NOT a requirement for an agent who is helping you to complete a loan modification package, or is showing you rental properties in preparation for your move out UNLESS and UNTIL you are actually ready to list your home and actively begin marketing it for sale. Â I have had numerous sellers come to me and say that an agent wanted a listing agreement "just in case we need it later", or "because my company requires it" in the case of distressed homeowners who are trying to get a loan modification or are not yet ready to commit to a short sale. Â This is a trick to get you to commit in advance. Â You do not have to agree. Â It is unwise to agree to lock your property into a listing contract with anyone until, or unless you are, at that moment, ready and willing to sell your house.
- Before the agent leaves with a signed listing agreement, you should: Â
- Â Have a copy of it, with all blanks filled in. Â Your agent should also return to you a copy of any disclosures you have completed during this meeting within 24-48 hours. Â These are legal representations that you are making. Â You need to have a copy of what you have Â disclosed. Â *** Idea *** if you have a printer that will copy, or the ability to scan at your Â home, suggest that you do the copies right there. Â That way you can be sure that nothing gets changed or added to later with your signature on it. Â Alternatively, you can ask to meet at the agent's office where copies can be made in order to execute the contract and agreements.Â
- Understand what you have agreed to, or don't let them leave with the agreement signed.Â
- Â Know what to expect next:Â
- How soon will showings begin?
- Who will be present during showings?
- Who has access to my house? and how?
- Will there be a sign?
- How will my home be presented on the internet?
- Do I have to complete other paperwork/short sale questionaires, etc.?
- If so, what should I be prepared to provide?
- How do I contact you, and your broker in case of an emergency or problem?
- If I need to cancel...decide not to sell, or go into a loan modification program instead, how will this work, and will I owe any commission or costs because of that? Â
- How soon will I need to move out if we sell? Â What should I be prepared to do?Â
- Am I expected to make any repairs at this time?Â
4. Â Agents that ask you to sign BLANK documents, or incomplete documents
I have seen instances where consumers were asked to complete signatures and date documents that were completely blank, in order for the agent to fill in the blanks later. Â This is a BIG no-no. Â While it may be much more convenient for an agent to do this - and many agents would, in fact, complete any "unknown at this time" items later with your specific consent and approval, you are leaving yourself open to unimaginable risks. Â By signing blank documents, you are giving someone else the power to make representations that you can be held liable for on your behalf. Â In one case, I saw an agent ask a homeowner to sign and date completely blank financial declarations which said at the bottom of the page, "I hereby declare this information to be true and correct to the best of my knowledge under penalty of perjury.". Â And the client signed it anyway. Â Please don't do this - Â An agent - or anyone for that matter, has no business asking you to take this kind of risk for the sake of their convenience. Â It's unconscionable to even ask. Â Â
In my own practice, I generally include, in writing, that the seller has the right to cancel this listing upon 24 hours written notice. Â That's an easy exit solution. Â Some agents tell me that this is unwise...that I might get burned doing this. Â My response is this: Â in 26 years, I have never had a single situation where a seller cancelled a listing with me, that I did not agree that it was best to let them out of, primarily because their circumstances had changed. Â I don't feel the need to work with clients in a hostile environment, or to hold someone to a contract that doesn't wish to be there any longer. Â Quite frankly, when you provide outstanding service, and you choose your clients to begin with (I only work with people that I feel have reasonable expectations, and that I can get along with) there is no need to cancel a listing. Â Don't be afraid to ask an agent to make this guarantee to you - and to do so in writing. Â
If you feel that you have been tricked, unduly pressured, have been lied to or lured into a listing with misrepresentations, first approach the agent's broker and ask to be relieved of the listing. Â In California, the form is Form COL: Â Cancellation of Listing. Â Be certain that you agree to the option which applies. Â Understand that form. Â If you agree to option 1 - you are saying that you will relieve the agent of his/her obligation to you, however you will STILL pay them a commission if you sell, lease or transfer your property in a specified time frame. Â That is probably not your intention. Â I would recommend, in most cases, choosing option 4 which relieves both the agent/broker of his/her obligation to represent you, and also relieves you of the obligation to pay them a commission regardless of what you do with your property. Â This frees up your property so you can move on, and make a better decision next time! Â If the broker will not agree to do this, you may need to seek out the advice of an attorney, or seek other remedies such as making a report to the Department of Real Estate regarding the brokerage practices. Â If your property was listed on the MLS without your consent, you may also wish to contact the Association of Realtors office that governs the MLS where the agent listed the property. Â
Remember - these are Red Flags - not normal behaviors of good agents. Â There are many, many excellent agents with great reputations to choose from out there. Â My strong advice is to take some time, and find a great agent to work with. Â Please don't leave your financial affairs to chance!Â
Good luck out there -Â