Didn't you get a copy of the fully signed contract ? Didn't you read it, and notice she deleted that clasue?
You must have had a home inspection following the contracts being signed..............what ensued after that?
I am just not following how this played out with you only discovering this deletion now.
But, to give a short answer - yes, it is inappropriate and illegal for anyone to alter a signed contract without the permission of the parties involved......and their initials on any changes.
"Once everything was signed our realtor told us that she took the $500 out of the contract AFTER WE HAD SIGNED IT because she thought that it was asking too much from them. Isn't it illegal for her to do this?"
If "after we had signed it" was while you were sitting together with the ink still fresh on the paper, then at that time if you told her you did not want to take the $500 out, and she went forward with the signed document despite your clear instructions not to, you have a case for breech of your agents fiduciary duty to you. However, the way I read what you have said is that she in fact did inform you BEFORE she presented the offer to the Sellers, and you did not object at the time. So there are two issues in that case, you signed it, and once informed of it's contents you allowed your offer to be presented to the Sellers.
Ultimately it will be your word versus hers and honestly impossible to tell who is being truthful. But it sounds like based upon your own testimony that she informed you of the change before the offer was presented back to the Sellers. CA Real Estate contracts do not consummate upon the signing acceptance of the 2nd party, in other words when both parties have signed. The consummate upon the last party to make an offers acknowledgement of receipt of the other party's acceptance. In this case once the document you signed, was sent back to them and they acknowledged they had received it.
Which case is it? There is no point in us all speculating.
I find it interesting that you already felt prior to this event that she was not representing your best interests because of your comment "...We wanted to put in an offer on the house that was quite a bit lower than the asking price and she refused to even put in the offer unless we went up because she said it was a "waste of time". Then when we finally agreed...". I can't tell you how many times I hear about buyers or sellers that get into the most serious stages of working with an agent and begin to sense that agent may not be looking out for their best interests as the client. Anyone can show you homes... it takes someone with levels of skills similar to that of a surgeon or an attorney to represent and negotiate on your behalf. You would hire just any attorney from the yellow pages and you would let a surgeon that does one or two surgeries a year operate on you (I hope!), so take the time to interview & research the credentials, track record and references/testimonials of your Realtor BEFORE you hire them.
AND if you begin to get that gut sense that they are not highly skilled, ethical, hard working or most of all watching out for YOUR best interests (the very heart of the definition of "agency") then DO NOT HESITATE to drop them and hire a new one. If you get trouble from them talk with their broker. After the # of years I've been in the business I can't tell you how often I hear of buyers or sellers coming to that negative conclusion and yet they move forward with the transaction because they apparently are fearful of some legal repercussion. That's baloney! Would you stay under the knife with a surgeon you do not trust? Run! Those of us that are true professionals earn and certainly could use & deserve more business. Frankly one of the reasons for the relatively low standards of behavior and professionalism in Real Estate is because the consumer thinks hiring their neighbor or a friend or someone they picked out of the blue is OK. Expect more! Interview for more! Check references for more! It is one of the most important hiring decisions you will make in your lifetime.
Kaizen Group of Keller Williams
If the brokerage does not absorb the $500 - you can take the Realtor to small claims court afterward to collect.
With regards to the $500, if you signed a contract that didn't have terms you believed were supposed to be in there then some blame lies with you for not reading it through, however your agent should definitely have told you she didn't put that in as there is a certain reliance upon a professional to present terms as agreed.
If you were our client and I felt strongly about something (s) we would present the reasoning behind it, but ultimately it's your decision.
Arguing about $500 in the context of a house purchase is likely to cause you more grief than it's worth, but you could at least call her broker and complain or possibly take her to small claims court, but that's also a hassle. You can also share your experience on sites like yelp and other review sites so people will know who they are dealing with.
You too had the responsibility to read the contract as you signed it. She should have explained it step by step and if something was wrong or missing it could have been corrected then.
Instead of looking at blame. I suggest you have a frank conversation with your agent. I'm sure she wanted to do a great job for you and unless you talk with her how can she make things right.
Any alteration thereon should be initialed by both parties.
Having said this, you have been informed that she removed the $500 because in her opinion, the offer could have been declined. This is probably a result of communication between her and the other agent. This is just an assumption of her action.
She could have fixed this misconduct or impropriety by having all the parties affix their initials on the alteration. Her course of action could have been illegal but she could have acted in your best interest.
On the other hand, since you have been informed about the change, why didn't you confront her about this. Some things are better addressed amicably. You may not be happy with the $500 out of pocket. But must be happier that you got the house.
Best of Luck.
Ultimately, you are responsible for your offer. You should have known about the change long before the time approached close and, you should have expressed your issue immedicately upon learning the change.
The agent, on the other hand could be liable for the $500 if they never made it known to you in conversation, email, or in writing.
There are too many issues to say clearly your position.