As the industry moves to becoming paperless, the new technologies are exacerbating a problem that has existed for years: agents failing to make sure their clients understand the contracts they are signing. Are you taking the necessary steps to protect your clients?
Your clients have found the perfect house but there are already two offers on it. They’re in a hurry to submit an offer, so you take out your iPad, pop open the zipForms version of your purchase contract, and auto-fill the contract. The buyers digitally sign the contract, you obtain their deposit check, and you email the offer to the listing agent. The entire process took a little over five minutes — isn’t technology grand?
I have been interviewing managers and broker-owners regarding the major challenges they’re facing with new agents. Every broker and manager I have spoken with has cited the same problem: A substantial proportion of all agents have failed to master the fundamentals of the business.
Not only do the agents lack the ability to explain the contract provisions, they don’t even discuss them. As more agents shift to using mobile technology including automated forms and digital signatures, this problem has exploded.
As Cecilia Roberts, vice president of sales for Coldwell Banker United, put it: "Agents need to get out of the ‘auto’ zone. Their mindset is hurry, hurry, and sign this. They use the auto-fill function on zipForms, have the sellers initial using DocuSign, and then email the offer to the listing agent. They use the technology to cover the fact that they lack an understanding of the contracts."
This problem is even more pronounced with new agents, especially when they affiliate with a brokerage where there is no mentoring or contract training. Making matters worse, if they obtained their license by taking courses online, chances are they have never filled out a contract and cannot explain what the various provisions of the contract mean.
There’s never time to do it right, but there’s always time to do it over
While it may be cumbersome to go through the contracts in detail before your clients sign them, remember that in most cases you are representing them on their most important financial transaction ever. The best course of action is to make sure your clients are clear about the ramifications of contract before they sign. This will prevent problems during the transaction and will also increase the probability of receiving referrals.
The cost of the "auto" zone: loss of relationship and future business
Another important finding from my brokerage interviews is that an overreliance on technology is the recipe for a failed real estate sales career. Agents who shun face-to-face meetings and rely exclusively on texting and social media usually exit the business quite rapidly. Unless they have strong face-to-face skills, the same pattern holds true for many technology professionals.
A simple alternative
To avoid the costs of the "auto" zone, here are two simple steps to take.
1. Know your contracts
Can you explain the difference between arbitration and mediation? What happens to the buyer’s deposit should the buyer default? What are the agency requirements and what happens if you receive your own offer on your listing? If you cannot explain every provision on your listing agreement, purchase contracts and disclosures, sign up for the necessary classes so you can master this material as quickly as possible.
2. Circumvent the "auto" zone
When clients are in a multiple-offer situation, everyone is in a hurry to get the offer written. The best way to prepare your buyers before writing an offer is to give them a set of completed contracts when you first start working with them. (Be sure you write sample across the contract and choose a price range different from the one where they are looking.)
Ask if they would like to review the contracts on their own, with their attorney, or have you review the contracts with them. If they have a question that you can’t answer or that requires legal advice, don’t try to bluff your way through it. Instead, say, "Let me contact my manager just to make sure that you have the best answer to that question."
The same strategy works with sellers. Prepare a completed set of seller documents, including the listing agreement, agency disclosures, property condition disclosure statement, and federal, state and local mandated disclosures, etc. Rather than doing this as part of your listing presentation, give these documents to your sellers as part of your pre-list package. Ask them to review the contracts. If they do have questions, tell them that you will be happy to answer them when you meet for your actual listing appointment.
If you haven’t mastered the fundamentals to stay out of the "auto" zone, there’s no better time than right now to begin the process.