All professions have practitioners who provide exemplary service and others who are not so good. Such is the case with residential real estate. While most agents are ethical and abide by the rules, a few seem more interested in earning a commission than working in their clients’ best interest.
Real estate agents can be well intentioned in their actions but create huge problems by overstepping the limits of their expertise. Most agents aren’t attorneys and are prohibited from providing legal advice. Yet they sometimes slip into the role of attorney.
This can happen easily with the clients’ help. For example, a common question that arises when a buyer backs out of a transaction is, "Who’s entitled to the buyer’s deposit money: the buyer or the seller?"
Buyers and sellers often don’t want to pay more for extra advice, like consulting with an attorney. So, they’ll press their agent for advice.
In one case, a seller’s agent relented and told the seller he was entitled to the buyer’s deposit. In doing so, she was practicing law without a license. Under the circumstances, which were complicated by several factors, the agent gave the wrong advice, which resulted in a costly lawsuit.
Listing agents often help sellers get their properties ready to sell. Sometimes, sellers have painters, landscapers and other contractors that they’ve worked with successfully in the past. But sellers often ask agents to make recommendations and give access to contractors.
Where agents can overstep their bounds is when it comes to paying the contractors who performed work on the property. Ideally, the seller signs contracts with the contractors and pays them directly.
If the sellers want the agents to pay the contractors, checks should be made out to the contractors and held in the real estate company’s trust fund account until payment is due.
For instance, during the recent sale of a home in Oakland, Calif., the sellers were asked to give a check in a large amount made out to the agent who was overseeing the fix-up work. It was unclear how the money was being spent. When the agent asked for more money and the fix-up work was not complete, the sellers became suspicious. They moved on to another agent.
HOUSE HUNTING TIP: To guard against finding yourself in one of the situations mentioned above, select your agent carefully. Check references who have worked recently with an agent you’re considering. Find out if there were any problems and if they would use the agent again. If you’re a buyer, you’ll want to check with a buyer who used the agent. If you’re looking for a listing agent, get references from sellers who were recently represented by the agent.
Here are some more tipoffs that agents are stepping out of line. An agent might not make the seller aware of all offers that are made on the property. A variation of this scenario is an agent who plays favorites and puts pressure on the sellers to accept an offer that could benefit the agent, or the agent’s broker, more than the sellers.
Another misstep occurs when an agent breaches the buyer’s or seller’s confidentiality. For instance, if the agent knows the seller will accept less than the asking price, it may be in the agent’s best interest to pass this information on to a buyer. But it may not benefit the seller.
Agents sometimes make decisions for the sellers without making them aware of what they’re doing. The intent can be to protect the sellers from potentially negative news. However, sellers and buyers should always be informed about what’s going on during the transaction.
THE CLOSING: If there is a potential problem brewing, it is better that clients know sooner rather than later when it might be too late to do anything about it.