Honesty, transparency and responsibility are key to avoiding legal and ethical missteps. Luke Babich offers timeless advice for how to stay on the right path.

Disclaimer: This article gives advice that may not be specific to your state/region etc.  Check with your Broker and defer to state/national laws and the NAR code of ethics guidelines before taking ANY contributor’s advice for guiding your customers on their real estate journey. 

A home sale is a complex legal process that brings out emotional highs and lows for clients. As an agent with a duty to represent your client’s best interests, you need to tread carefully and beware of common pitfalls inside of transactions.

In today’s hot market — skyrocketing house prices have made home purchases more difficult than ever — it’s inevitable some clients will end up disappointed. When that happens, and if the client discovers you made a mistake or misstatement, you could find yourself on the wrong end of a lawsuit.

But navigating customer service doesn’t have to be a tightrope walk. Stick to a few core values of honesty, transparency and responsibility, and you’re 90 percent of the way there. That last 10 percent deals with industry-specific laws like the Fair Housing Act and specific ethical obligations under the official Realtors Code of Ethics.

Here are some tips to help you avoid legal and ethical missteps.

1. Be communicative and responsive

A simple way to avoid problems is to create a system to keep your clients in the loop of communication at all times. In the smartphone era, there’s no excuse for not notifying all concerned parties immediately when there’s a major development in a transaction.

You should also document these communications. For example, when you call a client to update them on the status of their offer, compose a quick email for your records noting when you called and what was said. 

In the same vein, try to respond quickly when clients have questions or concerns. Taking longer than 24 hours to return calls and emails could give the impression of negligence, and if customers and clients are dissatisfied enough, they may pursue a grievance against you.

2. Never give tax or legal advice

A home sale involves a big tax bill and complex legal issues. But as a real estate agent, you shouldn’t give your clients tax or legal advice, even if you feel confident that you know what you’re talking about. Refer them to a tax professional or lawyer.

Tax regulations and local laws change frequently, and if you give your client incorrect advice, they’ll have grounds to take you to court.

3. Be thorough — but careful — with disclosures

State and federal law dictate that certain conditions or items have to be disclosed by sellers, but there’s a sizable gray area where agents have to keep a sharp lookout.

If you’re working with a seller, it’s wise to disclose all problems, even if not legally required. If your client tells you about problems that aren’t on the disclosure forms, try to convince them to include them. 

On the buyer’s side, you should make sure that all required disclosures are made. If your client asks you about specific items on the disclosure forms, try not to offer your opinion on whether the problems are fixable. If you tell them that a certain crack in the foundation doesn’t look serious, for example, and they go through with the sale only to find out it’s a major issue, you could find yourself in an awkward spot.

But you should also make sure that a buyer knows exactly what they’re getting into. If an eager buyer wants to waive a home inspection, carefully explain the possible consequences.

4. Handle multiple offers carefully

In today’s hot market, multiple offers are quickly becoming the norm, but it’s a situation that requires some delicacy. It can be hugely damaging to an agent’s reputation — not to mention potentially illegal — if a client accuses them of playing favorites. 

When you’re working with a seller who’s getting multiple bids, try to send the same counteroffer to all bidders simultaneously, and present the responses impartially to the seller. Avoid disclosing too much personal information about each bidder.

On the buyer’s side, if you’re showing the same listing to multiple clients, make sure you let them know, so no one feels misled or neglected in the event of a sale.

Another potential source of trouble is the “buyer’s letter” that some bidders may want to include with their offer. These have become more popular as the market has become more competitive, but they can easily run afoul of fair housing laws. If your client insists on writing one, don’t contribute to it.

5. Always be realistic and direct

When you’re listing a house, don’t promise client pricing/profit outcomes. In fact, try not to make any specific guarantees at all. If you throw out a number and the home sells for less than that, the seller will understandably be disappointed. If a seller wants to list at an unreasonably high price, explain to them that the home won’t attract interest at that number, and suggest a more realistic range. (Of course, they have the final say.)

The same rule applies to buyers. If they’re bidding on a hot property, be clear on the type of competition they’re facing, and don’t give them false assurances. If they’re putting in a non-competitive offer, let them know. 

6. Keep fair housing laws in mind

A fair housing violation is extremely serious and a huge red flag on an agent’s reputation. Sometimes this is going to require you to put guardrails on a seller’s inquisitiveness. If they ask about a potential buyer’s identity or express a desire to look into their background, an agent has an obligation to discourage that and redirect them to focus on the offer. If they insist on making the sale personal, you should walk away from the sale.

7. Remember, the buck should always stop with the client

As an agent, your role is to advise and inform. If your clients have questions about the local market, tell them what they want to know. If they’re having trouble getting past certain pain points in the deal, help ease their concerns. If they’re worried about buying too much house, educate them on the true costs of homeownership

But when it comes to actually making the decisions in a transaction, the client should always be the one in the driver’s seat. Even if they ask you to make the call, don’t make decisions on their behalf. If your decision turns out to be wrong, the client will be justified in feeling upset — and maybe even in filing a grievance against you.

Luke Babich is the CSO of Clever Real Estate in St. Louis. Connect with him on Facebook or Twitter.

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