REAL ESTATE DOLLARS AND SENSE

Did you know that in twenty-one states, you are legally required to work with an attorney when buying or selling a home? While California has no such requirement, the thought still weighs heavy on me with every client and every transaction because at the end of the day, we, as real estate agents and brokers, are doing nothing less than practicing real estate law on behalf of our clients. Buyers and sellers entrust us to represent them as their fiduciary with what is likely to be one of the largest transactions in their lives at a cost that is not insignificant. In return, buyers and sellers expect and deserve real estate professionals that not only have exceptional command over all facets of the transaction but that also understand the nuances of the legally binding contracts that we ask our clients to sign. For example, a “short” real estate contract in the state of California contains about 75 pages (not including state-mandated disclosures). In all likelihood, buyers and sellers, not being very familiar with these contracts, will lean on their agent to explain to them the salient portions of the contract and the ramifications of various clauses. Given this, it is always disconcerting to me when I am in a transaction where the opposing agent indicates, suggests, or outright states that “contracts aren’t their thing”.

Of course, the thought that goes through my mind is - wait, you’re telling me that your client is paying you tens of thousands of dollars to represent them in a real estate transaction with legally binding terms and “contracts aren’t your thing?” Now, I am certainly not suggesting that all or even most real estate agents fall into this category. In fact, I have worked with some amazing agents and brokers that have become great friends of mine. What I am saying is that over the years, the number of times I have worked across agents with a marginal comprehension of commonly used real estate contracts is markedly higher than should be tolerated within the real estate industry. You might be wondering how is it possible for an agent to skirt by without a solid understanding of their industry’s contracts? While brokers have come to rely on their agents to scale up their operations by acting on their behalf to execute real estate contracts, agents in some cases, have come to rely on their transaction coordinators in the same way. Specifically, agents may rely on a transaction coordinator’s understanding of contracts to bridge gaps in their own understanding. Now, while I happen to have an exceptional transaction coordinator (hands down the best I’ve ever hired), the job of a transaction coordinator is not to provide expertise in real estate contract law, but rather to ensure that the real estate file is complete and includes signatures from all required parties in a timely manner. And agents that rely on the legal advice of their transaction coordinator with respect to contracts are potentially putting their clients in harm's way. The next time you are looking to hire an agent to assist you with the purchase or sale of your home, before you sign a Buyer’s Representation or Listing Agreement (i.e. the contracts used to hire an agent to represent you on a purchase or sale, respectively, in exchange for a negotiated commission), ask your agent detailed questions about the agreement. If they cannot articulate details to your satisfaction on a contract that outlines the circumstances around their compensation (a contract that lists the agent as a principal no less), then it may call into question how well they comprehend contracts between buyers and sellers, where the agent is not one of the principals. How well does your agent understand their real estate contracts?