Given that real estate transactions are getting more complex, it is not surprising that few deals are perfect or that some are downright traumatic. So who gets blamed when the faucet leaks, the hot water heater fails, or a tree dies? Who is responsible when "buyer's remorse" sets in and a conversation held months before suddenly seems less clear?

Too often realty brokers are blamed when transactions are less than perfect, a situation brokers can avoid or mitigate by taking seven basic steps according to Phoenix defense attorney Robert N. Bass.

Bass, a former administrative law judge for the Arizona Real Estate Department, offers claims-reduction counseling for brokers and defends those who wind up in court or with license complaints. In many instances, says Bass, suits arise because brokers have failed to protect their own interests or those of their clients.

"It doesn't matter that you've been in business for 20 years and have a great consumer track record," says the Phoenix attorney. "It only takes one disgruntled client to sue or to file a complaint against your license -- your right to earn a living." Bass suggests these baseline strategies to reduce claims.

• Communicate & Follow-Up. Document your disclosures, discussions and any choices the client makes against your advice. Send confirming letters. Brokers should ask: "What if they deny I told them this important fact? You need to have a record of what was said, and when."

• Explain Financing Terms. Consumers need to understand financing language and what it means in terms of costs and liability. Have clients sit down with lenders to review loan options in detail.

• Avoid Contract Language Errors. Make contract language clear and simple, know your rights and limitations to alter contracts under the rules in your state, and work with an attorney to perfect contract language.

• Handle escrow funds with care. As Bass tells brokers, "The money in your trust account is tainted money...'TAINT YOURS!'" Place buyer deposits in an escrow account. Do not touch them. Do not assume a closing will occur. Do not withdraw a penny without written authorization. If there is a dispute between buyer and seller, turn the money over to a court or, in some jurisdictions, a real estate commission.

• Be careful with measurements. There is no standard way to measure the size of a home. Be sure to include a written disclaimer stating that all measurements are approximate, and that if any measure is important, the buyers will measure it for themselves. If someone wants to know about lot lines, easements or possible encroachments, recommend a survey in writing and warn clients what can happen if they ignore your advice.

• Never let a transaction close without a home inspection. If buyers refuse, make them sign a release acknowledging that they were advised to obtain a home inspection, but they declined, are acting against your advice, are responsible for everything a professional inspection would have revealed, and that they release you from all liability for the condition of the property.

• Work with an attorney before problems arise.

"It's cheaper and easier to act defensively than to face litigation," says Bass. "It's also a marketplace necessity. After all, professionalism and risk reduction go hand in hand."

Question Of The Week

Q What rules protect home buyers against varying forms of discrimination?

A In addition to state and local regulations, federal laws which offer protection include:

• The Civil Rights Act of 1866
  
• The Civil Rights Act of 1968
  
• The Americans with Disabilities Act
  
• The Equal Credit Opportunity Act
  
• The Fair Housing Act

Weekly Resource

With more than a million personal bankruptcies each year it is not surprising that some folks have not paid their tax bills. An interesting list of homes available for sale can be found at the IRS site.

Mr. Miller welcomes your questions, comments, and news releases. All correspondence shall become the property of Mr. Miller upon receipt. He can be reached by e-mail at OurBroker.

Editorial Notice: Content on this page reflects the opinions of Mr. Miller only and not necessarily the views of any publication, organization or website owner.

Published: June 23, 1998

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