I do a lot of expert witness work, and my specialty as an educator is risk management. I think I have found what I believe to be a couple of common denominators that cause a lot of consumer complaints. Simply put, I have to believe that a lot of the problem lies between the comfort zone of the licensee and consumers.

Ask yourself - when is the typical time that a buyer or seller sees an offer or most of the related forms that are aimed at starting and completing a transaction? The answer is when we put the documents in front of the client for a signature.

Contracts, offers, property disclosures, agency disclosures are just a few of the forms that show up in several law suits with the client saying something like: "If I had known that was in there, I would not have made the same buying or selling decision." This problem is often compounded by the fact that most buyers and sellers don’t have a clue as to the third parties that will come into and later control the transaction.

First, start making a list of all the third parties that are likely to show up in a transaction. These include an escrow officer (closer), inspector(s), lender, underwriter, loan processor, loan officer, home warrantors, and the list goes on. This list with a little work, can grow to 25 or 30 entrees.

As you develop your relationship with a buyer or seller, give them a copy of that list. Explain to them that once an offer and acceptance is in place, most of these people take over the transaction. I take it so far as to say that if we can determine who on the list is not producing, I ask the consumer to make the initial call to that person. My thinking is that I know all of these people and our relationship is much different than the relationship between those persons and the clients. Once they have called and reported back to me, I will follow up in a day or so. The benefit here is that the client becomes pro-active in their own transaction which in turn reduces my exposure.

The next thing are the forms themselves. Being in Arizona with a nine-page contract, I like to enlarge it to an 11” X 17”, telling them to make notes in the margins or on the back of pages as we look at and discuss various homes. The good news is what can happen as you travel from one home to the next. Instead of talking about the weather, sports, hobbies and local issues, direct their attention to this enlarged form. The typical consumer is writing down phone numbers of competitor yard signs and FSBO’s, but you've got them focused on you and the task at hand.

The benefits to this work ethic are incredible. This practice affords you an opportunity to show them your professionalism, your knowledge of the forms and with each part of that discussion, their comfort and loyalty to you will grow significantly.

So what would you talk about as you go from home to home? When using the contract, I would focus on the buyer's rights to inspect, the protections they have concerning loans and explain what other documents that are forthcoming mean to them. Documents like CC&R’s, property disclosure statements and home warranties are a great start. Most of your clients have never seen or heard of these documents and the importance they have in a transaction. I would also focus on the risks they take, like forfeiture of earnest money and the number of circumstances where such a thing could happen. Another key area of any contract is how to cancel the agreement while at the same time protecting their rights.

I am of the opinion that you will build your self-confidence, the respect of your client and your referral base from the consumer should grown significantly. The good news, all of this is stuff you all ready know. The only difference is that with this approach, they gain insight to the transaction. Now that is managing risk!

Published: April 19, 2004

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