Friday, July 9, 2010

Risk Management - tips for a better real estate transaction

Risk Management with Jan Fite Miller, Executive Vice President of CENTURY 21 Judge Fite Company in Dallas, Texas

If we all know and abide by the rules, then why would we still be facing problems?

Here we are back to really talking about RISK to you and your clients and what I see happening in our real world of real estate. Let’s start, maybe I always will, with the disclaimer that I am not an attorney just in case any of you ever quote me. Then we can get into what has happened this month to keep me busy. And, please, keep in mind that I do not ever want to scare you. I just want to keep you cautious.

This month’s important precautions:

(1) Watch forwarding emails! It might be buried several emails back and forth and THEN, you may be forwarding to the other agent some confidential information that could hurt your client or the client’s negotiating position (maybe only in their opinion—YIKES). This action threatens or kills your agency relationship of confidentiality and can cost YOU money, the commission, hours of heartache, and the loss of a client.

(2) Mineral Rights: You are sitting with the Seller in your listing presentation and they just barely mention that they want to keep their mineral rights, or mention it strongly enough that you put it in MLS; then, when the offer comes in and everyone is so excited that you stop thinking, NO ONE remembers mineral rights. You can not blame this mistake on the Seller. If not addressed in the Addendum for Reservation of Oil, Gas and Other Minerals, all owned mineral rights remain with the property. You risk losing your commission if not more. Pay attention at time of offer!!!!

(3) Seller Financing: There really is a moratorium on the implementation of the SAFE Act in Texas until 8/31. Stay tuned.

(4) PARAGRAPH 7.D (2): For those of you who were at ARBOR on 6/8/10, please, do it my way. Only check this box when you have a SPECIFIC repair in mind, like painting the exterior, or replace the roof. Do NOT say “subject to inspections.” Buyers still have the OPTION to inspect, amend and terminate if needed.

Last, Seller Disclosures: You know the rule--don’t touch them, mark on them at all or even explain them. The Seller fills it out to the best of their ability, even if they are blind. If really blind, someone helps them pay their bills; they can have that person help them---NOT YOU. But once filled out, I want you to read it. If something is obviously left off that you KNOW is a problem, advise the Seller that they need to be open and honest. Strongly suggest that they complete it properly. Sell them on doing the right thing for their own future protection. I can see some of you wondering why I would write about this subject where “everybody” knows the rules. If we all know and abide by the rules, then why would we still be facing problems, calls and even depositions concerning the Seller’s Disclosure? One call I received recently was from an agent who knows a family member who had already divulged details of why the Seller was moving…Seller didn’t divulge the leak that they had found that had leaked long enough that the black mold had started up the wall of the bedroom. The Seller had even had the mold tested and, yes, it was the bad kind. No, it hadn’t been remediated, just covered up. Who would end up being liable here? WE may not be liable, but we would have to defend ourselves as we would be named in a potential lawsuit for sure. If the Seller refuses to disclose something that you know is a potential problem, see your manager to discuss and you may end up releasing the listing. What I have found happens most often is the Seller respects our honesty and fills in a new or more complete Disclosure.

This reminds me that Seller Disclosures need to be updated at least every 60 days and especially if something changes like a hail storm, plumbing leak, etc.

Another challenge and misconception…TAR has been saying for years that, if a defect has been repaired, it does not have to be disclosed. This, in my opinion, is WRONG! We are in a lawsuit right now that had a plumbing problem which ruined floors. The repair was over $10,000. It had been completed when the house was listed and the Seller chose not to disclose. A year later the claim showed up on the CLUE report when the Buyer’s insurance was renewed. The Seller and REALTOR, that’s us, have been sued for Deceptive Trade Practice Act violation. Buyer says he would never have bought the house if he had known. We pay to defend ourselves. DISCLOSE!!!

That is all for this month. Be careful out there and sell lots of real estate. Surpass your goals.

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