Vendit Caveat

A while back I posted suggested questions to ask potential real estate agents. After attending the CAI learning sessions and listening to the legal issues being faced by various owners and associations during those sessions, I have expanded that list. This post is general in nature and provides a realistic perspective. It's based on general information and is not about any specific geographical area. It is not a recommendation for a specific property nor the opposite. Nor is it a recommendation for or an endorsement of, any specific real estate agent. However, I am a condominium owner and I do have a concern about the issues I could face when the time comes to sell my unit.

There are several people who can assist me when that time comes. One is the real estate agent I hire to represent my property. The other is the real estate lawyer I hire. That lawyer will review documents and make certain that the legal "i"s are dotted and the "t"s are crossed. However, the person on the ground who will be showing and representing my property to potential buyers will be the real estate agent. Success will depend upon them.

By success, I mean selling my property for a reasonable price considering market conditions and the condition and amenities of my property. It also means selling in a reasonable amount of time.

"Reasonable" is a subjective term. It's essential that the seller and the real estate agent come to an understanding of "my" expectations as seller. What is the realistic selling price I can expect and how does it differ from the asking Price? It's also essential that I understand who I am hiring and how effective they will be. By effective, I mean accomplishing a sale that meets my stated objectives and results in a happy buyer, and with no secondary legal issues.

Anything else may lead to a dispute that will put me in court. That is something everyone would like to avoid. As we know, there is money to be made in legal disputes, and it is always made by the attorneys. However, there are times when the settlement of legal disputes goes to real estate agents or the seller or the buyer.

Entering into an agreement with a real estate agent to sell one's property is a legally binding contract. As an owner in a HOA, it's natural that my perspective be the "seller's" and so that's my perspective in this post. If things go wrong, the seller may be sued by the real estate agent, or the buyer may sue both the agent and the seller. The title of this post is Latin and can be roughly translated as "Let the seller beware."

I have added a question pertaining to the differences between listing prices and selling prices for the past three years. I concluded this is a very important question to ask. Why? There has been a significant difference between listing prices and selling prices, and some agents now advertise success and use the listing price, rather than the selling price. It would be very useful for a seller to know how successful a real estate agent is in obtaining the asked price. That is an important statistic. I would suggest that the agent be asked the listing and sales prices and dates for properties they represented in the HOA over the past three years; it's important to determine the length of time to make a sale at the listed price and the difference in asking versus sold price.

I do realize that real estate prices have been generally downward since June 2006. That was the top of the real estate market in Wheaton. Any property listed after that time was selling into a market in which prices were dropping. For this reason I would expect that the final sales price was lower than the asking price for most properties sold in the past 6 years.

Of course, an agent may refuse to answer these questions or may provide inaccurate information. However, an agent should be willing and able to provide realistic information to a potential seller and be able to substantiate it. Shouldn't they?


Questions to Ask a Potential Real Estate Agent
If I were to consider selling my unit, these are the questions I would ask a real estate agent whom I was considering would represent me:

1. In the past three years, have you been involved in a legal dispute with an owner you represented? If so, how many disputes, when were these disputes and how were these disputes resolved? What was the outcome for the owner(s) you represented? 
2. In the past three years, have you been involved in a legal dispute with an HOA? If so, which association and when was that dispute or disputes? Were these disputes resolved and if so, what were the outcomes for the HOAs? 
3. Why should you be my realtor(R)?  (Note 1).
4. What is it that you do better than other realtors(R)? (Note 1).
5. How are you going to sell my unit for the highest possible price?
6. How are you going to get buyers to come to my unit?
7. Can you provide me with testimonials and references?
8. How many condo units have you sold (major involvement - 66% of fees to your office) in the last 12 months? How many were in Wheaton?
9. How many condo units have you sold (minor involvement- less than 33% of fees to your office) in the last 12 months? How many were in Wheaton?
10. What was the difference between listing price and sales prices for units you represented in my HOA in the past three years?
11. What are the most common things that go wrong to kill a sale?
12. What do you like about BLMH and why would you consider buying here?
13. Why are you a realtor(R)? (Note 1).

Why Might a Real Estate Agent be sued?
It seems many but not all disputes are about representation. However, there are times when the agent initiates the suit. This information is available at the Court as a matter of public record. Some people use dispute information available at consumer and other sites on the internet. I am somewhat skeptical of this information, which may be unsubstantiated. Court records are factual. Better Business Bureau information may also be useful.

I think over a professional lifetime it is quite possible for a real estate agent to have differences with buyers or sellers. There are a number of possible causes, according to materials I have reviewed. After attending recent CAI events I concluded that real estate agents are probably dealing with unhappy owners just as various associations are, and that some of these disagreements are in the courts. So I've been doing a bit of research. The recent collapse of the home and condo market produced some very unhappy people. It has been difficult and sometimes painful for agents and owners to adjust to the real estate market conditions since 2007.

Here are a few published reasons for disputes with real estate agents:

1. A failure to comply with the contractual time frame. 
2. A failure to keep promises made.
3. A failure to disclose issues to the buyer or the seller.
4. A failure to explain the agent's contract. 
5. Making exaggerations about the property.
6. A failure to recommend property inspections. 

It's important for a seller to realize that according to real estate articles and materials I have read, many of the issues seem to involve disclosure to the seller and/or the buyer. When this goes to an extreme, some real estate agents have been accused of being untruthful.

I would expect a real estate agent would be honest with the buyers or sellers they represent. Apparently this is not always the case, or mistakes have been made. I cannot state precisely how far "disclosure" should go for an agent, but it seems that disputes by buyers have included a failure to disclose that modifications were made for which proper permits were not obtained. Owners in a HOA should also obtain written permission for certain types of modifications, and these are usually explained in the governing documents of the HOA. A modification dispute can occur if an owner who is the seller, failed to get such written approval or does not provide these documents to the buyer. The new owner may be faced with a violation which then needs to be corrected at their expense.

Some HOAs have difficulty getting access to units. A few owners have taken the position that their unit is their domain and the association has no business in it and is be refused entry. So it is critically important that the real estate agent fully review the condition of the unit. How far should a real estate agent go? Well, it seems if they don't disclose issues to the seller, the buyer or the HOA, that they could be held responsible for these issues. Unawareness may not be an acceptable legal defense.

I would suggest that any seller or buyer discuss their issues or concerns with their attorney. I also suggest that they become familiar with the financial and governing documents of the HOA which include the bylaws and rules & regulations of the association. After one buys it is a bit late to discover that your three dogs are not allowed according to association rules. This is an example, but a similar situation was presented during a recent CAI legal discussion.

I don't know if a real estate agent should be expected to be aware of all of the details of these governing documents. On the other hand, any agent who promotes themselves as in the business for many years with many sales in a small geographic area or a specific HOA should be, shouldn't they? It would be expected for an owner to be familiar with these documents, but I can understand an inability to quote chapter and verse!

It is a legal requirement that any buyer be provided with them and be given reasonable time to review them. If there is then something unacceptable the potential buyer can then decline the purchase. The potential buyer also has the option to contact the professional manager and discuss questions after reading these documents. The potential buyer can also review the governing and financial documents with their professionals. I suggest any questions be in writing to the manager, and that answers be noted and a follow up letter issued to the manager.

Conclusion
The goal of all of this preparation by a seller is to avoid problems. That does require some homework on the part of both buyer and seller. It also requires realistic expectations. On that, all I can say is "good luck!"

The collapse of the real estate market in 2006 has created lots of problems for owners, buyers and sellers.

It seems that these issues have migrated into the sales relationship between buyer, seller and the real estate agent. It may be possible to avoid most of these problems by doing some preparatory work. For the HOA seller, that includes assembling documents for unit modifications. For the buyer, it includes a thorough review of the association's governing documents. Finally, it requires a good approach to selecting an agent. That approach should include a candid discussion about expectations and legal issues.

The National Association of Realtors (Registered trademark) has published professional standards policies. These include a "Code of Ethics," the latest version is dated 2012. The NAR has published this on their website, and it may be viewed here:

Clicking will open a  New Window> Code of Ethics and Standards of Practice

Notes:
1. Realtor is a registered trademark of the National Association of Realtors. 
2. This post is not a recommendation for any product or service by anyone, anywhere. 
3. General information for buyers and sellers is available by the National Association of Realtors at their website, and at their website at Buyandsell.Houselogic.com. Here is a link to the "houselogic" website:
 National Association of Realtors "Houselogic" Website