Publications

Phillip C. Querin
Partner - Portland, Oregon Office

philquerin@dwt.com
(503) 241-2300

Avoiding Old Mistakes
[July 2007]

When I was in college and law school, I worked as a switchman on the railroad. One of the things I was told early on was not to walk in the tracks without looking, because when the flatcars were released, they ran quiet and could hit you before you heard them coming. I also learned that it was not the new switchmen who got killed or injured. It was the older, experienced ones, who simply grew overconfident and less vigilant. The same holds true for Realtors®, lawyers, and all professionals. Paying attention to detail is important to your professional life.

Mistakes happen to the best Realtors®. Being busy leads to avoidable mistakes—the type of mistakes that are small and usually don’t cause anyone any damage and often times go unnoticed because no one complains. But unfortunately, when these mistakes come to the attention of the Real Estate Agency, they can result in public sanctions. Most Realtors® can ill-afford being written up in the Oregon Real Estate News-Journal for committing errors that could have been avoided with a little more attention to detail. Here are some of the more frequent errors that the Agency is seeing again and again:

Failing to Include Material Issues in the Sale Agreement

Be sure to listen to the client. If the buyer wants a significant condition to be made part of an offer, the buyer’s agent should make sure the sale agreement addresses it in clear and concise terms. If the seller wants to accept the offer, but needs additional time to vacate, the listing agent should not leave it to future negotiation—make it a part of the counteroffer now.

Equally important, if there is a material condition or contingency written into the transaction (e.g. that the buyer provide the seller with proof of their source of funds for the downpayment), then both agents should make sure that this issue is not ignored. All too often, once the transaction is written up, agents are hesitant to “rock the boat” by insisting that the other side actually honor the smaller terms of the deal. The saying “trust but verify” applies here. Agents should not take the word of their counterpart in the deal—but rather independently verify that an event or condition has actually occurred.

The same rule applies to technical issues. Agents should not rely upon their counterpart’s explanation—which may be flawed, inaccurate, or incomplete—but should secure the explanation of the appropriate expert themselves.¹

Drafting Clear Documents

The best way to evaluate whether the Sale Agreement sufficiently describes the agreed-upon terms of the transaction is to ask yourself whether the document can be understood by someone who knew nothing about the transaction, or the history, or intention, of the parties. In other words, does the agreement “speak for itself?” Will it “stand on its own?” If there are ambiguities in the document, which are in need of additional verbal explanation before the transaction can be understood, the document is not as tight as it could be.²

Property Condition

This continues to be a persistent source of complaints to the Agency. Admittedly, sometimes the customer complains against the agent when they have no one to blame but themselves or their own inspector. However, since a complaint to the Real Estate Agency is sometimes merely a prelude to the filing of a civil action in court or arbitration, Realtors® should always follow some basic rules regarding property condition:

Never, never, never, discourage an inspection. Even for new construction. Even for condominiums. It’s like discouraging someone from going to the doctor. You never know what you’ll find unless you check, and the advantage of checking far outweighs the disadvantage of doing nothing.

And, when it comes to inspections, more is better than less. Frequently, home inspectors cannot access an area due to storage or other reasons. The conditions of high roofs are sometimes assessed only from the ground. The seller’s disclosure of prior water problems is occasionally not followed up on by a buyer’s expert who can say whether the problem has been completely remedied. In all of these cases, agents should make sure that they encourage their buyer clients to obtain complete inspections, even if it means bringing in additional experts.

Agents should be careful about rendering their own opinion in lieu of recommending that the buyer obtain an independent expert’s opinion. A water leak, no matter how innocuous looking, may be symptomatic of larger problems.

And perhaps most importantly, be sure to notate in the file about what you’ve done. For example, if the buyer declines to have an inspection, despite your adamant insistence that they do so, be sure to paper your file with a description of your efforts to convince them to secure the inspection. In some instances you may even wish to put in a letter to the client, or even have them sign a disclaimer that you’ve recommended an inspection, but they decided otherwise. While all of these efforts are self-serving, they will go a long way in supporting your contention that you recommended that the client obtain expert advice.

The Use of Inspection Reports

Inspection reports can vary widely in their scope and sometimes their accuracy. Occasionally, some reports can imply that a particular type of building material appears to be of a type that has had problems in the past, such as Louisiana Pacific siding. Or perhaps the report identifies some deterioration in the siding. If there is a sale-fail, there are two rules to follow: (1) if the seller has the prior report, the listing agent should make sure that it (or the contents) is/are disclosed to the new buyer; and (2) the buyer’s agent should encourage the buyer to secure their own report rather than relying upon the prior report.

When there is a discrepancy between the old and new report—e.g. the second one does not disclose a defect that the first one identified—Realtors® should avoid the temptation of ratifying the second report and discarding the earlier one. Rather, agents should make sure that they encourage their buyer clients to resolve the discrepancy. If your buyer declines to do so, make the appropriate notation in your file, in case they later claim otherwise.

Lastly, if a property has been inspected, and the transaction later fails, for whatever reason, Realtors® should make sure that they re-evaluate the accuracy of their earlier advertising. For example, if an earlier report discloses the existence of substantial material defects, agents should take a good look at their use of superlatives such as “like new,” “perfect (or mint) condition,” which would tend to suggest the nonexistence of the defects. The same warning applies to a property disclosure form a seller may have filled out prior to receiving notice of the contents of an earlier buyer’s inspection report. In summary, the rule should be once you find out that the property may not be in the condition as advertised, you should promptly modify the advertising and all other disclosures that suggest otherwise. This does not mean that agents must “advertise” the existence of a particular defect noted in an earlier report—after all, the report may be incorrect itself—it simply means that terminology that implies the absence of such defects should be deleted.

Conclusion

Metaphorically speaking, we must all beware of flatcars. They run quiet, but can have a devastating effect if we ignore them. Be vigilant and aware at all times. While the basics can seem mundane, repetitive and boring, attention to detail is the hallmark of a true professional.

FOOTNOTES

1 A good example is the disclosure in the preliminary title report of an easement that is unclear or otherwise in need of further attention. In such cases, agents should encourage their buyer to contact the title officer for a more complete explanation, and possibly secure legal advice if there is a problem. Relying upon the seller or seller’s agent for an explanation may not be enough. If the agent takes it upon themselves to speak to the title officer or other expert, he or she should make sure that they summarize the information in written notes, and then accurately communicate that information to their client. Since there is always danger of miscommunication between expert and agent, Realtors® dealing with experts on behalf of their clients should encourage their clients to verify what the agent was told.
2 If a provision is capable of more than one interpretation, this means that it will be up to the court or arbitrator to determine its meaning. If it is capable of only one interpretation, then there will be no ambiguity, and (hopefully) no argument.

© Copyright 2007. Phillip C. Querin, Davis Wright Tremaine. No part may be reproduced without the author’s express written consent.