From my vantage and from what I hear from brokers, 2020 was a banner year. At least for residential sales. Perhaps that is not so in all reaches of the Commonwealth, but I hope you had a good year and I hope you have a better year in 2021, in business and in health.
Yet, and despite this boom, I know that some of you are already worried about what a falling market may bring. One broker client recently engaged me to draft a disclosure advising buyers that, while historically home purchases have proved to be a good investment, it may not be so now. The broker’s concern is the recrimination she and her agents may face when buyers who pay over list and forgo inspections find the floor drop from under them in months or years from now. That is not to say that buying a home is ever a bad idea, but should we always expect great appreciation? The disclosure advises that agents cannot predict the future in the real estate market and that there are always risks when making such a purchase.
In fact, there is good reason to look elsewhere if investment is a primary goal. The stock market has proved a better investment than the acquisition of a home in poorer markets and those teetering on decline.
So, how do you advise your prospective purchasers? What do you say to their offering five, ten or fifteen percent above list price? What do you say to waiving inspections? I am presently defending several licensees against claims of over-aggressive sales tactics in civil suits. Those buyer-plaintiffs, now remorseful about their purchases, claim they were “told” by their agents to offer more and demand fewer inspections!
The issue is whether you have a responsibility to counsel and caution your purchasers about the risks, however slight or significant you assess them to be.
I believe most of us care about our clients and their present wellbeing and their wellbeing in two, four or ten years. Are there buyers who would be better served by staying out of the game until the market cools? I am convinced there are.
If your client is your brother, sister or child, would you caution him/her any differently than you do your unrelated clientele? Fiduciary responsibility requires that you advance your clients best interests and that means reviewing the up and downside of their choices. Exercising that responsibility also significantly better shields you from liability. Though I believe there is “little” (a relative term) chance of being held liable to a buyer over an aggressive purchase, we offer caution because…there is risk. We cannot predict the future and therefore we are not required to offer perfect advise. Like a lawyer assessing the possible outcomes from the various strategies to be elected, you, the real estate professional merely have to advise your clients of available choices and possible outcomes. Inform them of the pros and cons of making an offer at above list as well as the pros and cons of waiving inspections and mortgage contingencies. As long as you adequately discuss the competing interests involved, you cannot be liable for a client making a choice, that with retrospect, was not the best.
Those who put their client’s interests first are successful and satisfied practitioners. There will always be a payday and clients who defer jumping into the market today will eventually use your services. There is great satisfaction in serving your clients the way you would like to be treated!
Copyright © James L. Goldsmith, Esquire, 2021
All Rights Reserved
Mr. Goldsmith is an attorney with Mette, Evans & Woodside and serves as outside legal counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends Realtors® in disciplinary hearings conducted by the Real Estate Commission. Jim was one of the voices of the PAR Legal Hotline for the first 27 years following its inception in 1992.