Buying a Home in Salt Lake City, UT

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Wussy Disclosure - A black mark on the real estate industry

 

Buyer Broker AgreementI just read a blog entry by an agent who was reacting to a recent article about REALTOR's rejected request for commission from a buyer who, according to the story, was hurriedly asked to sign a Buyer-Broker Agreement because it was necessary in order to submit an offer on a house. According to the story, the details, terms, and responsibilities of the Buyer-Broker Agreement were not clearly explained to the buyer. The deal didn't work out and they went on their way, later purchasing a home directly from a builder.

I read the article and it sounds like the agent did not take the time to sit the buyers down and explain what they were signing. It sounds like he threw the agreement in with the rest of the offer documents and *perhaps* gave a few second blurb about it.

This is a REAL and known problem in the industry and it bothers me. The attitude of professional real estate agents who commented on the blog entry also bothered me... a lot. They vilified buyers saying things such as "buyers are liars", and calling buyers sleazy, saying buyers go behind agent's backs to stick it to them. Wow! Our company works only with buyers and that has not been my experience with buyer-clients at all!

All agreements and contracts should be discussed clearly and understood completely before a buyer is asked to sign them. This means the responsibilities of both parties must be clearly communicated and should be clearly understood. The length of representation should be understood. Whose responsibility it is to pay the brokerage the buyer-brokerage fee should be clear. How a buyer interacts with builders and FSBOs should be clearly understood.

From the agent's post in response to the article, it clearly sounds like they too may also be glossing over some of the more difficult important parts of agreements. This should not be. If the buyer may be responsible for the Brokerage Fee, they should know this UP-FRONT before signing the agreement... NOT told that the agent will "address the topic further if anything changes". (I got that phrase from the agent's blog entry.) That's a weak way to get them to sign the agreement today, clearly NOT understanding the full ramifications of what they are being legally bound to in writing.

Clients of our brokerage know that they are responsible for the Brokerage Fee. This is what our agreement says, so this is what they are told. (Many traditional agents tell consumers that working with a buyer's agent is free. That simply is not true in many cases.) The contract clearly states that any compensation received from another party will be credited toward what the buyer owes. If that compensation covers the Brokerage Fee in full, great! But the buyer knows that if it doesn't, they are ultimately responsible. Everybody is clear up-front. 

I understand that most buyer-brokerage agreements state that it is the BUYER'S responsibility to pay the Brokerage Fee, and that any compensation from a listing brokerage or seller, or other source (builder, etc.) will be credited toward the Buyer-Broker Fee. (I know buyer-broker agreements vary, so I know there are some out there that are different.) This should be clearly explained to all clients, yet it is known that many agents skirt around such "ugly" details or avoid them altogether.

The judge in this case is making a point. There is a real problem in the industry. Agents routinely do not properly disclose terms, responsibilities and details of legal contracts they ask consumers to sign.

The judge is saying that as professionals, we cannot continue to get away with asking consumers to sign something that says one thing legally, but explaining it differently or not explaining it at all.

Many real estate agents have no problem glossing over the details of a Buyer-Broker Agreement... and then they publicly whine and complain when a buyer doesn't live up to their side of the agreement. Their side which was NEVER clearly represented or explained to them by the professional they trusted at the point of signing. The professional who is asking them to accept them as their FIDUCIARY agent. Some fiduciary.

Lack of disclosure is one of the biggest marks on this industry. I would dare say it is one of the largest sources of lawsuits between consumers and professionals. We would all be better off if we wouldn't skirt around parts of contracts that may bring questions or objections. Disclose material facts. State the terms. Explain the details. Address concerns. Asking consumers to sign legal contracts that haven't been clearly explained to them leaves only the professionals to blame if the consumer then acts contrary to what they agreed to in writing.

The buyers in the article said they thought "the only reason they had to sign the Buyer Agreement was so that they could put on offer in" on the first house. We ALL know this type of "wussy disclosure" is rampant in the industry, if disclosure happens at all. This is sad and must change.

The outcome of this case could have been different. If clear and proper disclosure had taken place, I doubt we would be reading this story today. The buyers either would not have signed the agreement, the agreement would have been amended to cover JUST that house, or the Buyers would have clearly understood that they had a responsibility to continue to work with the agent regardless of which house they bought during the agreement period. I bet the judge would have ruled differently had clear explanation and full disclosure of details taken place and the issue still arose.

Shame on agents who skirt around the details of the legal agreements, especially the facts and details of agreements they are asking CLIENTS to sign.


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Comment balloon 25 commentsBenjamin Clark • July 24 2012 01:50PM
Wussy Disclosure - A black mark on the real estate industry
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