5 Things for Real Estate Agents to Remember When Things Go Wrong
With a looming recession and the accompanying increase in economic volatility, real estate agents will begin to deal with an increase of deal-breaking on behalf of buyers in the market. The best way to ride out this time is to be prepared with exactly how to handle your business as an agent in these cases.
Here are 5 key lessons for agents to remember when things go wrong in any real estate deal:
- Finding a solution should be your first priority.
Things may be uncertain in today’s real estate brokering work, but if the two parties were able to come to an agreement once, there’s a real chance that the deal can be saved.
Investigate the factors that led to the deal-breaker. Buy time for both parties by extending the deal. In some cases, buyers can explore the avenue of private lending for a short-term loan until the buyer’s financial situation improves. The seller may want to consider lowering their home’s selling price so that the deal can commence unperturbed by litigation.
In less hopeful cases, mutual releases can be negotiated. The seller can put their property back on the market to try and reduce the losses suffered.
Always get legal advice before suggesting any solution.
- What if the client threatens to sue you for what has happened?
When a real estate deal materializes, it’s an exciting time for both buyers and sellers. Given the unpredictable nature of today’s economy, however, this excitement can be snuffed out by unfortunate turns of events, which are happening much more commonly – rendering the deal broken.
In frustration, it’s common for let-down buyers and sellers to threaten a lawsuit against their agent, even in cases where the agent did everything right. These threats are often misguided attempts at reconciliation of losses, but in many cases, the plaintiff-to-be will change their minds when they realize the retainer will cost them a minimum of $5,000, with the extent of fees often being much greater. As long as an agent has not committed fraud, they are protected against any lawsuit by their Errors and Omissions insurance policy. This coverage means that the agent will not need to pay out of pocket for their defence attorney in such cases.
- What if the client threatens to report you to the Real Estate Council of Ontario?
A common misconception experienced by buyers and sellers is that RECO and other provincial regulators operate as collection agencies for consumers.
While RECO will investigate every complaint made against a salesperson or brokerage, their fact-finding mission is to determine whether a salesperson or brokerage followed their duties under the REBBA 2002 Code of Ethics for the protection of consumers. These regulatory bodies are not installed with the purpose of collecting damages against agents for the benefit of consumers.
- How do I demonstrate to RECO that I have followed my obligations?
Documentation is your best friend. Always make sure that your paperwork is comprehensively completed and that you have a written record of your work with the client.
This includes making sure that the ‘Working with a Realtor’, ‘Buyer
Representation Agreement’, ‘Listing Agreement, any amendments thereto and the Agreement of Purchase and Sale’ have all been carefully explained and signed – with copies delivered to the client. To be thorough and to avoid any misunderstanding, it’s wise to also include written records of any instructions you’ve shared with your clients as well.
- Always speak to your broker or manager before responding to any complaint or potential lawsuit.
Lawsuits due to a deal gone awry are always a potential risk that agents could face, which is a frustrating part of the job. When faced with such a scenario, it’s best to reserve any of your reactions and politely inform the client that, while you empathize with their frustrations or disappointment, you will be in touch once you’ve had time to review their file. After handling that conversation, discuss the situation with your manager or company lawyer to figure out what your next step should be.
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If you have any questions on what to do when things go wrong on any real estate deal, please contact me at 1-888-876-5529 or at [email protected]
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