As a REALTOR®, we want to be the one person a client can turn to for answers to all of their questions. We don’t want to look unprofessional if we don’t know the answers or have the information they need. We should be the primary source of information for a client, right? WRONG! I have seen lawsuits and regulatory complaints arise from something an agent said to a client about matters that were clearly out of their area of expertise.
When a REALTOR® begins working with a seller or buyer client, they should provide their clients with a written statement explaining what an agent can and cannot do in a real estate transaction. This statement should be a formal disclaimer outlining the importance of utilizing other professionals for certain aspects of the sale or purchase of the client’s property. We are not home inspectors, structural engineers, roofing contractors, electricians, plumbers, city planners, surveyors, appraisers, etc. We are licensed real estate agents who have the education and experience to assist buyers and sellers in purchasing or selling real estate.
When you start working with a client, you need to discuss with them the scope of your expertise as well as the boundaries in which you must operate. If you have established a good rapport with your client and a strong relationship forms, often they will turn to you for advice. Sometimes their request for counsel or information might be very specific and complex.
The following is a scenario that happened to an agent, who is no longer licensed, I knew of in Nashville several years ago. Let’s say you are showing a property to some buyers who fall in love with the house and the large one-acre lot. Located directly behind the row of pine trees in the backyard is a large parcel of vacant land. Your clients ask you if that particular piece of property is ever going to be developed. You are not sure how to answer their question, but you did hear the land was put in a land trust and would not be developed. Later in the afternoon, the buyers elect to make an offer on the property you showed them. The offer is accepted, and the transaction closes forty-five days later. One of the reasons they wanted the home was because it backed up to a large, undeveloped piece of property.
Fast forward one year. One evening, you are eating dinner with your family and your cell phone rings. You allow it to go to your voicemail. After dinner, you listen to the message the caller left you. The voicemail is from the buyers you sold the one-acre lot and house to last year. They are extremely upset. They inform you they just learned the city commission had approved a large outdoor family entertainment center with go-carts, miniature golf, and two waterslides. Construction of the facility will begin within the month. They remind you of the conversation you had with them regarding the property behind them being in a land trust and never be developed. You have to sit down as you begin feeling faint. Two weeks later you and your broker are served with a two-million-dollar lawsuit accusing you of misrepresentation and not using reasonable skill and care as a licensed real estate agent. The next day you receive a complaint from your state real estate commission filed by the buyers. The complaint is for misrepresentation. Your life just took a turn for the worse.
In this scenario, what could you have done to avoid a lawsuit and a real estate commission complaint? The answer is straightforward. When the buyers asked you about the vacant property behind their future home, you should have said you did not know if it was going to be developed or not, but the city planning and zoning commission probably could answer their question. You should encourage them to call the city planning department to seek out any information on any future development plans for the property. By doing so, you have not been the source of information, but the “source of the source” for information.
The following are examples of how agents can jeopardize themselves by “being the source” or coming across as an expert on a particular topic:
- Advising your client there is a structural problem when you see a stair-step crack in the mortar of the brick. You are not a structural engineer.
- The HVAC unit at the house your client is buying is ten years old. You tell the client it is old and will need to be added as a “replacement item” on the repair list submitted to the seller. You are not an expert in HVAC systems.
- You advise your client the roof needs to replacement because it appears to be relatively old. After a qualified and licensed roofing professional inspects the roof, it is determined the roof is only five years old and needs cleaning. You are not a roofing contractor.
- You see what appears to be termite damage near the back door close to the foundation sill plate area. It is rotten wood that can is easily replaceable. You are not a termite expert.
- You believe the house your buyers are considering will rise in value over the next few years. You are not a fortune teller.
So many times, to gain the trust of a buyer or seller, real estate agents will come across as being knowledgeable on EVERYTHING asked of them by their clients. They know if they gain the trust of the client they will be more likely to get the seller or buyer to use their services again and refer people they know to them. They do not want to be seen by clients and prospects as not being the expert they can turn to for answers to their questions.
Unfortunately, when we step outside the bounds of our licensure, we put ourselves at significant risk by causing severe harm to our clients with incorrect information or indigent counsel. Also, we can lose our real estate license through disciplinary action by the state and be subject to civil lawsuits with large monetary requests. Trust me, you do not want this to happen to you.