Legal Hotline Article: A Broker's Risk Reduction Toolbox
Top 10 Broker Resources for Sticky Situations
Every broker is required to deliver Real Estate Brokerage Services with “reasonable skill and care.”
That means that in all circumstances, you must act in the way that a “reasonably prudent real estate broker would act in the same situation.” How do you know how a “reasonably prudent real estate broker” would act in a circumstance that you are just now encountering, for the first time ever, all alone? While that is certainly how it feels when you are facing down a new problem, the truth is, you are not all alone, in any real estate conundrum. Each of you has resources. When the question is: “how would a reasonably prudent real estate broker act?”, the answer is: “ask!”
There are many resources available to every Washington REALTOR® member, including these ten:
1. Your managing broker.
In Washington State, you are licensed to sell real estate only if your license is affiliated with a firm. That firm must have a designated broker. Your designated broker is your managing broker. Additionally, you may have other managing brokers who are delegated by your designated broker, to provide oversight to you. Your managing broker(s) are your resources. If you have not already done so, develop relationships with your managing broker(s) so that you can call on them: when you need help drafting language for an offer at 10 am or 10 pm; when you have two clients each needing immediate attention and you can only attend to one of them; when a broker on the other side of the transaction is acting like a bully and you begin to doubt yourself; when your client makes a demand of you that makes you feel uncomfortable; when you don’t know if that condition you just discovered constitutes a “material fact”; when you encounter any of the myriad other experiences that every real estate broker encounters routinely and you have no idea how to proceed. Your managing broker is there to help you but can only help you if you let them know you need assistance. No matter how good your managing broker is, that person is not a mind reader. Until you reach out for assistance, you will not receive it.
2. Other, trusted real estate brokers.
Many of the benefits that can be gained from a managing broker can also be gained from another, trusted, competent real estate broker. A broker need not hold a managing broker’s license or authority delegated from the designated broker to be deemed “reasonably prudent”. Within your firm, you have a limited number of managing brokers. Our association offers limitless members who are reasonably prudent real estate brokers. Find other brokers, licensed to your firm (preferably), who are competent. Use them as a resource and offer your own services to them as a resource. Sometimes, you just need another broker to read the language you drafted in an offer and tell you what they think it means. If they read your language and think it means something other than you intended as the drafter, then you know you need to make some edits. Sometimes you just need another licensee to be somewhere that you cannot be when you need to be there. Sometimes you need a sounding board to hear your experience and tell you whether it seems normal. Sometimes you need a buddy to enter a residence with you so that you don’t have to enter alone. Develop relationships with other real estate brokers. We are an industry of independent contractors but that does not mean you must practice independently. To the contrary, every one of you will need assistance if you are successful. Develop relationships that allow you to call on other brokers, and be called upon, when help is needed.
3. The broker on the other side of the transaction.
Never underestimate the goodness of other human beings, especially those who are REALTORS®. While not every REALTOR® is going to be a trustworthy resource when they stand on the other side of the transaction from you, many will. Do not ever assume that just because the suggestion you receive comes from the broker representing the other party, you should disregard it as unreliable. To the contrary, the “other broker” is the only other REALTOR® likely to be as familiar with the facts at hand as are you. When you encounter a challenging situation in a transaction, consider asking the broker on the other side of the transaction how they would proceed. If the issue you are confronting is one of strategy that should be confidential to your client, then exercise good discretion and do not seek assistance from the other broker. Many times, however, the problem you are trouble shooting is one associated with which form to use, how to structure a solution with a third party, how to navigate third party obstacles to a smooth closing and other issues that the broker who represents the other party may be perfectly suited to help you address.
4. Your Title and Escrow Officer.
What should the signature block on your purchase agreement look like when your seller is a family trust? How should you proceed if you question seller's capacity? Buyer is signing with a power of attorney so how do you determine if it is legitimate? The best purchase agreement terms are irrelevant if the transaction cannot close and no transaction closes if the title officer and the escrow officer are not satisfied with all of the issues that fall within their purview. It is amazing the number of issues that fall within a title officer's and an escrow officer's purview. Each is motivated to make sure that you have given them all the information they need to do their jobs as early in the transaction as possible. Performance of their jobs can be accomplished with significantly reduced stress if you bring issues and questions to their attention sooner rather than later. Waiting until close to the closing date to resolve questions associated with signing, delivery of funds, clearing title, paying encumbrances and the like is a sure way to miss the closing date. If you have any questions associated with title insurance or the closing process, ask your escrow officer and/or your title officer. In every transaction, order title early, open escrow early, talk to your title officer and your escrow officer, ask them if there are issues that require your attention or the attention of either party, check in with them as the transaction proceeds to make sure they got what they need. As with all of your resources, your title and escrow resources are only able to assist whey they know you need assistance.
5. The Legal Hotline Lawyer.
As a REALTOR® member, you have access to the Washington REALTORS® Legal Hotline. warealtor.org/legalhotline The Legal Hotline includes a library of thousands of categorized questions that have been asked and answered for the last ten or more years. The questions were all asked by other real estate brokers and the answers were all provided by a lawyer familiar with the real estate industry. The answers provide educational information intended to acquaint you with legal concepts that will help you navigate a situation you’ve not encountered before.
If the Legal Hotline library does not provide the answers you need, you can email a question to the Legal Hotline lawyer (legalhotline@warealtor.org). Before the end of the following business day (in most cases), you will have an answer that provides educational information intended to help you determine your next step.
6. The Washington REALTORS®.
Your Association of REALTORS® provides current information, weekly, through the delivery of a Tuesday email entitled “Get the Facts” and a Friday Video update. Both emails include information about state and national events and trends that impact the industry. The Tuesday email features the Legal Hotline Q & A of the week and often links to articles that discuss issues important to your clients, the industry and to you, personally, as you navigate your way in the industry. The Washington REALTORS® provides numerous member services such as relationships with insurance providers, education offerings, Your local REALTOR® Association and/or Multiple Listing Service. What if your seller tells you that he does not like his neighbor and wants to make sure the neighbor is not allowed to access seller’s listed home? What if your buyer is your cousin and you’re not sure whether you’re required to disclose that to the seller? What if you’ve learned that your municipality is considering adopting a new water policy that will restrict construction of new homes?
All of these are examples of questions your local REALTOR® Association or MLS can assist you in answering. Your local REALTOR® Association may also serve as your industry voice to challenge local land use policies and other local laws that will negatively impact your business and your clients. Your local REALTOR® Association and/or MLS likely sponsor education classes that will help you satisfy your licensing requirements while staying current with information you need to remain competent and competitive. Perhaps most importantly, your local REALTOR® Association and/or MLS host meetings, social activities and committee work that allow you to get to know other real estate brokers outside your office and your transactions. By meeting and working with real estate brokers with diverse backgrounds and practices, you are far more likely to expand your own abilities, develop meaningful referral networks and gain new opportunities.
Pick up the phone and call your local REALTOR® Association. Find out what services are offered and what events are on the calendar. What can you do to get involved?
7. The National Association of REALTORS®.
What national issues capture your interest or concern? Could it be antitrust, cold calling and spam email, Fair Housing, lawsuits impacting the industry or copyright? As a REALTOR® member, you have access to the research and analysis conducted by the National Association of REALTORS® and its hundreds of publications on topics of concern to real estate industry members nationwide. Log in to REALTOR.org and start surfing.
Additionally, like the Washington REALTORS®, NAR pre-negotiates contracts with vendors who provide quality services to REALTOR® members at reduced rates. Browse the member services tab at REALTOR.org to discover the benefits you may not know about.
8. The Department of Licensing.
The Washington State Department of Licensing regulates the Washington real estate industry. DOL enforces the Real Estate License Law (RCW 18.85), the minimum Agency duties owed by all brokers to all parties (RCW 18.86.030) and the Washington Administrative Code (WAC 308-124.). DOL receives consumer complaints against real estate brokers and conducts the investigation necessary to determine if disciplinary action is warranted. Most important to this article, however, DOL staffs a phone line intended to answer questions for industry members and consumers alike. Find contact information and customer service hours for the DOL here: dol.wa.gov/business/realestate/contact.html
If you’re not sure how the Department of Licensing interprets a situation or the response it expects from a broker to a particular set of facts, ask.
9. Your Firm’s Errors & Omissions Insurance Carrier.
Have you ever wondered what you need to do to properly disclose to the public, that there is a dangerous condition within the home you just listed? Maybe there is a weak bathroom floor or a slippery staircase or a dangerous dog. Many E&O carriers will assist their insureds in learning how to reduce risk to the carrier and thus, to the insured. Reach out to your E&O carrier. Discover the resources they offer for education and case-by-case pre-problem solving. Different carriers offer different levels of support. Your firm’s E&O carrier may offer services you did not know existed. You should ask.
10. Your and your firm’s lawyer.
You cannot sell real estate successfully without encountering situations that call for specific legal counsel. The Washington REALTORS® Legal Hotline lawyer, the Department of Licensing, your firm’s E&O carrier, other trusted brokers and even your managing broker can all give you educational information and guidance to help you consider your next step. When you need legal counsel, however, you have only one resource. Only your or your firm’s lawyer can give you legal advice. Develop a relationship with a lawyer who understands real estate law and on whom you can call for quick advice and complex advice. While hiring, and compensating, a lawyer can feel daunting, most every lawyer’s client will tell you that the cost of advice that avoids a dispute or litigation is substantially less than the cost of legal services after a dispute or litigation has begun.
Let this list of resources inspire you to consider all of the resources available to you. If you are successful selling real estate, you will encounter situations you’ve never encountered previously and you will be called upon to solve problems that are new to you. Tap into the resources available to you that will allow you to act prudently in every situation, even those you’ve never seen before. Be prepared to get and give assistance. Recognize a situation that challenges you and seek guidance before it becomes a crisis. The first step of solving any problem is recognizing that you have a problem. The second step may be getting the assistance you need. Develop your resources so that when you need assistance, you know where to turn.