ALL THINGS REAL ESTATE Realtor’s obligations need to be clearly defined

Q: I’m a local Realtor and I read your column all the time and find it very informative, even for those of us in the business. I have a problem that I think your readers would find informa tive and I am interested in your response. A former client whom I represented is suing me. This guy came to me about a year ago with credit problems, up to his ears in debt, and with no money in his pockets. After working with him for over six months, my lender and I were able to get him in a position where he could get a mortgage. We found a house, had our offer accepted and opened escrow. Two days before the escrow was to close, the whole deal fell apart. It appears that my client stopped paying his bills as soon as we opened the escrow because he thought the lender had already pulled his credit report so he didn’t care. When the lender ran a lastminute credit check prior to funding and found out, they refused to write the loan. He has sued the lender and me because we didn’t tell him he had to keep paying his bills. I guess I’m writing because I’m tired of people thinking that the Realtor is responsible every time a sale falls through. I was hoping you could outline for your readers what a Realtor is responsible for and what they aren’t responsible for. Thanks.

A: Obviously you won’t be held liable under such a stupid cause of action. Unfortunately, you will have to pay your deductible to your insurance carrier and possibly go through a year or more of court proceedings.

The problem with the real estate profession as a whole is a lack of a good job description. Nowhere does the law succinctly define what a Realtor is responsible for and where that responsibility ends.

When you take your car to the mechanic, you don’t expect him to be responsible for fixing your home plumbing. Yet I have seen more than one case of a Realtor being sued because their client bought a home with faulty plumbing.

I give seminars to Realtors on risk management. I can tell you from experience that it is impossible to advise them concerning how to eliminate the risk of being sued. Why? Because every judge and jury has a different idea of what a Realtor should be doing.

In fact, as an attorney, I am always afraid of putting a Realtor in front of a jury. The plaintiff’s attorney will hammer home the idea that, ultimately, the Realtor knew they weren’t getting paid unless the transaction closed with the inference that the agent would do anything possible to make it happen.

On top of that, Realtors bear this extremely high degree of legal responsibility, known as a fiduciary duty, to

This fiduciary duty has been misinterpreted to mean that everything that goes wrong can be laid at the feet of

While this is legally untrue, it hasn’t stopped unhappy clients from filing a lawsuit regardless of its merit. And all too often their efforts are rewarded because the insurance company may well settle the claim in the early stages rather than pay the substantial cost of taking the case to trial.

Frankly, if insurance companies would stop paying settlement money on worthless lawsuits, this practice would stop in short order.

I’m certainly not suggesting there aren’t Realtors out there who don’t do a good job for their clients and deserve to get sued over mistakes they’ve made. However, in my experience, there are a lot more of the silly suits against Realtors than ones with merit.

For many years now I have been an advocate in seeking clear legislation outlining the obligations of a real estate agent. That way both the agents and their clients know what to expect. The California Association of Realtors which, as you know, provides the standard contract forms and disclosures for Realtors throughout the state, tries its best to keep adding language

See Jones, Page 10