Risk Management

Getting sued isn’t super fun. Neither is the gross feeling of knowing you messed up on something that you could have avoided, or that you actually aren’t at fault for at all but it reflects poorly on you. Below are a series of tips that you can’t go wrong with. I HIGHLY recommend you take the Risk Management Class at MAAR at your earliest convenience, it’s very thorough. If you ever have questions or feel like you might be in some hot water, please reach out. Not only do we have free access to the MAAR attorneys, I also have a real estate attorney on retainer for any problems that might arise.

READ the document. This sounds SO simple, but you’ll be amazed at how often an answer lies within the contract itself. I know you’ve probably read most of it by now, but do yourself a favor and print out a purchase agreement, along with the most common amendments you use and spend some time getting familiar with their language. MAAR usually has a Forms class that is helpful for keeping up with the updates every year too.

Double, Triple Check before hitting SEND. You can never check it too many times. Especially as you gain experience, and get faster at putting documents together, you may find that you miss things more often. Or if you have a high drama deal you’re working through and you’re also taking care of something routine, you might find that your focus wanes and you miss something simple that makes you look less amazing than you actually are. Take a minute. Read it. Take a deep breath. Read it again. Hit send.

Keep good records and organized files. Digital organization is hard. Especially when you’re juggling multiple files or have a lot going on. Set up a system that works for you so you don’t have to think about it. Here’s what I use:

File names are always: LAST NAME Full Address Document Name. Example: DILLS 10302 108th Ave N Maple Grove 55369 Amendment to Purchase Agreement.

Folder structure in my Google Drive: Clients > Client Files > Client Name (Last, First) > Property (List or Buy) > All docs. If that sounds crazy, here’s a little visual:

Sample Listing Folder Structure: (insert image)

By keeping your files organized on your hard drive, it’s easy to find files in order to upload to Paperless Pipeline, but also in the case that you might need to refer back to them in the future. I make a new folder for each property a buyer offers on. Paperless Pipeline backs up monthly so even if your deals don’t come together and you’d like to use it for redundancy on your files, feel free to add them even if they’re not accepted.

Don’t say anything you don’t know the answer to. It’s ok to research something before responding. Believe it or not, most people are looking for someone who will work hard on their behalf, not necessarily someone who already knows everything about everything. So take responsibility for your words and actions. If you don’t know something, say so. And then follow through by looking it up, or calling someone who knows and reporting back. If you are mistaken, admit it quickly and work to find a solution that works for everyone. We’re not seeking perfection, we are seeking constant improvement. You should always be able to look back at your past work and make improvements to it if you are continually learning.

Keep your mouth shut. Let the silence do the work. It’s really hard to deal with silence. It’s uncomfortable, and being the bubbly and positive sales person that you are, you’ll want to keep everyone comfortable as much as possible. Resist. When the time comes for someone to make a decision, you’ve already done your job. You may not always agree with your client, but you’re representing them so as long as they aren’t breaking any laws, you’ve got to write it the way they would like. You’ve got to maintain your client’s confidentiality. If your sellers haven’t expressed to you (in writing) that you can market their property as ‘motivated sellers’ you may not do so! Think of how often you’ve called up a listing agent and they have completely spilled all of their seller’s beans. This is great for you to be able to better represent your buyer, but that agent has possibly done a disservice to their seller. Please remember to only speak what you’ve been authorized to speak on behalf of your client.

Get it in writing. We know this, and yet, it’s amazing at how often it happens that there is a verbal agreement that doesn’t come together and you have nothing to fall back on. Remember, everything is negotiable in real estate. But ALWAYS get it in writing and have it signed by all parties to the transaction. Keep it in your file and add to the Pipeline.

Agency Relationships in Real Estate Transactions. ALWAYS! This one is easy to overlook or just wait to do until you’re putting together a purchase agreement. But it’s so simple to go over with your clients and if they end up shopping you or having an experience with another agent, you’ll look like the true professional for taking the time to go over this information with them right away.

Always disclose material facts in writing. Should anything change with the property, whether your buyers uncover it in an inspection, or something happens to your seller’s place while it’s listed or before it has closed, make sure to disclose to all parties in writing as soon as possible.

No Disclosures Alternatives for Agents. As an agent, when you sell your own property, even if you’ve never lived there, you MUST use Seller’s Property Disclosures, not alternatives.

Compensation Disclosure to Buyer/Tenant must be completed for each purchase agreement you write. This document remains internal, but your buyers must sign and you need to keep it with your file. This is how we let our buyers know they are off the hook for paying us a commission. We are sharing how much the seller has agreed to pay. This should feel good, not gross, so if you’re having internal issues with it, let’s discuss.

Seller Net Sheets are required for listings. Keep in your file. This is how we are disclosing to sellers how our fees and other related expenses will affect them. This will help a seller make the decision if they can sell and you may need it for their lender on their purchase. It’s important to emphasize that it’s an estimate and not exact. Let them know our title company can get them exact numbers when we have a purchase agreement and are closer to closing.

You must have a signed listing contract before advertising a listing as ‘coming soon’. Include in the contract that you have permission to do so. I use something like this in the ‘other’ section of the listing contract “Broker may advertise listing as ‘coming soon’ prior to contract start date. Broker may hold a premarket open house on (DATE) prior to contract start date.”

You must have a signed buyer rep agreement before referring to ‘your’ buyers as ‘yours’. Remember, until you have a contract, they are customers, not clients.

When relationships get heated, only communicate in writing, text or email. Do not engage in arguing and he said/she said. Refer to the contract. If things get scary, make sure to alert your broker so we can seek legal advice if needed. This happens more often then we all would like. It’s your responsibility to be the professional, disengage, do your job, represent your client well, and execute on their wishes. Don’t buy into agent emotion on the other side.

Time is of the Essence. If you know something that will affect the parties to the transaction, you have a duty to disclose as soon as possible. This comes up most often when a deal is falling apart or a closing is delayed. People have made arrangements they’ll need to reschedule so be courteous and keep everyone in the loop.

Amend Seller’s Disclosure statements if anything material changes with the property in writing and send to all parties. Make sure all parties sign to acknowledge changes.

Multiple Offers. Sellers must decide if they would like multiple offers to be disclosed to interested parties. If you represent the seller, you may shop their offers against other offer if you have the seller’s permission to do so, including disclosing details of the purchase price and terms. Make sure you discuss this with your sellers prior to listing. If you’re representing the buyer, make sure your buyers are aware this may happen.

Action Items

1. Take the Risk Management Class at MAR.
2. Implement your own systems to get organized and mitigate risk.
3. Slow down, read the documents, ask for help when you need it and reflect on ways to improve when applicable.