People often ask me why they need full-service real estate agents when so many agents are advertising substantial discounts. Another frequently asked question: “Why can’t we hire someone from a website?”
For most buyers, a home is the most important and expensive purchase of their life. They intend to live in the home for many years. They hope to enjoy it, see it appreciate and receive the tax benefits. They want to go to the transaction problem-free.
Real estate purchases are not easy as they used to be. The agent representing you needs to be well versed, intelligent and have the ability to work hard for your interests.
I recently was involved in a court case that illustrated the need for an experienced, intelligent agent who stays awake through the transaction and who can guide buyers through the home purchase. Unfortunately, that agent representing the buyers in this case was on the cruise control.
The purchase was expensive– more than $1 million – for a hillside house in the mountains. The buyers, whom I represented in the lawsuit against the agent, were typical, busy executives who hired a full-service agent. They expected no less than undivided loyalty from an agent who would give them proper advice regarding their purchase.
A full-service agent is more than a cab driver who takes buyers from home to home, determining which they like most. The agent should understand the purchase contract and the many other documents associated with the home purchase – not just fill in the blanks. The agent should be a true real estate agent and advisor, as a law in most states requires.
In this case, that agent representing the buyers admitted that she owed the buyers the duty of utmost care, including counsel and advice on the decisions they were making in purchasing the home.
In this particular transaction there were a number of red flags for the agent to advise on. If a red flag, such as a crack in the foundation, is pointed out in one of the disclosure documents or observed by the agent, it should be pointed out the buyer. The buyer should be advised as to whether there should be further investigation. If the red flag is a serious problem the buyer could either renegotiate the price for a discount or abandon the transaction.
A full service real estate agent should have the necessary skills to review the various documents and point out red flags.
Some of the red flags in this case:
- The home was in a designated landslide area.
- One of the disclosure statements indicated that there had been slippage in the upper orchard.
- Another disclosure statement indicated that there was ponding in the upper orchard when it rained.
- Yet another disclosure indicated that some parts of the property contains fill.
- Another report included that there was a bulge in the retaining wall.
- The termite report indicated there were cracks in the foundation.
The buyers testified that the agent not disclose the existence of these red flags. The agent testified that she did not disclose each and every red flag and explain them to the buyers.
There were various warnings in fine print in all the contracts in disclosure documents advising the buyers that they should have the property inspected by licensed geologist or geotechnical engineer. The agent said the buyers paying more than $1 million for the home — did not want to spend $300-$400 to have it inspected by a geologist or geotechnical engineer.
As in many trials, it was a “he said, she said” type of case. Someone was not telling the truth.
Shortly after escrow closed, a landslide occurred on the property. It took about 1 acre ground and left a guesthouse teetering on the edge of the landslide. Needless to say, this landslide caused the buyers substantial damages.
Buyers who pay a full-service agent a full commission should be entitled to just that – full service. Agents are required to review documents and point out potential problems. They are not required to be geologists or geotechnical engineers but, based on their experience and education, they should be able to point out red flags.
If your agent cannot explain the red flags, higher another agent. If your agent cannot explain the purchase contract, hire another agent
Ron Rossi is a San Jose attorney. Write him in care of the Mercury News