Buying? Selling? Don't Become A Real Estate Trainer!
Today I want to share a horror story about what just occurred when a homebuyer working with a brand-new agent lost their binder deposit. It's terrible that it happened but it is easily avoided if you prepare yourself for success.
Both home sellers and homebuyers alike need to understand a very important fact about the real estate brokerage industry. It is incredibly decentralized where every single agent is a business within a business, and that means real estate training is rarely obtained through professional channels, rather it is achieved through experience in the field.
In case you did not understand the implication for you as a seller or buyer, let me make it very clear. When you work with an agent with limited experience, your purchase or sale is effectively becoming a training class for that agent. Best of luck to you!
Take a look at what we recently experienced in a real estate transaction where our knowledge of the contract and high-transactional experience helped us put money in our home seller's pocket while the opposite was true for the buyer who had a brand-new, untrained agent.
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Real Estate Horror Story
It is a fairly common occurrence when we receive an offer on one of our listings from a brand-new real estate agent. Our industry has a very high turnover rate, so new agents are coming and going all the time. Typically, they are helping a family member or close friend buy a home, and the buyer has not realized the importance of hiring an experienced agent to help them navigate the purchase of a home.
Remember, brand new agents are most often trained by experience, and I want to tell you about a recent homebuyer's experience that was costly, but great training, for the real estate agent "helping" them.
We received an offer to purchase one of our listings. After negotiations, we had secured a favorable price and terms for our home seller, and the contract moved into the due-diligence time period referenced in the contract (the period of time the contract allowed for contingencies to be resolved).
The primary contingency on the contract was the buyers' right for obtaining a favorable home inspection. The contract terms stated:
"At any time within the 15 days BUYER at their sole discretion, may terminate Contract by notifying SELLER, in writing, if any inspection(s) are not satisfactory to BUYER. Notification shall be made on the Termination Form and BUYER is entitled to receive a refund of deposit upon execution of the Termination Form."
The terms shown above are the exact words in the contract between the seller and the buyer. Experienced agents know that every single word and every single suspense date created by the contract are an integral piece of the agreement between the two parties, so dates, responsibilities, and proper forms referenced in the contract are critically important. Unfortunately, the new agent helping the buyer had not yet learned those lessons.
Unfortunately, the new agent helping the buyer had not yet learned those lessons.
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Training Your Real Estate Agent The Hard Way
The real estate contract was written “as-is,” meaning the seller was selling the home in its current condition and would be making no repairs. The contract allowed the buyer 15 days to inspect the home and then notify the seller, in writing (on a specific Termination Form) if they wanted to cancel the agreement and receive their binder deposit back. But that’s not what the buyer did.
But here's what happened.
On day 14 of the inspection period, the buyer's agent submitted a request for repairs to the seller's agent, along with a demand for a significant price reduction. It was not accompanied by a Termination Form, so in effect, the buyer’s request was a new counter-proposal. Since the counter-proposal (or counter offer) was not executed by both parties, the original terms of the contract remain unchanged.
On day 16, the listing agent informed the buyer's agent that the seller was proceeding to close, not doing the repairs, not lowering the price, and would keep the deposit if the buyer wanted to terminate the contract. You see, the window to terminate the contract had closed for the buyer, so closing on the home or abandoning the deposit was their only course of action.
I can't imagine how that agent felt but I suspect I understand how frustrated the buyer was. And the buyer was likely not mad at their agent, but instead at the listing agent or the seller. But the fault clearly was on the buyer for failing to follow the terms of the contract.
Dates, times, and forms identified in the contract are not merely for organizational purposes, they are part of the terms of the contract. A more experienced agent would have explained the “as-is” language to the buyer and ensured that all requests or counteroffers were submitted in a timely manner. At the very least, the buyer’s agent should have simultaneously submitted the counter-offer coupled with a Termination Form to ensure the buyer’s security deposit was protected.
The buyer chose to work with an untrained, inexperienced agent, and that choice led to less than optimal results. I hope this buyer's lesson can serve as a cautionary tale for our readers. It's not your job to provide training for your real estate agent and you should demand optimal performance when you engage a real estate agent to help you sell or buy a home.
If you feel you must work with an inexperienced agent, require them to include their broker in your meetings and during the drafting and negotiation of your contract. Additionally, seek out an experienced and active real estate attorney to review everything you are signing.
Remember, a real estate contract is a legal document. It's not a "gentlemans' agreement," it's a document that has survived the test of time in the court of law. If you are concerned that your agent is not selling a lot of homes, then either find a better agent or at least keep yourself safe with people who will properly guide and protect you.