Overstepping Boundaries

Something we Realtors have to be careful of, is overstepping our boundaries. Often, in our effort to be helpful we may assume a role that we shouldn't. For instance, I've been to over 100 home inspections / Engineer inspections, and that gives me a little bit of an ability to predict some of the basic things that will come up in an inspection when I look at a new listing. It does not, however, make me a home inspector.

Recently we had a sale that fell through due to a low appraisal. When the Buyer discovered that they are out the pre-paid money for the appraisal ($700.00) The loan originator advised them to get the money back from the Seller. This is mistake #1. This person wants to look like a hero by saving this Buyer's $700.00. This is the first instance of doing my job and interpreting the contract. I re-examined the contract, to see if I had been mistaken, but no.

I called the lender, to find out why she said this. She told me that that's what the contract says. I pointed out paragraph 3A that says any pre-paid monies may be forfeit. She acknowledge her mistake, and told me she would call him and take care of it.

So she called him, and pointed out that spot in the contract to him. When he asked how he could avoid this in the future, she went in to mistake # 2. She basically told him that "There's a special clause that Realtors use to protect Buyers from losing their earnest money, and implied that she didn't know why Ryan didn't use that. When she explained this on the phone, she said, "I don't think he will be working with Ryan anymore, since he didn't protect his appraisal money."

First of all, she was giving the client contract advice. Second, it was bad advice. This magical protection clause she's talking about is written in one of two ways by my colleagues.

1. Should the transaction fail to close due to no fault of the Buyer, Seller will reimburse Buyer for pre-paid appraisal.

Look at this statement objectively, and you'll see how insubstantial it is. "due to no fault of buyer" can be used in anything. In this case, the Buyer would say that it's not his fault that the appraisal came in low, but the Seller would say, it is the Buyer's fault because they were going to buy the house at the agreed upon price, and now they changed their mind. This clause is nonsense, and I always advise Sellers to strike this language from any offer they receive. This offer would have been no different. This language would not have protected the Buyer.

2. Should the transaction fail to close due to seller breach of contract, Seller will reimburse Buyer for pre-paid appraisal.

This language is straight-forward, and is the one I sometimes use. The Seller, however, did not breach their contract, so in this case also, the clause would not have protected the Buyer.

This advice was irresponsible and malicious. Irresponsible because she is practicing Real Estate (badly). Malicious because it is the easy way to deflect conflict with the Borrower (Buyer) who had his hopes up earlier when he thought the Seller might pay him back for the Appraisal. She is the hero for pointing out what she believes to be the Realtor's mistake. She took his negative energy and pointed it at me over a fallacy.

It would be like me saying, "A good lender would still give you the loan anyway, even though the appraised value is low."

Let me know what you think in your comments, (Blogger, Facebook and Twitter). Just don't ask me to tell you who it was.