EPISODE NO. 65

When Things Go Wrong in Real Estate Transactions

It’s not a matter of if, it’s only a matter of when something is going to go wrong in one of your real estate transactions. If you’ve been through a complaint or lawsuit before, you’re already painfully aware of the horrible toll it can take on you.

For the rest of you that have been fortunate enough to not experience this trauma yet, this episode is going to arm you with 8 strategies to do everything you can to prevent it from happening in the first place, but will also give you some tools for dealing with it if it does happen, despite your best efforts at prevention.

Here’s what you’ll learn:

  • The 4 most common areas where problems occur and strategies to prevent them
  • Strategies to stay on top of everything you need to know, to keep yourself out of trouble
  • Tools to ensure you never forget an important task or miss an important detail
  • Best practices to live by when taking on transactions you’re not qualified to
  • Tips for how to fight back when you’re accused of doing something you didn’t do

It’s not a matter of if, it’s only a matter of when something is going to go wrong in one of your real estate deals. If you’ve been through a complaint or lawsuit before, you’re already painfully aware of the horrible toll it can take on you. For the rest of you that have been fortunate enough to not experience this trauma yet, this episode is going to arm you with strategies to do everything you can to prevent it from happening in the first place, but will also give you some tools for dealing with it if it does happen, despite your best efforts at prevention.

Hello hello hello. Welcome back to the show. As always I like to send a big shout-out of appreciation and gratitude to those that have left me reviews on Apple podcasts, they help the show, so I am very grateful to every one of you for taking the time to write them. I am now thanking you personally in my monthly newsletter, so if you’re not subscribed to my email list you can opt-in through the link in the show notes. For those of you that listen on Spotify, thank you for your ratings too. I can now engage with listeners on that platform, so make sure you check out my episode question and let me know your thoughts!

Alright last week I was having an eXp discovery call with an agent and she
said something that made me laugh and was so on point.

We were talking about how much you have to know as a real estate agent and that the licensing process does not prepare you enough for the real world. She was telling me that she had been in Nursing before getting into real estate and that if the training she’d received to become a nurse had been the same as it is to become a real estate agent, she would have accidentally killed a bunch of people by now. I thought that was hilarious (concerning obviously) but so very true. So this episode is going to be all about how to help you not kill people by accident when doing transactions in real estate and some things you can do to protect yourself if you accidentally do.

Now I’m going to insert a very important disclaimer here so everyone pays attention.

The information provided in this episode does not and is not intended to, constitute legal advice. All information is for general informational purposes only. Always seek a professional opinion from your legislative body, your errors & omission insurance provider, and your brokerage, and always get independent legal advice from a qualified lawyer.

Alright with that out of the way, there is one cliched saying that I want you to say to yourself on repeat. An ounce of prevention is worth a pound of cure. So we are going to start this episode off by focusing on the things you can do to try and prevent things from going wrong in your real estate deals in the first place, but also prevent you from taking the fall for it if it wasn’t your fault. Then we’ll spend some time talking about what to do if, despite your best prevention efforts, something goes wrong anyway.

To start, when something does go wrong, one of four things is going to
happen:

  • You’ll get an unhappy quiet client who will not use you again or refer you.
  • You’ll get an unhappy loud client who will tell lots of people about their experience. If they leave a public review you’ll know about it, but they may also be speaking negatively about you to everyone they can without you knowing.
  • Next, you can get an unhappy client that takes it a step further and files a complaint with your legislative body and lastly,
  • there are the ones who take it even a step further and files a lawsuit. In my opinion, it’s the third scenario that can damage your business the most. Although getting a negative review, can feel very upsetting, as long as there is only one or at most two and they are offset by lots of positive reviews, most people will see beyond it and recognize that you can’t always keep everyone happy. Again this does depend on the details of the review. If you get multiple scathing reviews that will impact your business.


But having a complaint filed against you and losing the investigation resulting in the discipline outcome being posted publicly online can be career-ending. Lawsuits on the other hand usually get settled out of court and the settlement usually includes a non-disclosure clause. I’m not suggesting that a lawsuit isn’t ever damaging to your career, of course, it can be. But it’s often not AS damaging as a complaint.

If you’ve been through any of those situations before, you know how awful it is. It is like sick to your stomach, keeping you awake for nights on end, wanting to go crawl in a hole and die, causing a horrible cold sore outbreak, like just a terrible feeling and an awful experience to go through. If you haven’t gone through it yet, take my word for how bad it is and get serious about implementing what you learn in this episode.

Alright so when things do go wrong, it always happens for one of two reasons:

  • You did something wrong OR
  • Someone perceives that you did something wrong and let me tell you that sucks even worse. It’s brutal when you didn’t do anything wrong and someone believes you did and then takes steps based on that, to damage your reputation.


It’s a bit easier to prevent the first situation, where you did do something wrong and so we’re going to start with that one scenario first, but you’d be surprised how many things you can do to prevent the second scenario one as well because unfortunately there will always be situations where you did absolutely nothing wrong and you will still get blamed. In those situations and depending on the circumstances, you may need to put up your dukes and fight back, so we’re going to circle back on this and get into those situations later on in the episode.

So to get started, how do you prevent doing something wrong in your real estate transactions? The answer might seem obvious, but it happens enough that it’s clearly a question that needs to be unpacked a bit.

To do that, let’s look first at the most common causes for the more serious outcomes of complaints and lawsuits: These kinds of fall into the following 4 categories:

  • Fiduciary Duties: failure to provide conscientious and competent service or breach of duty or negligence
  • Disclosures - misrepresentation, errors and omissions, failure to disclose material defects
  • Offer Handling: multiple representations, handling multiple offers
  • Agreements: chattels and fixtures being a big cause of issues, and failure to include relevant clauses in the case of buyers or failure to strike problematic clauses in the case of sellers


When it comes to Buyers, pretty much anything that costs them unexpected money after purchasing, will cause you problems.

When it comes to Sellers, problems typically arise after the face when the buyer comes after them for something. It often becomes a pass-the-hot potato thing, where they may have been super happy with you until they’re suddenly not and you’re to blame.

So what are some of the things that you can do and the steps that you can take, to prevent doing something wrong?

  • Obviously know the rules and follow the rules. As a Realtor, it’s your job to know the laws and the code of ethics. Passing your real estate exams means nothing if you don’t retain what you learned. So memorize the rules to protect your clients and yourself. If you’re supposed to convey offers in a timely manner, convey offers in a timely manner. If you’re supposed to notify all interested parties that an offer has been registered, make every effort to notify agents. If you’re not supposed to imply that real estate commissions are fixed, don’t imply that and the list goes on and on and on. You’ve got to know the rules because ignorance will never be accepted as an excuse. Now I get it, trying to stay on top of all the rules and regulations, can be a challenge if you’re not intentional about it. So be intentional about it. Set aside a time block in your calendar every month when you’re new and every quarter once you’re more established to review the rules and any new updates. Subscribe to your legislative body’s newsletters and actually read them, opt-in to your local lawyer’s newsletters, and read their blogs. Research court cases and understand new precedents that have been set. Regularly writing your own blogs and creating associated videos can not only be used to educate your audience, but it can also help you learn and retain information better as well
  • After knowing your shit, the next most important thing is remembering to do shit. There are a lot of tasks that need to be done in the course of buying and selling real estate and even if you’ve been doing this for years, you will likely drop the ball at some point if you don’t have a digital system in place for task management. If you’re new, do not even try to do a transaction without a digital checklist. Ideally, you need to create a template with a standard set of tasks that need to be completed every time you do a transaction. Once this template is created, it can be expanded on as new things come up, but you’re essentially just inserting it into your project management system every time you start a transaction and then you can include relevant details, due dates, assign tasks to different people, and track completion. When you’ve got the right systems in place, nothing should fall through the cracks. I talked all about this in my Systems series which was episodes x through x. I use the program Notion for this and have created all of the templates a realtor needs to manage everything in their business. You can purchase this notion template pack on my website and I’ll also include a link below this episode. For those of you that already use it, they have just released a new feature called Buttons that is a game changer when it comes to task templates. I will be releasing new training to show you how to use the new feature, so keep an eye out for that.
  • One of the fastest ways to get yourself in trouble is by taking on transactions you’re not qualified to. That means if you’re not qualified to sell commercial property, either don’t sell commercial properties or get qualified. If you’re not qualified to sell new construction, don’t sell it or get qualified. If you choose not to follow this best practice, just know that doing so is always going to be a ticking time bomb waiting to explode and if you think getting advice throughout the transaction from your broker will protect you, it won’t. In situations where a complaint is filed against you with your legislative body, as soon as it’s discovered that you weren’t qualified to take on the transaction, there are no pointing fingers anywhere else. Yes, your brokerage will take some heat too, but it will be separate from the heat you’ll take. So get intentional about recognizing when you don’t know, what you don’t know. Don’t gamble with clients’ lives and your reputation, because you need the commission. If you are going to take on transactions that you’re not qualified to, at minimum hire a mentor to oversee everything. Don’t rely on your broker. Ask a realtor who specializes in this type of transaction to mentor you on it and then share the commissions. Learn and be prepared to pay for that learning. If you choose not to do this, be prepared to accept the consequences and don’t blame anyone but yourself if you ruin your career. Sound harsh? Yes, but I’m saying it to protect you.
  • Alright, moving along always always always keep everything in writing. If you try and defend yourself and don’t have written proof, it will always become he said/she-said situation and I assure you that your legislative body will always take the consumer’s side. After all, they are a consumer protection agency and if there are any grey areas, they will find them in favor of the consumer….even if you didn’t actually do anything wrong. The burden of proof falls on you, so you have to keep records and those records need to be in writing. Now as you well know, real estate transactions often involve a lot of conversations whether in person or on the phone and that’s why you need to always follow those conversations up with a written email outlining exactly what was discussed and what the decisions were. And always ask for those emails to be acknowledged. Don’t leave any room for misinterpretation or what I like to call….re-creating history. My husband is the king of this practice. He is constantly re-creating history to match his narrative and I often threaten him that I’m going to start recording conversations to put an end to it. Often people don’t even do this maliciously, they genuinely believe their version of events or at least they convince themselves of it, because it’s so much easier to blame someone else than it is to take ownership of the mistakes we make…especially if they’re big ones.
  • Up next under the umbrella of preventing problems applies to buyers. One common area where mistakes get made relates to clauses in your offers and forgetting to insert important ones. For that reason, rather than remembering to insert them, delete them instead. Create an offer template and include all of the standard clauses that should be included in EVERY offer, including any conditions (like financing and inspections) even if you plan to strike them out. If a buyer wants to go in with an unconditional offer, don’t exclude the conditions from the offer. Include them, strike them out, and get your client to initiate the change. If you don’t include them, you’re potentially leaving yourself open to a serious complaint, unless you have it in writing that the buyer wanted the conditions excluded from the offer. Even in that case, it leaves you exposed. Once you’ve got all of the standard clauses in your template, then add the ones that may not be relevant with every offer, but occasionally are needed. Then when you are drafting your offers, you’re deleting clauses you don’t need rather than having to remember to add them. Now for this strategy to be effective, you’ve got to be really thorough when you’re creating your template to make sure you haven’t missed any important clauses. On the flip side, when representing a seller, be so careful about thoroughly reading and explaining each clause so that the seller clearly understands what they are agreeing to and what the implications or complications could be. This is particularly true with representations and warranties.
  • Outside of offer templates, there are other types of templates you can and should create to prevent problems. At my brokerage, I always provided an exhaustive list of questions to ask the listing agent when representing a buyer. Granted, listing agents can sometimes get annoyed by a long list of questions, but sorry not sorry. As an agent representing a buyer, it’s our job to ask all of the questions that would fall under the caveat emptor principle. The listing agent is not required to disclose absolutely everything that may be important to a buyer. They are only required to disclose material known (or ought to have known) latent defects. So if something is important to a buyer, it needs to be explicitly asked in writing. By the same token, as the buyer’s agent, it’s up to you to ask your buyers what’s important to them, especially related to things like stigmas such as a past death in the home. Long story long, ask your buyers and ask the listing agent everything that would materially affect your buyer’s enjoyment of the home or decision to purchase or the amount they offer.
  • When it comes to preventing other problems with Sellers, I’ve talked about this one in past episodes, but creating a very thorough Schedule B that is drafted by the Listing Agent and included with the listing to be added to the Purchase Agreement can be effective. Often your brokerage will provide a standard Schedule B, but that doesn’t mean you can’t add your own clauses to further protect yourself and your seller. Now I’m not sure if Schedule Bs exist outside of Ontario, but for those of you in Ontario, it is an added step you can take to prevent problems. Of the same token, if you are representing a buyer, make sure you read Schedule B very thoroughly and know what your client is signing! Agents can get lazy and just assume it’s a standard brokerage schedule with nothing important included and that is not always true.


Alright, what about the situations where you did everything you could and still get blamed for something that someone perceives you did or didn’t do? Of the two times I had complaints filed against me, both were situations where I was the listing agent, and buyers who were not my clients and didn’t know me believed that I did something unethical in the handling of offers. Now in one of these cases, that buyer’s agent was actually the one that did something wrong and in order to get themselves out of trouble, they threw me under the bus and told their clients that I was to blame. Little did they know that their clients would file a complaint and in the investigation that it would come out that they were the ones who in fact had dropped the ball. Not a good look. So the moral of the story is to never blame the other agent in a transaction for something unless they are 100% to blame and you better be prepared to back it up with proof.

These are the types of situations where you need to put up your dukes and fight back, as are the situations where your own client is re-creating history when they’ve either got buyer's remorse or it’s a seller and the buyer is coming after them for something.

For those situations you need records. We’ve already talked about putting everything in writing, but you can take things a step further and make it easy for you to access everything you need. Trust me when the situations come up a year later, it can be hard to remember everything that happened, let alone whether you’ve got proof or you don’t know what you’re looking for. So for every client create smart folders in your email system that automatically stores every email exchange with that client in a folder for easy access. Then make sure you back up those emails outside the server so that they don’t get deleted by accident. Be particularly careful with text messages. Remember that if you change phones you often lose them, so take screenshots of all important exchanges and save them to a folder stored in the cloud and not on your desktop.

Another system that you can implement that will help you keep records and out of trouble, is to create Intake Forms for buyers and sellers. Remember that it’s up to you to ask the right questions. You’ve got to extract important information, which means knowing what you need to ask and then remembering to ask, and then getting the responses in writing. We always created a set of standard intake forms for buyers and a separate one for sellers. I can’t tell you how many times the answers in those forms got us out of trouble.

Not only do you need to extract information from clients, but there’s also a lot of information that you need to communicate to buyers and sellers in the course of doing real estate. It’s almost impossible to remember everything you need to tell each and every client and so the easiest way to do this is through drip campaigns. These are sequences of emails that include all of the important information a client needs to know and when they need to know it. When you’ve done this properly and thoroughly, a client can try to say that you never told them something, but when you’re able to show them the email that was sent and on what date, it’s pretty hard to argue. Especially if you’ve explained in your onboarding process how important it is for them to read and watch every piece of communication thoroughly.

Now full disclosure, this process is a big project to set up but it is well worth the time and effort required. If you want help with your own onboarding & intake process, client forms, and educational drip campaigns, I will be teaching everything step by step in my new Serve program launching soon. You can join the waitlist by clicking the link in the show notes if you’re
interested.

So to recap everything we’ve talked about

  • Know the rules and follow the rules.
  • Remember to do everything you need to do, by creating systems that allow you to manage and track the completion of tasks.
  • Don’t take on transactions you’re not qualified to do OR hire a mentor to oversee it
  • Keep everything in writing.
  • Create templates for clauses and questions to ask & verify each and every time
  • Keep records of all interactions & communications where they can’t be deleted and where they’re easily accessed in one place
  • Create standard intake forms so that you remember to ask the right questions and so that you have written proof of the answers
  • Craft educational drip campaigns to ensure you’re communicating important information when it’s needed.


If despite all of those precautions you still find yourself in hot water, take responsibility, learn from it, grow from it, and know that this too shall pass. If you’re accused of something you legitimately didn’t do, then it’s time to put up your dukes, fight back and feel liberation like you’ve never felt before when you show 'em what you got and you’re vindicated.

The more you learn the more you’ll stay out of trouble, especially if you actually implement what you learned in this episode.

Until next time.

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