Top 10 Complaints and How to Avoid Them

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BHGRE Metro Brokers and CBC Metro Brokers enjoy a wonderful relationship with the Georgia Real Estate Commission (GREC), primarily due to our excellent training, readily available Broker Support and the integrity of our agents. That’s not to say we’re perfect, by any means! What are the most frequent complaints filed with the GREC by the public and other licensees which result in citations, sanctions, suspensions and revocations? The top ten complaints follow with some suggestions as to how to avoid mistakes which may lead to complaints.

1) Misrepresentation/Failure to Disclose Material Facts – Material facts fall into three general categories: Facts about the property (leaky roof, cracked foundation, termite infestation, water intrusion, the presence of mold, etc); facts relating to the property such as zoning changes, school redistricting or road construction; and facts that relate to a principal’s ability to perform under the terms of the contract such as a pending bank foreclosure or short sale situation.

Typical complaints of misrepresentation involve advertising a property for sale or rent with a greater number of bedrooms than is permitted by the property’s septic permit, or advertising a larger living area than was constructed pursuant to the building permit. Some complaints involve hidden defects that were discovered by an inspection performed by a previous buyer.

To avoid complaints of misrepresentation or non-disclosure of material facts, do your homework!  Don’t rely on information obtained from others – verify it through reliable sources. Check the accuracy of what you are advertising on MLS’s and websites. Our duty to disclose material facts extends to our clients, customers, and to all parties involved in the transaction, including the lender in a short sale situation.

2) Mismanagement of Trust Accounts – The Qualifying Broker is responsible for the proper handling of funds belonging to others, including the management of the trust account and trust account records. Avoiding these complaints means the Broker is constantly monitoring contracts to ensure that earnest money, security deposits and other trust funds are where they should be, when they should be. Agents can avoid these complaints by turning in trust funds to their Office Managers immediately and always depicting a true picture of who has the funds and when they will be deposited in every contract. Earnest money to be delivered later MUST be described as such in contracts.

3) Disputed Earnest Money and Tenant Security Deposits – Brokers are required to follow the exact instructions contained in the sale or lease contract before disbursing any trust funds.

4) Charges Against Tenant Security Deposits – The most common complaints are against licensees doing property management and involve charges for items such as carpet cleaning, appliances and charges for “damage” versus “ordinary wear and tear.”

5) Short Sales – The fact that a short sale situation exists constitutes a material fact that must be disclosed to potential buyers.

6) Drafting Legal Documents – License Law prohibits brokers and agents from drafting contracts, contract provisions, or any other legal documents, or from performing any other service constituting the practice of law. Agents must avoid inserting complex contingencies into contracts or addenda. If a transaction requires more than can be inserted into the blanks of a standard form, agents should consult with Broker Support. Under no circumstances should a broker or agent attempt to alter or combine approved forms that are not written to be used together. For example, don’t combine a regular Purchase and Sale Agreement with a standard residential lease form in an attempt to create a lease/purchase contract.

7) Disputes Regarding Contract Acceptance – Negotiations leading to a contract can be fast-paced, especially when agents find themselves communicating offers and counter-offers, as well as acceptances, verbally. An example of such a situation occurs when an oral counter-offer is communicated to the buyers, who orally agree to the new terms. That acceptance is orally relayed to the sellers, who now mistakenly believe they have a valid contract.

The Statute of Frauds requires that all contracts for the sale of land or for lease agreements exceeding three years be in writing and signed by the parties to be enforceable. Any changes must also be in writing and initialed by all parties.

The acceptance of short sale offers and counter-offers confuse many agents. Agents must remember that the owner shown on the tax records IS still the owner of the property and that a short sale is nothing but a financing contingency for the seller, which must be removed in order to allow the seller to convey good and marketable title.

8) Conflict of Interest – The most common complaints deal with dual agency. Dual agency presents an inherent conflict of interest because the same agent is legally representing both the buyer and seller who have different and competing interests. Full written disclosure and consent is required to legally perform dual agency and even that will not head off complaints.

Conflict of interest complaints also arise in connection with the purchase or sale of the licensee’s own property. Agents are strongly discouraged from showing properties they own to buyers they represent. If necessary, it’s better to terminate the buyer agency relationship and refer the buyer to another agent or broker and collect a referral fee.

9) Lack of Communication – A very large number of complaints cite failure to communicate with the client or customer. Frustration at not being better informed affects sellers with properties on the market, buyers worried about short sale approval status and landlords concerned about marketing or property maintenance.

The number one complaint from brokers and consumers alike is the failure of other licensees to return phone calls or emails. Return calls and emails promptly or arrange for a back-up agent to handle things while you are unavailable.

10) Loan Fraud – Allegations of loan fraud often result from agent trying to assist a buyer having difficulty qualifying for a loan or assist a seller trying to salvage any funds from a short sale. The rule of thumb is that any money which passes between the parties and third parties (including the broker or agent) MUST be disclosed on the settlement statement (even “extras” paid for by the buyer to the builder over-and-above the contract price). Such payments may affect loan-to-debt ratios. An agent failing to disclose this information to the lender may be committing loan fraud, which is a federal offense.

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One Response to “Top 10 Complaints and How to Avoid Them”

  1. Rick Troup Says:

    Just 10 of many reasons why continuing education is so important.

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