If you think so, try to negotiate both the ”boilerplate” of the listing agreement and the economic terms. The listing agreement is the agreement between you and the real estate broker and or agent. You may be able to negotiate the percentage rate charged for the realtor’s commission. But not the boilerplate, the so called “fine print”. Knowledgeable attorneys can usually somewhat level the playing field with modifying the “boiler-plate.” Many listing agreements, provide, if the seller defaults, and the broker/agent sues the seller, the seller may be obligated to pay the attorney’s fees for the broker/realtor and all damages to the broker/realtor. Please note in listing agreements there is no limit to the amount which may be due under this provision so the seller could owe much more than the commission was originally due. But if the broker/agent breaches the agreement, the seller’s attorney’s fees and losses are rarely recoverable by the seller. This is just one instance of the unequal playing field. There are many more.
Just what are the broker/realtor’s duties? Under most listing agreements it is precisely only that, to list the home for sale. Under the typical arrangement it is merely listing the property without doing more, if the home is sold, the realtor is entitled to a commission in most jurisdictions. By statute in many states a broker/dealer’s job is to locate a “ready, willing, and able buyer.” The statutes do not usually specify how the broker/agent is to do this. The listing agreement will typically provide the broker/dealer will market the property. Looking carefully at the listing agreement the most broker/realtors provide is a list of marketing activities. The introductory language indicates the broker/realtor has a choice of what activities in which to engage, how frequently and how long. In short, what the realtor promises is at best minimal efforts.
Many realtors accept these changes rather than lose a listing. Remember the realtor works on commission. If the home does not sell, the realtor does not get paid. There is no legal obligation to hire a real estate broker/agent in connection with the purchase and sale of real estate.
There are many other areas which may be modified by a competent real estate attorney. With respect to some changes, if the broker/realtor does not accept them, many attorneys will suggest you find another broker/agent. What to agree to or not is seller’s business decision. It is the attorney’s job to point out what changes are desirable, it is the seller’s responsibility to make the business decisions.
After a realtor/agent locates someone interested in purchasing the property, the next step is the preparation of a contract of sale. Also referred to as a sales agreement. Usually the realtor/agent who locates the prospective purchaser is not the same person as the broker/agent who procured the listing. It is my recommendation do not use the same agent to represent the seller and the buyer. There too many areas for conflicts of interest – both obvious and not obvious. Keep in mind, neither broker/agent is paid unless the property is sold.
Today the broker/agent prior to or simultaneously with the preparation of the contract of sale provides what is referred to as an “exclusive agent agreement.” In Maryland there is no legal requirement to sign such a document. This is a document which binds the broker/agent to the putative purchaser for a long period of time. This document frequently provides the purchaser must use this agent in looking for a home. There is no legal requirement in many states for a purchaser to sign this agreement.
A service usually provided by broker/agents is the preparation of the contract. For most residential transactions the broker/agent uses a “standard form.” The source document for the standard form is typically a local or State Board of Realtors. Some brokerage firms have modified the standard contract, most of those seem to protect the broker/agent more so than the standard form. The primary focus in most of these documents is protection of the broker/agent. For example, in at least one standard form, both the buyer and the seller agreed in the contract to protect the broker from litigation and to pay the Realtors attorney’s fees and damages, and to pay such without a limit. There are also other clauses limiting the broker/agent from liability. There are many other broker protections built-in to the “standard contract.”
Remember, the broker/agent is only paid if the property is sold. So the next level of protection in the “standard contract” is to protect and make sure the deal goes through, almost regardless of cost. Many competent lawyers modify the “standard contract” to protect the client.
Depending upon whom the attorney represents affects what modifications are appropriate. There are different modifications for purchasers, different modifications for sellers. Some changes protect buyer and seller from the broker, It depends upon what interest is being protected.
The realtor/agent is motivated to be paid and therefore to control the various steps in the transaction. Frequently, the realtor/agent will recommend a home inspector, hvac inspectors, lenders, title companies, and so on. Real estate attorneys typically are familiar with those who do better inspections than others, title companies which are easy to work with and which provide better protection. Obviously, a seller desires a myopic inspector, a purchaser desires an exacting inspector with 20/20 vision. In short, many real estate attorneys assist their client to issues the inspector, title insurance company, and other providers based on appropriate circumstance.
Well, what about the inspector of the physical property? Does the inspector have the buyer at the seller’s best interest that part? Many realtors have their “go to” inspectors. This is partially to keep control. Some realtors recommend those on a short list. The inspectors receive most of their business through realtors. Don’t you think the inspector will be concerned to protect his/her referral sources? Not all inspectors are of equal quality or integrity.
Suppose an inspector makes a mistake or is just plain wrong. Or the inspector just misses something huge, for example, mold. What is the liability of the inspector? Usually, the contract language with the inspector limits the recovery of the person who hired the inspector to damages up to the amount of the cost of the inspection. So if the inspection cost $300, and the cost to remediate the mold is $10,000 the inspector may only be responsible for $300 in damages. So how much is the inspector on your side? Frequently the buyer has 5 to 10 days to inspect the property. An inspection is set by the buyer and/or the realtor. The buyer and, and sometimes the seller meet the inspector at the home. The inspector pulls his clipboard and checklist and goes through the property with the realtor and the buyer. This puts additional pressure on the inspector. At the end of the process, the inspector hands the buyer the inspection checklist, which is the report, signs it and frequently has the buyer sign off. Most of the time inspector will not give the buyer the form inspection until the buyer signs the form..The buyer gets a copy. In the fine print is typically the clause limiting the inspector’s liability to the cost of the inspection. So even if the buyer notes or complains about the limitation of liability, under the circumstances usually too late to find, hire, and reinspect the house. A good source of recommendations for inspector or several inspectors from which to choose is your competent real estate attorney.
Does the title insurance company primarily protect the buyer? First, it protects itself. Second, it protects the lender. The title company issues one form of policy for the lender and one form, with less protection for the buyer. The title insurance policy for your lender usually contains protection against potential defects, which the buyer’s policy may not contain. There are even standard exceptions to policy coverage which apply in the buyer’s policy which do not appear in a lender’s policy. the owner’s title insurance may exclude items which the lender’s policy does not. So, is the title insurer on your side? How do you make sure the title company pays off the sellers’ loan? How to protect the seller that the title company’s check is good funds? Most title insurance commitments to issue a title policy take exception for items appearing in the real estate records prior to the title company recording the deed from the time it did the title search. Why should the buyer run this risk? So whom does the title company put first? A competent real estate attorney can help with this.
For these type services, attorney’s typically charge by the hour. Hourly rates range in our area are from $ 300 per hour and more depending upon the number of factors including experience, time anticipated to be expended in number of other factors. Many attorneys are able to give a range of what the various services will cost. Some attorneys will also charge a flat fee or a range for limited services. So for example so much for reviewing the listing agreement, so much for reviewing and negotiating a contract of sale, so much reviewing the title insurance policy and so forth. Always remember, the client drives the work and controls the scope of work. For in our area typically the cost of an attorney to review and negotiate the listing agreement is between $500 and $800. The fee for reviewing a contract of sale is typically between $600 and $900. The fee to review a title insurance policy and any other documents which will be part of closing, without attending closing is typically between $600 and $900.