On the listing side our mission is two-fold: marketing, and, risk management. Our goal is not just to obtain the best price/terms possible, but to do our best to insure that the sellers never meet the buyers after close of escrow.
Of course, there is always a wonderful exception to the rule about the parties never meeting after close of escrow.
This involves a myriad of considerations: print advertising and online advertising; staging, cleaning/painting; public and private showings; lock-box and security; preemptive offers; yard and window signs; rent-back; etc.
THE major benefit to sellers is placement of the home on the Multiple Listing System [MLS]. I have heard of instances where a broker recommends against this. If I was the seller I would be very, very wary of such a recommendation. Obviously a broker increases the odds of not having to split the real estate commission if the home is not on MLS. But the broker, in California, is a fiduciary. This means that the broker's self-interest is subservient to the interest of the client.
In California real estate brokers are fiduciaries. The mandatory Disclosure regarding Real Estate Agency Relationships defines the duty owing to sellers and to buyers by their brokers as follows: “A fiduciary duty of utmost care, honesty, integrity and loyalty.”
At the bottom of that form reference is made to dual agents, brokers who represent both the seller and the buyer in the same transaction. The stated duty uses identical language! "Utmost loyalty" to adverse parties! At any rate, Dual Agency is legal. But why would any seller who entrusts the sale of the home to a broker permit that broker/fiduciary to later take on a prospective buyer with adverse interests, as a client? It can't happen UNLESS the seller agrees.
There are instances where attorneys, fiduciaries, may represent parties with potential conflict, but only as a rare exception, and only with the informed consent of the parties. Unfortunately, in real estate, for reasons related to compensation, the industry treats dual agency as a standard business practice. In my opinion it is not possible to have a fiduciary duty of utmost loyalty to the seller and to the buyer on the same home. The duty of a listing broker is to present and market the property in its best light. The duty of the buyer’s broker is to marshal the reasons why the buyer should not purchase the property. And yet sophisticated consumers who would never permit their attorney on a $100,000 lawsuit to represent the other party, never blink when their broker wants to represent the buyer on a $2,000,000 purchase.
We practice Single Agency. Once BlackStone takes on the representation of the seller, it will not represent any purchaser interested in our client's home.
FAILURE TO DISCLOSE
A major source of real estate litigation is failure to disclose. We cannot over stress the importance of disclosing, disclosing and disclosing. Two of the legally mandated disclosure forms are on our disclosure page. But there are many other disclosure forms and publications which your broker should direct to your attention.
In the late '90s I was personally presenting an offer for a buyer-client in the Claremont neighborhood of Berkeley. The listing agent was very impressive. At the end of my presentation I looked at the seller and said: "You will be receiving a number of offers this morning. I would not be surprised if one or more of them waive the Inspections Contingency. I suggest that any such waiver is a negative, for you, the seller. Because some day in the future, should the buyer encounter an unexpected problem, that buyer will tell his attorney that yes, he waived the contingency, but only due to the pressure of the sellers and the both brokers." The listing agent interrupted me and said: "Mr. Rodriguez, don't be concerned about that. It is our office policy to counter back any otherwise acceptable offer that does not have an Inspections Contingency, and to put that Contingency back in the contract." I was very, very impressed.
In my opinion there is a risk – albeit remote - that if a buyer waives the inspection contingency, that some day, suffering buyer’s remorse, that buyer may claim that the waiver was due to pressure from the seller and the brokers. Again, to avoid ever seeing the buyer after close of escrow, and to avoid any claim that the buyer was pressured into waiving due diligence, I “insist” on an inspections contingency.
LEGAL AND TAXATION ISSUES
A home should not be placed on the market until the seller has consulted his/her tax advisor regarding the tax consequences of the sale, if any, and whether they can be avoided. Also, both the IRS and the California Franchise Tax Board want assurances that tax will be paid on gain, as and if appropriate, by out of State sellers. Therefore, tax will be estimated and withheld unless the seller can demonstrate eligibility for an exemption.
Guidelines for avoidance of Capital Gain on the sale of a home are covered in >IRS Publication 523, which doubles as a cure for insomnia.
Capital gain on "investment" real estate may be deferred by doing a Section 1031 Exchange. This is time sensitive and requires documentation PRIOR to close of escrow. Also, the seller may not access any of the proceeds or the exchange is defeated. Again, please discuss with your tax advisor.
Net proceeds should be estimated by your broker prior to or concurrent with your signing the listing agreement.