Home Values Still Rising, But The Claims Remain The Same

Guest Blog by David Hamerslough

Last month’s article addressed one type of claim that I often see when a market is in transition. This month’s article discusses the other types of claims that I have seen in a transitioning market.

Claims by the buyer that they have overpaid

Buyers who purchase at or near a peak in a market cycle often make a claim against their agent that they overpaid for the property. The crux of this claim is that the agent was either not aware that the market was in transition or failed to advise the buyer of that fact. Market trends are easier to identify in hindsight than in the present. This does not, however, deter buyers from making a claim based upon an evaluation of, among other things, the following facts and circumstances:

  1. the comparables that the agent used to inform themselves, and the buyer, of the value of the property;
  2.  the agent’s knowledge and experience with the neighborhood or location of the property;
  3. days on market;
  4. inventory trends;
  5. whether there was competition for the property;
  6. whether there were prior offers;
  7. the terms and conditions of the offer, including whether there was an appraisal contingency;
  8. the lender’s appraisal, if any;
  9. any impact that the pricing of the property may have had on interest in, or the lack thereof, the property;
  10. information the agent had of market conditions based upon their experience or based upon the experience of other agents in their office;
  11. information the agent has received on this subject during office meetings, marketing meetings, or tours of properties listed for sale; and
  12. any opinions expressed by the agent in communications with the buyer or in any marketing material, including social media posts.

The strategy behind a buyer’s claim can turn on the information obtained in evaluating the facts and circumstances identified above. If the agent is not current or denies having any information on these subjects, then the buyer’s claim may be based on the agent being uninformed or uninterested in protecting the buyer’s interests. On the other hand, if the agent acknowledges having information on these subjects, then the agent will want to demonstrate that this knowledge was communicated to the buyer and that there were other factors or issues that impacted the buyer’s decision. Such factors might include the buyer’s needs, wants, and/or motivations, any pressure the buyer faced, the concept of buyer fatigue, and the buyer’s knowledge, training, skill, and experience, if any, with respect to the purchase of real estate.

Claims by sellers to cancel the listing agreement because the property has not sold

This claim is often made when the seller is chasing a downward-trending market. A seller may make this claim based upon an evaluation of, among others, the following facts and circumstances:

  1. the comparables that the agent used to inform themselves, and the seller, of the value of the property;
  2. the agent’s knowledge and experience with the neighborhood or location of the property;
  3. the pricing and marketing of any competing properties;
  4. whether the agent has reviewed the terms of the listing agreement with respect to marketing with the seller;
  5. the agent’s marketing strategy and plan;
  6. whether the agent’s marketing strategy and plan are in writing or are addressed in any way in written communications between the seller and agent;
  7. what price reductions, if any, have been made and why;
  8. any appraisals of the property that the seller has;
  9. information the agent had of market conditions based upon their experience or based upon the experience of other agents in their office;
  10. information the agent has received on inventory and market trends during office meetings, marketing meetings, or tours of properties listed for sale; and
  11. any opinions expressed by the agent in communications with the seller or in any marketing material, including social media posts.

Once again, the strategy a seller develops when bringing a claim often turns on the information obtained in evaluating the facts and circumstances identified above. Any writing discussing the agent’s marketing strategy and plan may eliminate a claim by the seller that the marketing efforts were not consistent with the seller’s understanding or expectations. Many sellers don’t realize that the PRDS and C.A.R. listing agreements authorize the agent to advertise and market the property in any medium selected by the agent unless otherwise instructed in writing by the seller. While the agent does have this authority, a seller may still claim that they were not advised of this clause or that their understanding and expectations of the marketing were different based upon discussions with the agent.

Other factors that may impact this type of claim include the seller’s needs, wants, and motivations, any pressure the seller faced, the reasonableness of the seller’s expectations regarding value, and the seller’s knowledge, training, skill, and experience, if any, with respect to the sale of real estate.

Claims by sellers that they have lost the benefit of the bargain due to the buyer cancelling

The issue here is the impact of initialing the liquidated damages clause in a declining market. If the seller resells the property for a loss greater than the amount of liquidated damages, the seller may question why they cannot recover the loss over and above the amount of the deposit actually paid. A component of this claim will include an assessment of the seller’s agent’s knowledge of the market. Most of the facts and circumstances listed in the preceding section that are used to evaluate the seller’s agent’s knowledge of the market will apply in evaluating the agent’s knowledge in this type of claim as well. In addition, other facts and circumstances that may be evaluated include (1) the seller’s agent’s ability to explain liquidated damages and (2) whether the seller’s agent has ever handled a transaction in which the liquidated damages provision was not initialed. As with the other types of claims, this claim may be affected by the seller’s needs, wants, and motivations, any pressure the seller faced, the reasonableness of the seller’s expectations regarding value, and the seller’s knowledge, training, skill, and experience, if any, with respect to the sale of real estate.

This type of claim may also be impacted by the specific purchase contract that is used, the terms and conditions of that contract with respect to the deposit, whether the deposit was actually paid, and whether appropriate documentation was used with regard to any increased deposits.

HomeGuard Home, Roof and Termite Inspections in the Bay Area, Sacramento, San Diego and More

We aim to be a resource to both realtors and home owners/buyers through the home buying and selling process by providing outstanding home inspections, termite inspections, and roof inspections as well as NHD reports. We also provide additional services including realtor training sessions at your office, check out our resources page for more information. Have questions? Call (855) 331-1900 or contact us online today to get more information on how we can make your busy life as a real estate agent a little easier.