Expert: liznarr - 4/8/2008

Question
"Our house was put on the market on March 5, 2008. We signed a contract on March 14, 2008. Our buyers are going FHA, and they just finished with the FHA appraisal/inspection (came back 'as is' -no repairs required). However they asked us if they could call an electrician to come out and give them an estimate on some things that -their personal home inspector- noted and we agreed. Their 'final decision' will come after they go over the estimate from their electrician (no later than tomorrow night-Tuesday, April 8).  **Our concern starts here: Our real estate agent took our house off their website last Friday, April 4, 2008 as well as 'out of the system' so that no other real estate company can pull up our house. 'It has disappeared off the radar screen' as she put it. We are still on the MLS website (we have a link to our house only), and beside 'status' it says 'pending' --which of course we ARE, but our buyers could STILL decide they want to walk, or WE could still decide at this point that WE want to walk (if they give us unreasonable repair requests).    My question is: Aren't agents supposed to keep you 'out there' advertising-wise, until you CLOSE? What if something happens with their financing? What if they decide they don't care about the earnest money and walk RIGHT BEFORE we close? In our opinion, anything can still happen, and while we HOPE it doesn't...we just thought real-estate 'protocol' was to keep it advertised until the FINAL last minute. Our agent says that 'this is the way it's done,' and she 'feels good' about this contract so she pulled it. --We almost feel like our agent is trying to pigeon-hole us into going through with this contract 'do or die' because she's acting as a 'limited consensual dual agent' and will be making a hefty commission. Can you advise? Thanks, Avery"

Answer
Hi Avery,

My MLS system has a classification as “ACI,” which means:  Active, but contingent on a home inspection being performed and satisfactorily resolved if there are deficiencies to be addressed.  Unless and until any and ALL home inspection issues are resolved AND signed off in writing, I NEVER take any of my listings off the market and enter them as “Pending Contract.”  As you pointed out, this would be very unfair to a Seller in the event a home inspection revealed defects a Seller was not willing to correct at the agreed-upon sales price then in effect … or if possibly the Purchaser’s loan was not fully approved and ready to be funded.

If your listing agent’s MLS system does not have a classification such as ACI, she may not have any choice.  If, however, there is another classification such as ACI, your home should have been entered that way... until any home inspection issues are resolved.

The reason for the different classifications in a MLS system is to put other agents who might be interested in showing your home on NOTICE of the TRUE STATUS of a home.  If an agent had advance notice that your property is contingent on a home inspection (and knowing the Purchasers might have an option to walk, if that is what the Contract gives them the option to do if a home inspection is unsatisfactory), another agent might STILL want to show your home.

On the other hand, if your home is truly “Pending Sale,” and ALL other contingencies have been met, but you are just waiting on the closing to occur, another agent probably would not want to waste time showing a home that is almost assured of a timely closing.

As to whether or not your agent is required to continue marketing your property, you should read your listing agreement very carefully to look for language similar to the quote below, which is pre-printed on the MLS listing agreement forms used in my area:

“MARKETING THE PROPERTY:  The Broker has the option, but is not required, to continue marketing the property after an offer has been accepted.  Owner may terminate this option by giving written notice to Broker.”

As you can see, in my area it is up to the Broker whether or not to continue marketing the property.  However, a Seller can override the language by giving me, as Broker-in-Charge, written notice.  This has never happened, though, because I ALWAYS work in the best interest of my Seller-Client.

Call your agent immediately and ask pointed questions.  If there is a classification similar to, or the same as ACI, instruct her to immediately enter it into the computer that way and restore it to the web site.

If I were you, I would want to know the significance of the date of April 4, the date your agent said you “disappeared off the radar screen.”  Why, all of a sudden, on April 4, was a decision made to remove your listing from an active position for other agents to show?  Was the Purchasers’ loan fully approved on this date?  If so, ask for proof in the form of a commitment letter.  Do NOT accept just an approval letter, but insist on a commitment letter – which is “almost” as good as money in the bank.  I’m exaggerating slightly here, but it doesn’t get any better than having a commitment letter in hand.

In Contracts I am familiar with, a Purchaser has TEN BUSINESS DAYS AFTER ACCEPTANCE to have a home inspection performed and also request any deficiencies noted in the home inspection to be corrected.  Negotiations between Seller and Purchaser on repair issues possibly could, per a Contract, take another 3-4 days; but after that period of time, the time for an agreement on repairs can only be extended by an agreement of the parties – and this should always be IN WRITING.

It would be worth your time to check your Contract of Sale to see what the allowable time period is for a Purchaser to complete a home inspection and reach an agreement with a Seller to repair any deficiencies noted in the home inspection.  If the Purchasers’ time for this request has passed, you are under no obligation to give them extra time, period, nor agree to make any repairs, period.  These Purchasers could have just lost their opportunity and legal right to ask for repairs if they are outside the time limits specified in the Contract.

If you signed a Contract on March 14, and the Purchasers have until April 8 to give you a decision, that’s a total of 25 days which seems a little excessive.  But then, I have not seen your Contract of Sale, either.

On the subject of your agent acting in a limited capacity as a consensual dual agent, you know your agent and have a feel for her.  I cannot comment on that except to note that if you suspect something is “not quite right,” you could very well be correct.  

Simply “feeling good” about a Contract of Sale and an assured closing is absolutely, positively, a ridiculous, absurd and just plain IDIOTIC reason to pull a home from any kind of status to prevent other agents from showing – unless and until, as I mentioned earlier, ALL contingencies have been removed.  

For emphasis, read the previous paragraph again, and let me ask you if I made my point.  Solid business decisions are made on fact, not supposition; and I cannot say strongly enough that your agent did not act in your best interest by doing that.

ANY experienced agent who has been in the business for ANY length of time knows that a transaction is not closed … until it is closed, and ANYTHING can happen, at ANY TIME – as you correctly pointed out.

I am fresh out of an all-day seminar yesterday with about 300 other real estate teaching professionals in my State who teach (1) Pre-licensing classes to students wanting to apply for a real estate license, and (2) State-mandated continuing education classes for ALL licensed agents in the state.  

The subject of teaching ethics to agents was strongly emphasized, as it always is, and to read your question now brings it all home again.  I heard some horror stories yesterday about closings.  Had I made mention in front of the group that an agent “felt good” about a deal and took it off the market before home inspection deficiencies were addressed and agreed upon, I can assure you the entire audience would have been rolling in the aisles.

I certainly hope that you do not come to a worst-case scenario and not close your transaction, and that my comments serve only as a caution for you in any future transactions you might enter into.

If the Purchasers come back with a monetary request for repairs, since your agent “feels so good” about this transaction and removed it from any position so that other agents could continue to show your home before repair requests were addressed, possibly she feels good enough to pay from her hefty commission any repairs the Purchasers might request – especially since the FHA inspector/appraiser did not call for any repairs.

Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth