It’s Never Been A Problem Before

A real estate licensee may sign a contract on behalf of a client or principal.

What’s a missing qualifier to that bold statement? How about: As long as the licensee is prepared to personally fulfill the obligation or is prepared to defend herself and her broker from financial liability in court, at a high cost in legal fees the licensee might but shouldn’t sign anything for anybody. Signing on behalf is a bad practice to start because one day something will go wrong.

The liability risk is serious and still we see licensees picking up pens and signing documents we should never touch. A review of files in every real estate office may find more than a few offers to purchase, listing contracts, amendments, counter offers, and closing statements executed by well meaning licensees who thought they were out of harms way.

Attorneys, and title company closing agents who don’t represent the Realtor,  know a document signed by a party without proper authority and protection places liability on the Realtor and his Broker.  Even if that liability is the right to appear in court and defend his rights to immunity, the licensee will spend money and time finding out how much money this simple signature is going to cost him.

These are all too common situations:

A closing agent at a title company needs seller’s signature on the closing statement and the seller isn’t present. She passes the document to the listing agent and says, “We do this all the time. Sign it on behalf of the seller. We’re fine with that.” The well meaning licensee who has the best interest of her client in mind, not wanting to appear fearful or unhelpful picks up the pen and signs her name, “Jane Doe, on behalf of James T. Smith, seller”.

An attorney for a buyer instructs her client’s buyer agent to prepare and send a counter offer but, “just sign it on behalf of the buyer. He’s a busy surgeon and he can’t sign today”. The licensee signs the counter offer “John Doe, Realtor on behalf of Mark Anthony, as directed by attorney  Lisa Ward”. That should do it, he thinks and sends off the counter offer which is promptly accepted and made binding by the seller.

That’s an ugly one. Realtor John Doe is exposed to liability and the seller’s broker may be tied to the same sinking boat. Harmed parties will line up all of the usual suspects giving them their right to defend themselves.

Best Practices are better explained by lawyers and there are publications written by lawyers available online.

Be safe. Regardless of what anyone tells you, you are at risk of expensive liability when you sign on behalf of any party to the contract. A legal document prepared by your attorney protecting you as a legally authorized person to sign on behalf of anyone, without liability to any party may be a measure of protection. My advice is to pass the paper back to the  person who said it’s OK to sign,  and say, “It may never have been a problem for you, but it’s never going to become a problem for me. I’m not authorized to sign.”  I promise you will appear wise and prudent. And if anyone thinks differently of you, they have the right to their thoughts no matter how wrong they are.

 

 

 

 

 

 

 

 

 

Author: Tom Meyer Real Estate Broker, Madison, WI

I believe every every Offer to Purchase can present the unique ability of the person the contract is written for. The person who is most compelled to be cooperative, most qualified, most sincere, most committed, least risk adverse, can have an Offer drafted to show their true ability and commitment. Home sellers are likely to look favorably upon those offers which give them the most comfort. Licensees who know how to craft Offers as unique as the individual buyer are worth their weight in gold.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s