Is your Association Always Right?

A recent change in the California Association of REALTORS (CAR) Representative Capacity Signature Disclosure and resulting confusion on how it’s to be used prompted me to write about Standard Forms Advisory Committee (SFAC) and how disclosures/contracts are created.

Years ago, l had the privilege of sitting in on a contract committee for the Inspection Contingency Removal contract. The old original was too open ended and required the buyer’s agent to type/write out removals increasing errors in the process.

A roundtable of real estate agents, brokers, attorneys, employees of the California Association of REALTORS and I hashed out an amazing form that is still fundamentally used today in practice.

Sometimes the intent of the parties in that meeting doesn’t always play out well or it’s poorly understood in the field. First rule of altering or creating a new form: DOES IT MAKE SENSE TO THOSE USING/SIGNING IT? An example of this is the somewhat new HOA forms that CAR created to comply with the CAR purchase contract and other civil codes. Although it’s clear they should be completed or an acceptable substitute provided, it’s NOT clear why there is a signature line for the seller to sign that they are confirming the package is complete.  This appears unreasonable as many sellers never SEE the package that’s delivered from the HOA directly to the buyer’s agent nor do they know what a “complete” package is.

The latest form change is the Representative Capacity Signature Disclosure which has been split into buyer and seller formats. Here they added an area for the broker to sign. A broker's auditor believed that two forms needed to be generated, one for the broker to sign and a second one for the buyer to sign. Huh?!

When I asked why, the response was “I guess CAR thinks it’s a good idea.”

This appears to be an inefficient method of gathering signatures for one form. Why not create a form so that both the listing agent and buyer can sign just one document?

After a call to CAR with the legal department who directed my suggestions/concerns to SFAC, it was clear to me, this may NOT have been a well thought out disclosure change.

Second Rule of altering or creating forms: ALWAYS ATTEMPT TO REDUCE PAPERWORK SO RISK OF LITIGATION IS REDUCED. The more paperwork to track and audit, the more likely mistakes will occur!

Although CAR’s goal is to provide brokers/agents with contracts and disclosures to protect from litigation, they're NOT always right!  

Notify them when new a form is not working well for you. Adjustments will be made according to complaints/suggestions.

Don’t be intimated by contract/disclosure language. If you don’t understand, ask why? It’s your job to know so you can provide an explanation to your client and ensure you both are protected from potential litigation.