Documentation: A Critical Element in Real Estate Transactions | The Zebra Blog

Documentation: A Critical Element in Real Estate Transactions

Signing a document

Contracts are written for a very important reason: to protect all parties in a real estate transaction in the event that something should go wrong. While it is never the intent of any real estate agent to end up on the wrong end of conflict in a real estate transaction, things can go wrong and buyers and/or sellers may bring forth legal action to right those wrongs.

In many real estate transactions there is a lot of communication between the real estate agent and the buyers or sellers that may not be reflected in the paperwork, but may be integral to the transaction.    

For example, a number of years ago when I was the Managing Broker of a large real estate company, I received a call from an attorney alerting me that he was representing a buyer who was going to be filing a law suit against one of my real estate agents. When I asked him why, he told me it was because my real estate agent had not represented the buyers’ interest well by allowing the buyer to purchase the home without having the home inspected. There were a number of serious and very expensive issues that came up after closing and the buyer was left with a very large repair bill. At that point the buyers were kicking themselves for not getting an inspection, and ultimately wanted the real estate agent to be held financially accountable for the loss they had incurred. The attorney indicated that the remedy to avoid the lawsuit was for the agent to pay all the repair bills which totaled over $10,000. I thanked the attorney for his phone call and informed him I would be speaking with the agent and would get back to him.

The contract of the purchase and sale was fairly straightforward, with an addendum that clearly waived the inspection contingency and, therefore, an inspection had not been performed. But the contract did not tell the whole story. Upon discussion with my agent I was informed that not only had the agent advised against waiving this contingency, but they had also written the buyer numerous emails saying that they would not advise any buyer to buy a home without an inspection. In other words, while there was no inspection done on the property, the agent confirmed that it was ultimately the buyers’ decision not to have an inspection. That decision was not suggested by the agent.

I compiled the emails documenting the communication between the buyer and the real estate agent regarding the inspection and presented these to the attorney. Within the hour, the attorney contacted me back and informed me that he would not be able to take action against the agent, as the documentation I provided to him proved that the buyer had been informed of the importance of having a home inspection.

Real estate agents need to remember to keep not only contracts and addendums, but all written communication as well. And if you have a verbal agreement with your clients, then make sure to also put it in writing and ask that the contents be confirmed for file records. What isn’t documented can’t be used to protect you in the event there is ever a problem with one of your real estate transactions.

As a professional, you owe your clients the responsibility of a well-organized and detailed account of what goes on during the transaction. Documentation is the smart agent’s best friend. And while it may be more work up front, it is certainly a time saver – and sometimes a life saver – later on down the road.


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