The Seller Counseling Session
An integral part of the listing presentation is a seller counseling session, which focuses not only on your marketing capabilities, but also on the necessary legal disclosures, contractual expectations, agency relationships, cooperating relationships, office policies and procedures, and the in-depth knowledge you can impart. All things that differentiate your service package from your competition.
The purpose of the session is to thoroughly review the marketing and sales process with the seller, review what can and cannot be done for them, establish realistic expectations on the part of the agent and the seller, disclose all legal agency relationships, including fiduciary duties, and review all legal documents.
In outlining to the seller what can and cannot be done, it is important to convey that although you can provide options, alternatives and ramifications to actions, you are not in a position to tell the seller what to do. This may be a departure from days past when this was considered part of the service. The legal ramifications are immense, and no responsible practitioner would consider this part of their duties today.
When discussing with the potential seller what the practitioner can and cannot do. You should discuss how fair housing laws apply, the importance of disclosing material facts and the property condition disclosure statement, Megan’s Law issues, disclosure of rebates from third-party business relationships, and client fees that are more than the commission.
Clarify Office Policies Upfront
It is vitally important to explain your company’s official policy on agency relationships when discussing options with the prospective seller. All listing agreements should have a conceptual agreement, depending on the official policy of the firm, regarding the availability of various agency relationships, the possibility of dual representation, designated agency representation and permission for the firm to represent more than one buyer client. These issues need to be addressed in advance so that practitioners and seller clients comprehend how agents will act in these scenarios. The parties involved should also understand that informed consent forms will be used in the transaction to memorialize the understanding and agreement of the parties for the modification and/or reaffirmation of fiduciary duties.
It is equally important to explain, during the counseling session, your company’s official policy on compensation and cooperation. Both the National Association of REALTORS® Code of Ethics and your fiduciary duties as agent require you to inform the client not only what the total compensation will be, but how it will be split, the amount that is offered to different cooperating firms and how much will be allocated for the listing firm. In markets where there are subagents and buyer agents participating in the transaction, the compensation might be different, and this must be disclosed.
Discuss Compensation In Depth
In addition, if compensation is offered to subagents of the seller. It is required by law and the Code of Ethics to inform the seller of the possibility of vicarious liability so that the seller realizes that they are accepting financial responsibility for anything that the subagent says or does on which the buyer relies on, even though this information may not be correct. The disclosure of this potential of vicarious liability should be in writing for the protection of the agent and the broker.
If compensation offered to the buyer’s agent is less than the amount reflected in writing on the agreement between the buyer and agent. The listing agent is obligated by the Code of Ethics and lawful disclosure to identify the ramifications of that action and to point out that a clause may appear in the conditions of sale for a “seller-funded rebate” from the seller to the buyer to satisfy the terms of the buyer’s contract. If an office policy does not allow for compensation to certain types of cooperating agents, such as subagents or buyer agents, then the firm is obligated to make that clear before the listing agreement being signed.
Two more complex issues that need to be reviewed during the seller counseling session are the seller’s authorization of multiple offers to competing agents and an authorized statement to cooperating agents explaining why the property is being sold. On REALTOR®.org, there is extensive information regarding multiple offers and how they should be handled. The caveat to remember is that only the seller has the right to determine if the existence of multiple offers should be disclosed to competing agents. This is not an agent’s right to determine. Having this authorization in writing is crucial for the protection of all parties. Also, every buyer wants to know why the seller is selling -– having a neutral statement will protect the seller’s confidentiality and negotiating a position.
In the “legal” arena, the seller counseling session should include an overview of the laws regarding the presentation of offers. (Even if they are lower than the seller wants to see or not accompanied by a pre-qualification or pre-approval letter.) The timeliness of presentations, the mechanics of contracts versus binding binders and non-binding binders or intent letters, and the counteroffer process. The pros and cons of contingencies should also be discussed. It is important for an agent to take into consideration the current economic conditions when outlining the upside and downside of “as is” clauses; inspection contingencies; Hubbard (kick-out) clauses, etc. with the potential seller. Always be careful not to give legal advice and refer the seller to their attorney when the discussion involves their legal rights and liabilities rather than how the transaction works.
Practically, the seller counseling session should provide a roadmap for the activities that will occur throughout the marketing and sales process including the handling of offers. It should also define the partnership that is required between the seller and the listing agent to accomplish the primary objective of selling the property with terms and conditions acceptable to the seller. Showing procedures, safety precautions, property condition expectations, lockboxes, signs, advertising, and Internet display issues need to be outlined.
Plan Ahead for Inspection Logistics
Another key area the agent should counsel the seller on is the inspection process. Sellers often have the misconception that they, or the listing agent, should be at the inspection. The agent should point out that not only is this counterproductive to the negotiating phase and protection of seller confidentiality, but it has resulted in lawsuits and out of court settlements for listing firms. The liability can easily be shifted by allowing the buyer agent and his or her client to monitor the inspection process, then issue their request, written report and corresponding repair quotes, if applicable, and allow the seller to act on them at that time. The inspection phase is always an opportunity to renegotiate. Clients should be made aware that the statistical probability of having to do so will vary according to the economic landscape of the marketplace.
The seller counseling session is a unique opportunity for skilled practitioners to differentiate themselves from their competitors.
(Adorna Carroll is the Owner/Partner of Realty 3 Carroll and Agostini in Berlin, CT. She is a national speaker and sales trainer and a co-author of the Seller Representative Specialist (SRS) course.www.adorna.com)