In many of my litigation cases where I work as an expert witness, one of the claims against agents surrounds the issue of disclosure documents and inspections.  I would think even the dimmest bulb in our business should know that the agent has to review the disclosures.   So,  how do agents get into trouble:

• Failure to point out red flags: The reason that an agent reviews the disclosures is to see where the mine fields are.  Many agents tell me that instead of sending the disclosures to their client as they receive them,  they wait until they have them all.  Then,  they schedule a sit down meeting to review all the disclosures and inspections together.

• Tips of the iceberg? What I mean here is look for those things that seem minor but could be hiding a much bigger issue.  For example, a buckled floor in the bathroom gets bid by the Pest Company for $400,  which is the cost of  replacing the vinyl and minor under-lament.   The truth is that it might be thousands, if the damage goes into the structure or under the tub.  And,  was it caused by a leak?  Is there mold?

• Seller Disclosure Docs: Lots of issues show up here.  Are the form complete?  Did the seller explain why they answered YES?  Do they disagree with the inspection reports?  Do the disclosures agree with each other? (An example might be the TDS says no history of flooding,  while the pest report shows evidence of prior water).

• Did you point it out to the client? Too often,  the disclosures and inspections are sent to the client with the question,  “Do you have any questions? ”   Most clients don’t see the things you see, so it is your job to spot the issues and point them out to your client.  And,   if you are a listing agent,  you should spot the issues upfront and get them corrected,  instead of waiting for the buyer’s agent to find them.  And,  remember,  many of these cases happen many years after COE,  so make sure you document your disclosure so we can prove you actually did point out these issues.  Thank God for email.

• How did you follow up ? and,  it is not enough to point the red flags out.  California case law says that an agent should discuss the ramifications of the issue,  then give sound advice of what to do next.  That might include a further inspection,  a bid from a contractor,  checking governmental authority records, inquiring of the seller,  or a visit with an attorney.

A good majority of lawsuits would go away and I would not be able to be an expert witness if agents would follow these simple rules.

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Every year the Chamber of Commerce collects what it considers the most ridiculous lawsuits of the year.  At first,  they seem funny but they are costing our economy Billions each year.

I saw a recent interview with a CEO of a major company who stated that he spends up to 20% of this time,  working on defending litigation.  So,  instead of running the company,  they are wasting 1/5th of their time on lawsuits….not to speak of the legal costs involved.

How ridiculous…..and scary. This affects you in another way.  In my capacity as an expert witness, I have seem my share of crazy cases and you are always the target with a claim of negligence or fraud.

What I think is most puzzling is not that some people get crazy ideas that someone one else is to blame for their dysfunctional lives but that an lawyer actually takes the case.  Think they are doing it for free?  I doubt it.  But,  even if  they find a lawyer to take their case,  why doesn’t a judge simply throw out the case and sanction the attorney for malicious prosecution ?  Oh,  I forgot.  Judges are attorney also. And,   judges never  want to be embarrassed if they throw out a case and are later overturned on Appeal.   Never good for their career opportunities.

No matter what the reason,  this should be unacceptable.  So,  when you hear people discussing LEGAL REFORM,  it is not only trying to limit settlements on medical cases.

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One of the common mistakes I see real estate agents make in my real estate expert witness practice is related to attorney referrals.  Let me explain.

In real estate, there are agents who are competent in residential sales,  who may occasionally do a 4-plex.  But they would not consider doing a commercial sale or lease,  raw land sales,  making loans,  selling a business,  apartment houses,  syndication, or any other of the areas where agents legally are allowed to operate.  The reasons are simple.  Could they do it?  Yes,  the could.  Will they do as well as an agent who specialized in that part of our business.  Of course not.

The same applies to the attorney field.  They are even more specialized than agents.  I never will forget conducting a class,  when an agent raised their hand to ask a question.  Without pause,  I answered his question.  He said, “That is the same answer I got from an attorney but the only difference is that he charged my client $600 to get it.“  Of course,  the room all laughed.  Upon inquiry, I found that the client had randomly contacted an attorney,  who obviously wasn’t a real estate expert.  Clearly,  the attorney didn’t know the answer so he was charging the client for the research time he spent finding the question.  When a real estate attorney would have answered it without thinking or research  because it was so basic.

So,  the point is that when you or your client needs an attorney,  it is always best to find someone who does a lot of real estate.  But,  it is more complicated than that.  First, what is the nature of the matter?  There are attorney who are experts in the various kinds of real estate.  Some are experts in dealing with Homeowner Associations,  while others work with developers of raw land.  So, just finding an attorney who tells you they do real estate is not enough information.

If you called me to have an attorney draft a real estate partnership agreement or draft a lease option agreement, I would send you to a different attorney than if I thought you were headed for litigation. Litigation is a specialty and many attorneys rarely go to court.  And,  finding an attorney with lots of real estate experience,  especially in small towns,  is especially difficult.

This doesn’t mean that the General Practitioner attorney is a bad attorney  but his or her world revolves around doing a divorce case today,  writing up a will,  creating an LLC or new business,  handling a dispute over a car accident,  fighting a DUI and the hundred of little things that attorneys handle.  I have a fiend who calls this Door Business……meaning,  whatever walks through the door.

In my cases,  it pains me when I see an attorney who is totally out of their league and didn’t bring in a competent expert witness to help them figure out what their case is really about.  And,  at $300-$400 per hour and the typical real estate litigation costing $80K to $100K in attorney fees on each side,  your clients can’t afford to make a mistake.  You would be surprised how often the attorney who hires me is the second attorney on the case.

Here are some steps to consider before sending your clients to an attorney

• Never let the client go to a friend or someone they sat next to last week at the Rotary Club meeting
• If not sure who to call,  you can go online to www.martindale.com.  Put in your city and choose real estate.  Look up the resume of recommended attorneys.
• If you are in a small town,  you will have go to the largest near city to find an attorney who is primarily real estate
• You,  not the client, should call several attorney offices
• Ask which attorney does real estate in that office
• If more than one does,  ask to speak to their secretaries or a junior attorney who works with them,  not the attorney themselves
• Explain the general nature of your case to them
• Ask what percentage of their practice is real estate (should be 50%)
• As if they consider themselves transaction attorneys or do they also do litigation
• What % of their practice is litigation  (should be 50% or more)
• give them the names of  the seller,  buyer,  and agents and ask that they do a conflict check,   in case the attorney represents one of the parties or has in the past
• Ask them if there anyone else in the legal community that you might also interview?  Note:  just like agents, who know other good agents, attorneys know other good attorneys
• Find out if they charge for the initial consultation.  Note:  don’t choose the attorney based on price.  A talented attorney can accomplish much more in less time that an average attorney can at a much lower fee.  Also,  ask if you go forth with litigation,  how much is their retainer?
• And, most of all,  be sure that you go with the client on the first meeting.   You will be much more likely to be able to explain what did and didn’t happen than the client will.
• Another hint.  You must be impressed with and like the attorney.  If you don’t like them,  neither will the jury

And,  if this is too much work,  call me.  I can help you find a good one. Yes,  Virginia,  there are good ones.