What this episode adds to the discussion: Watch how a seller’s willingness and financial ability to fund fundamental property disclosures serves as a critical indicator of their motivation to sell — and significantly impacts the agent’s risk of a failed transaction during the representation period.

In this new video series, we break down how to increase transparency and mitigate risk, ensuring a smoother transaction for both buyers and sellers — plus the agents who represent them.

Marketing, not misery — how up-front disclosures save the sale

A seller’s reaction to their agent’s request for the seller to invest in an advantageous marketing plan offers the agent insight into the seller’s motivation for selling the property.

The agent’s goal — besides employment to sell a property and earn a fee — is to encourage and receive maximum cooperation from the seller in their sales effort.

A seller may “dress up” the property to enhance its “curb appeal” by cosmetic painting, landscaping and clean up. However, it is the buyer’s knowledge of the property’s fundamentals which generates firm and uncontested offers to purchase.

Thus, the seller is asked not only to enter into a seller representation agreement with an agent to achieve the sale of the property. They are also asked to fund acquisitions of the tools unique to the property and only for use by the agent to openly disclose the property’s fundamentals to prospective buyers at the earliest opportunity — ASAP, on a request for more property information. [See RPI Form 102]

However, the seller’s motivation to sell might be due to a lack of sufficient cash to retain ownership such as payment of property taxes, insurance, mortgage payments and deferred maintenance. A cash-availability issue interferes with paying for reports needed to properly market the property.

A financially distressed seller unable to pay for third-party reports significantly increases the seller agent’s risks in the employment. The agent is faced with issues arising in a sale due to a buyer’s disapproval of contingencies brought on by in-escrow disclosures and discoveries.

Here, the seller agent is caught up in the sale of the property twice:

  • once to find out what the property conditions are which caused the first buyer to back out; and
  • again, when the agent discloses to a new buyer conditions discovered in the failed transaction.

Timely disclosure and transparency is best

A seller (and lazy agent) may not want to disclose the condition of the property until after the seller accepts a purchase agreement offer from a buyer. The seller may seek this sequence of events with the intent to:

  • make only those concessions necessary to keep the transaction together once in escrow after the buyer is emotionally committed to the purchase; or
  • remarket the property to another buyer who has been fully informed about the property’s condition.

But such conduct by a seller is deceitful. Worse, the seller agent is always viewed as part of any problem in a transaction.

A seller, as well as the seller’s agent, who knows property conditions which negatively affect the value of the property and withholds the information until after they accept a buyer’s purchase offer, commits a type of intentional fraud.

To avoid seller misconduct and gauge the seller’s motivation, the best time for the agent to present the seller with the marketing package cost sheet is when the seller representation agreement is reviewed. A seller motivated to sell — not merely “testing their asking price” in the marketplace — responds positively to the agent’s advice, even when they do not agree to fund the reports.

A seller’s negative response to making property disclosures when marketing the property indicates the level of future cooperation the agent can expect. The deceptive nature of a seller manifests at all stages of representation to interfere with the marketing, contracting to sell and closing an escrow. This seller is not part of the team.

The seller agent who acquiesces to delayed disclosures loses control over marketing and takes on unacceptable risks from the moment they are employed to represent a seller with questionable behavior.

Editor’s note — Stay tuned for the next episode covering when and how to pay for third-party investigative property reports.