Form 17 — an addendum to the contract?

As always, this is not legal advice. If you want legal advice, consult an attorney, not a blog.

Is the Form 17 part of the purchase and sale agreement (PSA)? Should it be listed in the “Addendum” paragraph of the PSA? In a word: NO! (At least if you’re the seller — if you’re the buyer, then YES!)

First, some background: Here in Washington, a seller is required to provide a fairly comprehensive Seller Disclosure Statement to any buyer of real property. Our local MLS provides this to sellers as its “Form 17,” so everyone in the biz refers to this legally required disclosure statement as the Form 17. Pursuant to the statue, the Form 17 “is for disclosure only and is not intended to be part of any written agreement between the buyer and the seller,” i.e., it is not supposed to be part of the PSA. On the first page of a PSA, there is a section in which the various addendums to the PSA should be listed so that there is a clear description of the complete contract and its terms.

In practice, many agents (and unrepresented parties) will list the Form 17 along with the various addendums that are typically included in the PSA (e.g., financing contingency, title contingency, inspection coningency, etc.). If you are a seller, this is a significant mistake. Conversely, if you are a buyer, this provides you with some leverage if the seller fails to disclose or misreprsents a defect in the house.

By listing the Form 17 as an addendum to the contract, the parties incorporate the Form 17 into the contract notwithstanding the statutory language. In that event, if the seller fails to disclose or misrepresents a defect, then the seller has arguably breached the contract. This would give rise to a breach of contract claim against the seller, which is an easier claim to prove than a claim of fraud, the typical claim arising out of a seller’s misrepresentation. Moreover, the PSA contains an attorney’s fees clause. Thus, if the buyer were to prevail on the breach of contract claim, he would also be entitled to an award of his fees and costs incurred (which will very likely exceed the cost to repair the undisclosed defect). Fees and costs typically are not available on a fraud claim (although the case below calls that proposition into doubt, a topic of a future post).

A very recent case helps to illustrate this point. Stieneke v. Russi, decided July 1, involved a seller’s failure to disclose a leaking roof. At trial, the court concluded that the Form 17 was part of the contract, even though the buyers signed it four days after mutual acceptance. The trial court reasoned that a seller should not be able to easily avoid liability for the contents of the Form 17. The court found that there was “an understanding” between the parties that the Form 17 was “part of the deal.” Accordingly, the seller was liable for breach of contract.

On appeal, the appellate court reversed the trial court. The appellate court focused on several issues, including the fact that there was no mention of the Form 17 in the PSA itself. Had the PSA referenced the Form 17 in the “Addendums” section, thus specifically including the Form 17 in the terms of the contract, the appellate court would have had a much more difficult time concluding that the Form 17 was not part of the contract.

So, if you’re a seller and you receive an offer showing the Form 17 as an addendum, prudence would dictate that you strike that term and present the counteroffer back to the buyer. There is no reason to include the Form 17 in the contract, and indeed the legislature did not intend for it to be part of the contract as indicated by the statutory language. On the other hand, if you’re a buyer, go ahead and list the Form 17. Why not? It is common practice among agents and there is a good chance the seller will accept this term. In that event, you will have some additional protection to insure that the contents of the Form 17 really do reflect the actual knowledge of the seller. If the Form 17 does not reflect the seller’s actual knowledge, then you will have a good claim against the seller for the costs you incur as a result.

[Footnote: the damages in the Stieneke case, the cost to repair the leaking roof, was $72k, but the attorney’s fees and costs were $175k. Clearly, as a buyer it is really, really good to preserve any ability to recover your fees and costs in the event you have a claim against the seller. In a future post, I’ll discuss other interesting aspects of this case, including the basis for this award of fees even though there was no breach of contract claim.]

144 thoughts on “Form 17 — an addendum to the contract?

  1. I haven’t read that case yet, but I assume it was on the old contracts that didn’t have provisions for whether the seller would be liable for form 17 errors. When I read that case I’ll have to see whether having the choice actually protects the seller better.

    I did see a different case where the court didn’t apply the “Bull” case on septic because the argument wasn’t raised below.

  2. Okay, I read it, and the trial court was really stretching to find Form 17 a part of the contract. Stretching is putting it politely. Quite frainkly I’m not sure the appellate court would have come out the other way if it had been referenced.

    Also, I’m totally missing the basis for holding the agents part of the suit. I didn’t see any indication that they had known of the prior condition of the roof. Did I miss something?

    Finally, it’s interesting that the conditions developed after pressure washing the roof. I assume this was a flat roof, but I once saw some workers pressure washing a shingle roof from below, so that they were blowing the shingles up as they went. Undoubtedly they damaged the roof, so it’s possible that the plaintiffs in this case caused their own damage (not that it would excuse the false disclosure of prior roof problems).

  3. Question: If it’s a “Court of Equity”, aren’t they permitted to stretch a legal point to come to a fair resolution? I don’t really know the difference between a court of equity and some other court…just heard that on People’s Court and maybe Judge Judy too. I’m an avid fan of both, though Judge Judy is my favorite.

  4. Craig, like another commenter here, I’m curious of the change now that the MLS contracts have the section 9 regarding the issue of if a Buyer will or will not have remedy for negligent errors, inaccuracies or omissions in Form 17. By having that element included in our now standard contract language, regardless of whether the Form 17 is noted as an addendum or not, doesn’t it bring the form into play regardless? Your thoughts?

  5. Reba – The new PSA form does not address the issue I raise above. By including the Form 17 in the contract, the seller may be liable for breach of contract. That is a distinctly different claim than negligent misrepresentation. So, assuming the Form 17 is made part of the contract by the parties, a buyer may waive a claim of negligent misrepresentation by checking the corresponding box in Section 9 but would still have a breach of contract claim.

    Ardell – “court of equity” vs. “court of law” is a distinction that arose in Jolly Olde England. Courts of law were bound by the law and often rendered decisions that were consistent with the law but unfair. Courts of equity developed to provide a fair result. The web has a lot of relevant information that does a much better (and probably more accurate) job of explaining the difference. Here in WA, a superior court can hear actions at law and in equity. That said, if there is no claim for equitable relief and the case does not involve recognized principles of equity, technically a court should not “stretch a point” for a fair result. Of course, that in fact happens all the time, as judges generally are concerned about fairness as well as the law. As for Judge Judy – no comment.

    Kary – the trial court did find the agent and broker liable for negligence and breach of fiduciary duty. However, neither the agent nor the broker was a party to the appeal. Accordingly the appellate court did not address the basis for that liability.

    Finally, Kary, I agree that the trial court really stretched to find the Form 17 part of the contract. However, I disagree that even specific reference to the Form 17 in the PSA would have led to the same result. First, if the Form 17 was incorporated into the contract by reference as an “addendum,” then it would fall within the terms of the integration clause, particularly if both parties have signed it at the time of mutual acceptance (which is pretty common, right?). There would be no need to argue “modification” as it would be part of the original contract.

    While the terms of the Form 17 itself would still indicate that it was not part of the contract, the intentional inclusion of it in the contract by the parties would presumably be given more weight than that boilerplate language. As you know, “intent of the parties” is the touchstone for a court in giving effect to contractual terms. How could you argue that the parties did not intend to include the Form 17 in the contract — regardless of the boilderplate language — if it is specifically listed by the parties as an addendum?

    We can certainly agree to disagree on the issue, but that only begs the question: as a seller, what benefit do you gain by including the Form 17 as an addendum? None that I can tell. So regardless of your opinion on the issue, why do it?

  6. Reba – negligent misrepresentation and breach of contract are two distinctly different claims. So, Section 9 is irrelevant to a potential breach of contract claim based on the Form 17’s inclusion in the contract. In fact, a negligent misrepresentation claim probably would not give rise to a claim for attorney fees, whereas a breach of contract claim would (given the attorney’s fees clause in the contract). In that sense, listing the Form 17 as part of the contract is even worse for the seller than preserving the buyer’s right to claim negligent misrepresentation.

  7. Ardell — courts of equity and courts of law arose in Jolly Olde England. There was a concern that the rigid application of the law led to an unfair result, so courts of equity were created where the court was governed by fairness, not the law. There is lots of info on the internetinternet about this distinction.

    Here in WA, the distinction is still recognized, although a superior court can hear and decide both types of claims. If there is no equitable claim and no applicable recognized equitable principles, theoretically the court is bound by the law. In those situations, Ardell, a court is more likely to “stretch a point” in order to “do justice.” Sort of an unofficial version of equity — and one that may get reversed on appeal, as an appellate court is less involved and therefore less likely to be swayed by the needs of the parties.

    As for Judge Judy – no comment.

  8. Ardell – courts of equity and courts of law developed in Jolly Olde England. Courts of law would rigidly apply the law, sometimes leading to an unfair result. So, courts of equity developed to insure that the litigants could get a fair result. Google “court of equity” for more info (I tried to include links but my comments would not post — this is my third attempt!).

    Here in the US, the distinction is still recognized. However, courts — such as the superior courts here in WA — typically can hear either type of claim and can apply both legal and equitable principles. That said, if there is no equitable claim and no recognized and applicable equitable principle, a court is supposed to simply apply the law regardless of the result. In those cases, a trial court is much more likely to “stretch the point” in order to get a fair result. Of course, that type of result is susceptible to reversal on appeal, as appellate courts are removed from the parties and thus less swayed by an unfair result.

    As for Judge Judy – no comment.

  9. Kary — I agree that the trial court “stretched the point” (see my comment 8). However, I disagree that, even if the PSA referenced the Form 17, the result would have been the same. As you know, the touchstone for contract interpretation is the intent of the parties. If the parties specifically referenced the Form 17 as an addendum, and presumably signed the Form 17 prior to or at mutual acceptance (which is common when the Form 17 is listed as an addendum), how could you argue that the parties did not intend to include the Form 17? Yes, the boilerplate language indicates otherwise, but I’m pretty confident that a court would disregard that biolerplate language if the parties also intended to do so. We’ll have to wait for another case that squarely addresses the issue (this one does not) in order to resolve the argument.

    But even recognizing the merits of your position (even specific inclusion of the Form 17 in the contract by the parties would not actually incorporate the Form 17 into the contract) — why do it? What benefit is there to the seller? None that I can see. So why take the risk? There is no need to so do.

    Finally, as for the agent and broker, they were found liable by the trial court. However, you may not have noticed that they were not parties to the appeal. Accordingly, the appellate court had no reason to delve into the basis for that liability.

  10. Reba — that’s an interesting point. If the Form 17 is incorporated by the parties into the PSA, the lender has every right to a copy of it. In fact, if the parties so incorporate the Form 17 and then fail to provide the lender with a copy, arguably the buyer has breached an obligation to provide a full and complete copy of the contract. Of course, on the other hand, if it is listed on page 1 of the PSA but is not provided, the lender had knowledge of the contractual term but failed to request it. So I’m not sure about liability.

  11. As a matter of practice, our brokers and attorneys have always maintained form 17 is outside the contract and not to be included in addendums.

    I’m curious, Craig stated many agents by practice include the form 17 on the addendum line. Who’s seeing this?

  12. I reread that Greg, as it seemed to me that Craig was saying it would be a good practice for buyer’s agents to include the Form 17 as added protection for the buyer.

  13. Greg, I’ve never seen an agent put form 17 into the PSA. Now I’ll strike it out! Thanks Craig :-).

  14. I guess I was just too focused on this sentence,

    “In practice, many agents (and unrepresented parties) will list the Form 17 along with the various addendum’s that are typically included in the PSA ”

    At any rate, one wonders how NWMLS and big broker attorneys will interpret the decision.

    One of the most fascinating aspect of this business is watching 3 high powered RE attorneys look at a statute or court decision. I’ve seen them look at the same thing argue it 3 different ways…..passionately!

    Thanks, Craig, for your post. I’ts good to know what the courts are doing.

  15. Craig, but in that case the Form 17 wasn’t prepared at the time of the contract, and was only done four days later. So you’d have to get past the boilerplate and somehow deem it an amendment.

    But I think your main point is good. If a buyer’s agent ever includes Form 17 as an addendum, strike it out. I don’t think anyone can really argue with that.

    Finally, getting back to the agents, the only fact I saw that could have made them liable (I hadn’t noticed they didn’t appeal) is they read the form to the seller in having it filled out. Very bad practice for it opens you up to claims you read it wrong, read it differently or didn’t put down the answer they stated. Give them the form and review it afterward for obvious errors would be better. I guess that get’s back though to why wouldn’t they appeal? Based on the fact that they didn’t, maybe their mistake was deeper than that.

  16. Oh, one more thing. I just checked and Form 17 isn’t in the pull downs if you fill out the purchase and sale forms electronically. One other reason to not fill in contracts by hand!

  17. BTW Craig, thanks for pointing this out. I sent an email to all the agents in our branch letting them know about this topic (and giving you credit–but I forgot to paste the link I’d copied into my clipboard).

    Anyway, I think this is an important topic, and since I wait for the advance sheets to come out, it’s something I wouldn’t have known about for several weeks.

  18. Craig wrote: “Reba – negligent misrepresentation and breach of contract are two distinctly different claims. So, Section 9 is irrelevant to a potential breach of contract claim based on the Form 17’s inclusion in the contract.”

    I’d agree with that. When I mentioned the new forms it was in the context of wondering if anything in the new forms would provide protection under the language of the case. I don’t see any such protection.

    However, I do differ a little from Craig in that I don’t see the new forms clearly being a right in tort. They are contractual authority to sue in tort, for a tort claim that doesn’t exist. IMHO the forms would make more sense if they just said the seller waives any defense under the economic loss rule if the liability box is checked yes. As it is it’s sort of a mess. I could see a court interpreting it as a tort right, a contract right or no right at all.

  19. For the record, many of the contracts we see in our office — both as part of a transaction and in addressing a subsequent dispute — do include the Form 17 as an addendum to the contract. It’s referenced probably in one of every four contracts.

  20. Craig, that’s interesting. I just looked through about 8 offers that have come into us recently, and only one was handwritten, and none of them included it.

    Since the computer generated ones couldn’t include it, can I assume a lot of your transactions involve offers not written by agents? I don’t think even 25% of agents hand-write forms (but surprisingly, some very competent agents seemingly do).

  21. Kary – yes, we see a lot of handwritten offers, but typically they are written by agents. That said, the “1 in 4” statistic was just off the top of my head with no actual data to support it (I didn’t — and won’t — review files). Perhaps its less. The point is we see it, at least occassionally.

  22. Interesting. I find most offers are computer generated.

    I really hate handwritten documents. We even use the counteroffer form to avoid having any significant handwritten material (you can’t avoid it entirely). The last thing you want is a dispute over a contract where part of the dispute is over what the contract says!

  23. BTW, I don’t think this has been mentioned directly (if at all) is that a buyer (or buyer’s agent) shouldn’t read this and assume they want Form 17 included. If there’s an attorney fee contract in a contract, and you sue and lose, you could end up owing the seller’s attorney fees. It’s a double-edge sword.

    Kary — Huh? As you note, the potential for an adverse award of attorney fees only exists “if you sue and lose.” Don’t want that risk? Then don’t sue. But to say that you should deny yourself that protection because you MIGHT sue and lose — that does not make any sense. Why is it bad simply to preserve the option of a breach of contract claim, particularly here where only the buyer will have such a claim? (The seller will not have any claim against the buyer based on the Form 17.) Keep the option open — there is no harm in doing so.

    Now, if the buyer has the option, then certainly before filing suit the buyer needs to be aware of the possible adverse attorney fee award. But that is a consideration down the road, not at the time of contract formation.

  25. Craig, what I’m trying to work through is this. Obviously a seller would prefer Form 17 not be included as an addendum. But what about from the buyer side? Should the buyer push to have it included? What’s an agent to do in preparing a purchase and sale?

    You’re right that it’s a decision that really needs to be made AGAIN prior to suit, but what I was trying to get at was how much would a buyer want to push to have it included at all?

  26. Kary — Ah, a different issue entirely. I think that depends on the general tenor of negotiations and how aggressive the buyer wants to be in regards to the contractual terms. I’m not sure there can be any default rule — it really depends on each transaction. The most you could say would be, “include it in the offer.” After that, see what the seller does and respond as the circumstances (and buyer’s attitude) require.

  27. A buyer doesn’t have to be all that “pushy” to stick “Form 17” on a line. If you mix it in there between the 22J and the 35…I bet the listing agent doesn’t blink 90% of the time.

  28. Further compounding it, any listing agent aware of the issue would likely view the inclusion as being somewhat underhanded, unless you explained what you were doing (which would probably give you a better chance of having the court say it was actually included as part of the contract). So if you were dealing with a multiple offer situation you’d hurt your client’s changes of being selected.

    I really don’t think this is what the legislature intended with Form 17. They need to step in and provide for clear rules that can’t be waived or supplemented.

  29. Kary — people should be free to enter into whatever contracts they believe are in their best interests. The legislature has done enough — they required language indicating that it is not a part of the PSA (in two different places, I believe). If people want to include the Form 17 in their contract notwithstanding the legislature’s instructions, they should be free to do so. And if a seller and the listing agent fail to appreciate the significance of specifically including the Form 17 in the contract — well (dare I say it?) — the seller should have consulted an attorney.

  30. “Kary — people (Agents for the Buyer) should be free to enter into whatever contracts they believe are in their (their clients) best interests (without the listing agent viewing that as doing something underhanded)”

    I added the in parenthesis to Craig’s response. Kary…it is not a seller’s market. Market conditions should prevail and WOULD prevail, if agents weren’t so darned seller oriented ALWAYS. It is the Buyer Agents job to represent their client the buyer. It is the listing agent’s job to represent their client, the seller. In a buyer’s market, agents do less under the guise of the offer possibly being rejected if it leans toward the buyer. But lacking multiple offers, and in a slowing market, your stance is swaying to the seller side for apparently no good reason.

    Until all Brokers instruct their agents in TWO formats, one if they represent the seller and another if they represent the buyer…the one way is usually the seller’s way. Think about that. No legislature can tell you how to represent your client well, because one day you represent a buyer and another day you represent a seller. You have to figure that one out for yourself and your Broker has to have TWO procedure manuals…not ONE.

  31. The legislature tried to create language specifying what the liability should be:

    RCW 64.06.050
    Error, inaccuracy, or omission in disclosure statement — Actual knowledge — Liability.

    (1) The seller of residential real property shall not be liable for any error, inaccuracy, or omission in the real property transfer disclosure statement if the seller had no actual knowledge of the error, inaccuracy, or omission. Unless the seller of residential real property has actual knowledge of an error, inaccuracy, or omission in a real property transfer disclosure statement, the seller shall not be liable for such error, inaccuracy, or omission if the disclosure was based on information provided by public agencies, or by other persons providing information within the scope of their professional license or expertise, including, but not limited to, a report or opinion delivered by a land surveyor, title company, title insurance company, structural inspector, pest inspector, licensed engineer, or contractor.

    But the point is more creating some certainty for buyers and sellers. The NWMLS language regarding Form 17 liability is absurd, and now there’s this wrinkle in the case law which may or may not fly in the future if someone tries it. People need more certainty. As for not being able to waive it, this is in essence consumer protection, and non-waiver is provided for all the time–look at the distressed property law.

  32. Ardell, part of my concern is for buyers. As I mentioned, I’m concerned this twist might result in their being liable for the seller’s attorney fees. Also I’m concerned that the way their agent drafts the offer might result in them losing out to another offer, which might be rather significant to them if perhaps they’d looked at 80 houses and this was the first one they found that they liked.

  33. Craig, I looked at something similar to this years ago, but I don’t remember the result. What’s your off the top of the head opinion on this:

    Buyer’s agent includes Form 17 as an addendum specifically to provide for attorney fees. Court rules that despite the attempt, the Form 17 is not part of the contract, and further finds no liability on any other basis. In that instance, would the buyer be liable for attorney fees on the contract, since the buyer sued under the contract and lost?

  34. Huh? It got over turned because of why? The roof cost $72K? Breach of Contract and future discussion? About what? What if the seller appeals, as they should because we all know it says Purchase and Sale Agreement right across the top? What about the Form 17 itself is that a side contract to the agreement? Is there a party of the first part? Let’s talk about it.
    I come here so seldom and found 37 comments about this absolute nutty case that makes absolutely no difference to the Real Estate business what so ever. Sue ’em again, get another ruling from another nutty judge. It can be such a great system of checks and balances, but discussing nutty court behavior can eat up a lot of time.

  35. David, the appellate court decision (unlike the lower court decision) sets precedent. You cannot simply ignore it.

    Represent a seller and don’t try to strike the reference to Form 17–that’s possibly (probably) malpractice. What to do from the buyer’s side is more problematic.

    Ardell made similar comments regarding the distressed property law–how it wasn’t going to affect her. You can’t ignore these things because they do affect you and your clients. Pretending they don’t isn’t a good strategy.

  36. I agree that anybody providing representation to a buyer or seller needs to stay abreast of the law. I’m really not sure what point david is trying to make…

    Kary, as for your “concerns” about the buyer — neither concern makes any sense at all. You worry about buyer’s liability for attorney fees, but that presupposes that that the buyer filed suit. So to protect the buyer, you think the buyer should be denied the ability to sue at all? By that logic, then every contract should not include an attorney’s fees provision, as somebody might sue and lose and therefore be liable for fees. You’re putting the cart WAY before the horse. Give the buyer the option of a breach of contract claim — there is no harm there (from the buyer’s perspective, obviously). Then, if the buyer believes that seller did breach the contract, at THAT POINT IN TIME the buyer needs to consider the possibility of an adverse award of fees. But until the buyer files suit, there IS NO CHANCE OF ATTORNEY FEES.

    As for your “offer less attractive” argument — like Ardell said, it’s a buyer’s market. Buyers can and should use that fact to their advantage. At the very least, you should discuss the issue with your buyer and let him/her make the decision.

    Finally, apologies to all for my several repetitive comments. They did not appear to be posting, so I kept redoing them — DOH!

  37. Kary — yes, if the buyer (or any party to a contract that included an attorney’s fees clause) sued and lost, then buyer would be liable for attorney fees.

  38. What I’m trying to get at is that the contract should be written to favor the buyer, but it’s impossible to know what will favor the buyer. It’s possible that including Form 17 as an addendum will not have any positive effect at all, and only open them up to a claim for attorney fees if they later sue in contract and lose.

    If you look at footnote 4 of the decision, the defendants did not raise RCW 64.06.020 at the trial court level, and the appellate court didn’t consider it. That provides:

    “(3) The seller disclosure statement shall be for disclosure only, and shall not be considered part of any written agreement between the buyer and seller of residential property. The seller disclosure statement shall be only a disclosure made by the seller, and not any real estate licensee involved in the transaction, and shall not be construed as a warranty of any kind by the seller or any real estate licensee involved in the transaction.”

    Also, a good part of this decision was based on the fact that the Form 17 was prepared and signed after the agreement. That’s not necessarily typical.

    What we don’t know from this decision is what the result would be if Form 17 was mentioned as an addendum, it was attached to the offer, and the seller raises 64.06.020 as a defense. If the result would still be it’s not part of the contract, then including Form 17 as an addendum would not have benefited your client at all, and it would possibly be bad for them if they did later sue on contract and lose. On the other hand, perhaps the court would come out the other way, and they’d have a claim for attorney fees, which in this case was more than the damages. Right now you just don’t know whether there is a benefit to mentioning Form 17 as an addendum.

    And Ardell’s buyer’s market argument is nonsense. First, agents need to know what to do in all markets. Second, multiple offers are not that unusual even in this market, especially on nicer houses. So trying to include Form 17 could keep your client from getting the property they really want, even in this market.

    But let’s say you do discuss it with your client. You tell them that you don’t know whether or not it would help in any situation, but they should perhaps consult an attorney. They then go to see an attorney who tells them that the result is not clear. And when do you do this? Prior to even showing them property so that they can make an offer quickly when they do find a property? Repeat for the 2000+ people that buy in King County every month and I just don’t see that the current situation is a good situation for buyers. Buyers would be better off with more certainty.

    Finally, as a side note it’s too bad this wasn’t the case that popped up brining the economic loss rule to everyones’ attention, instead of the Bull decision. If it had I don’t think the NWMLS would have had the knee-jerk reaction they did with the forms.

  39. Kary — good point about that footnote, and I think your analysis is generally correct. There is some uncertainty, although that is commonly the case in the law. At the least, if the Form 17 was signed before or with and specifically included in the contract by the parties, the buyer would have greater leverage to negotiate a resolution to a dispute than if the Form 17 was not included at all. If the buyer decides to proceed with suit on this basis, then there is certainly risk. But at least the buyer has that option. It makes no sense to deny the buyer the option because the buyer MIGHT exercise that option and then MIGHT be liable for fees. It seems to me you should at least consider reserve that option for the buyer.

  40. Of course you understand my comments. We are Real Estate agents and not attorneys. For that matter where were the agents in this, along with the inspector, managing brokers, witnesses for the plaintif and defense? Can we go back and sue them?
    Real Estate must be the most precedent setting litigation in the world. Real Estate law must be a pretty thick book. Are we now going to fight ove who adds what to the addendum line along with who has the right to sue for recourse? Of course we will.
    We can spend months on a Purchase and Sale Agreement. We can also pay an attorney to think up this stuff to negotiate into a Purchase and Sale Agreement.
    We can even think stuff up that should be in the Purchase and Sale in case we go to court and pay attorney fees. There again maybe we should have our attorneys look over all of the clauses to see what precedent setting mishap will be the next liability.

    I did the math twenty eight years ago. It costs me seven thousand dollars to go to small claims court. You can win or lose, it makes no difference how good your case is, or your attorney. Judges decide. We are in business to negotiate. We are paid to negotiate; we’re Real Estate agents. No matter what happened in this case, it’s not over. There is another precedent that will lead to a precedent that will establish a precedent about this precedent.
    Settle, no matter what it costs.

  41. I think we should mention for the benefit of people reading who are not familiar with our local contracts that a “Form 17” is a Seller Disclosure Statement. The post references it, but when agents talk in Form #s, many can feel left out of the discussion.

  42. David, a couple of comments.

    The leaking in the case at issue only started after the roof was pressure washed. Coincidence? And when their roof inspector showed up after the general inspection, they didn’t want to go up because it was raining! The facts in the opinion are very sparse, but if someone were really litigious, I could see a number of other people that could have been brought into this type of mess. When things go bad there are often a lot of potential defendants. I once had a roofer client who was sued over defects to concrete work, the plaintiff’s thought being the roofers walked on the concrete. But the defects in the concrete included the walls, so apparently my client’s employees walked on the walls!

    I’d disagree with your comment that real estate is “the most precedent setting litigation in the world” at least if you mean in annual volume. The rulings do go back hundreds of years, so perhaps total volume. But what I’m trying to get at is in most transactions you have a happy seller and a happy buyer. It’s not an area ripe for litigation, except when someone hides a serious condition. Compare that to the world of attorney litigators, where if a case gets decided (as opposed to settled) you have at least one, and perhaps two unhappy parties. And guess what? Unhappy parties almost never think it’s their fault, they’ll blame the judge or their own attorney, or the other side lying, etc.

    And that’s part of the problem I have with this whole “Form 17/Seller Disclosure Statement” area. It’s all been messed up since the NWMLS went and changed the forms, and this case makes it worse. And I think that might be what’s leading to your (Dave’s) frustrations.

  43. I’m not frustrate about the forms or NWMLS. It’s the idea attorneys offer these scare tactics to get involved in a Real Estate transaction. It’s that simple. Before I even started as a Real Estate agent I was hauled into court as a contractor, many times, by attorneys looking for a quick buck.
    As you pointed out, the pressure washing, or bad inspector, only added more points of litigation. A case can go on and on over nothing as long as attorneys can write letters and generate fees.
    This particular attorney generates these posts sending up these nonsense scenarios to create controversy. Why? What’s the motivation? Should the public hire this guy to review all documents or should he be writing the Purchase and Sale? What if he does? Should the party of the second part then get an attorney to review the documents that have an attorney involved? Of course.
    This is the very basis of being an Agency State. There will always be litigation no matter what, but in my mind these types of posts suggest having an attorney involve some how may make things better for the buyer and seller. This should be a case that demonstrates how much damage attorneys do to the process.

  44. I actually welcome Craig’s piece, because it is a good warning of something to look out for when you represent the seller. The argument never would have occurred to me absent this case coming out (and Craig brought my attention to it earlier than what it would have been otherwise.)

    And I don’t have a problem with attorney review. The problem is that with the law in it’s current state, I don’t think an attorney can really add a lot due to some of the uncertainties I mentioned above.

  45. david — Oh, I get it — LAWYER BASHING! Sweet!! “This particular attorney” generates these posts as a means of encouraging education and discussion about issues relevant to the purchase and sale of residential real estate. In the process, he markets his practice to potential clients and potential referral sources. Should the “public hire this guy to review all documents”? Heck NO! He’d be WAY TOO BUSY!! “The public” needs to hire LOTS of attorneys!

    You see, david, there are many ways to skin a cat, and some ways work better for some people. You may be a sophisticated buyer or seller who does not need the “full service” of a full service agent. So, instead of paying about 3% to an agent, you can hire me for a flat fee of $795. I’ll make sure there is a binding contract in place, I’ll assist with satisfaction of contingencies, I’ll review title and closing docs, and I’ll be a resource throughout the process. Or is that a bad thing simply because I’m an (cue evil music)… ATTORNEY!

    Ultimately, I like your attitude. Like Shakespeare said, you protest just a little too much. People who cannot appreciate the value of attorneys — and who steadfastly maintain that they only makes things worse — are either uneducated (I’m trying to keep it polite here) or are really looking out for their own interests only, or both.

    I’m sure you’ll respond with a rambling retort. The last word on the issue is yours — I have a hunch you have no real interest in any sort of informative conversation and therefore I see no reason to discuss further.

  46. As an attorney, I obviously see their value. But I will say as an agent it’s difficult to get people to go see one (or a tax consultant). People are concerned about the expense, but ignore the costs associated with making the wrong decision, or doing something the wrong way.

  47. Kary said,”I actually welcome Craig’s piece, because it is a good warning of something to look out for when you represent the seller. The argument never would have occurred to me absent this case coming out (and Craig brought my attention to it earlier than what it would have been otherwise.)”


  48. David,

    This post gives all agents a heads up as to whether or not to put the Form 17 as one of the forms notes on page one of the contract. There are pros and cons, and both have been explained well enough for agents to uitilize that information…or not, as they choose.

    You personal bad experiences are clouding your judgement. When you represent other people for a living, using personal experience as a guide is generally not the best way to approach a topic.

  49. P.S. also a buyer or seller reading this is also given the heads up, and can formulate a preference of their own, so they can direct their agents accordingly.

    Your criticisms of Craig’s motives, with regard to this particular post, are unfounded IMNSHO. This is an exceptionally well written and informative post that many will find useful both now and in the future.

  50. It’s not like if Craig hadn’t written this piece, that the attorneys out there wouldn’t learn of the case! Some sellers could be hurt by this without even knowing about the issue. Craig has done some of those people (and their agents) a favor.

  51. Here’s my objection. Craig has now confirmed he works in a discount brokerage capacity. I don’t remember that as being clear before. It was the same with Ardell. My understanding of her business model is that she also works in a discount broker capacity. Maybe charging more or less as the circumstances dictate.
    What set me off was in some post Dustin referred to a company called Blue Roof. I’ve had exchanges with the owner there about his discount brokerage internet based business model.
    I had no bad experiences as an expert witness for Real Estate attorneys. I understand the role.
    A buyer or seller who believes they will be served for
    a flat fee of $795
    should be warned that in my opinion they would be paying way to much for an attorney to do nothing for them.

  52. david,

    What does your objection to what other people may or may not charge for their services have to do with a Form 17?!?!

    Seriously, I don’t know how you are permitted to hate and harass people who charge differently than you for their services. Doesn’t your Broker see these things that you write?

    I am sure that within your own Company there are many different agents who charge differently. Prices are not “fixed” or “discounted from a fixed price”.

    Besides, didn’t you say you rarely represent other people and mostly have a license to buy and sell your own property? Don’t you have a license to primarily not pay real estate commissions on the purchase and sale of your own property? Seems I’ve heard you say that here before.

  53. “It was the same with Ardell…Maybe charging more or less as the circumstances dictate.

    Yes, I charge more or less as the circumstances dictate. You have a problem with that? Must I charge all people the same regardless of their needs?

  54. Ardell, don’t you know your “scripts?” When someone asks you to cut your commission because another agent offered less, you’re supposed to say: “If they’re that loose negotiating their own commission, how good of a job are they going to do negotiating for you?” 😀

    (BTW, the above should be read as if dripping with lots and lots of sarcasm. I don’t charge the same for every situation either. I guess if I got my broker’s license I’d be a discount broker?????)

  55. BTW, we’ve had clients in the past that were buying after selling to their kids. The price was determined. They needed the paperwork done for the sale to the kids. Should we have charged them 3% to do the paperwork? 1%? Or should we have sent them to someone who can do the work a lot cheaper?

  56. Our function is to provide a service for a fee. This is a discount brokerage site. That’s clear to me now. In my opinion that should be clear to any one who reads this site.
    You’re right Ardell my original intention was to handle my own transactions. It’s hard to find a competent Real Estate agent so this was my solution. It didn’t have to do with the fee, it had to do with finding some one who could represent me well.
    The public deserves better, much better representation then they have been getting.

    Telling anyone
    you can hire me for a flat fee of $795. I’ll make sure there is a binding contract in place, I’ll assist with satisfaction of contingencies, I’ll review title and closing docs, and I’ll be a resource throughout the process. Or is that a bad thing simply because I’m an (cue evil music)… ATTORNEY!
    sounds very bad to me.

    Real estate Agency needs to be elevated.

  57. I’d say the level of service for both agents and attorneys needs to be elevated. But that has nothing to do with the price charged. There are attorneys who charge high rates who are idiots. There are agents who charge 3% that are idiots. You cannot determine quality by price. So why are we talking about it?

  58. “This is a discount brokerage site.”

    LOL! David!

    1) It’s not a site…it’s a blog!
    2) It’s not a brokerage site at all!…it’s a group blog.
    3) RainCityGuide is not a brokerage.
    4) The people who write here have no business affiliations with one another.
    5) It’s about people having choices based on their needs. Not everyone needs the same thing. It’s the United States of America where we have many kinds of laundry detergent and people like choices.

    Keep trying, David. If you have to keep putting labels on us in your learning process, that’s OK. It’s a blog. It’s a group blog. It doesn’t have a unified purpose other than to maybe break a few molds.

  59. What on Earth! With everything that’s been going on today, I totally missed David’s comment 60. I see us as a real estate/tech menagerie blog. 🙂

    None of us are connected. We are a collection of professionals from different fields with different backgrounds and opinions. That’s what I enjoy about being a part of RCG!

  60. It’s a business model. The internet could be a one stop shopping experience for Real Estate. A person, in theory, can go to the internet, shop for a home, get a mortgage, have it written up and presented, order title, then closed by a virtual escrow office.
    I left the insurance to a seperate sentence because we are already seeing a lot of that.
    Yes you are a group who could do business as I have described, right now, today, you are all collectively set up to do exactly what I have outlined.
    Claiming that you are something other than a business model isn’t fair.
    With everything that’s going on today I think Real Estate in particular needs more over sight rather than less.
    We are an Agency state. Yes Real Estate agents should be competent. I think Brokerages have a responsibility to over see the agents who do transactions in thier names. I don’t see that happening. Brokers send agents to training courses.
    We are at a point where attorneys need to be involved because agents can’t negotiate an Agreement. That should be the warning sign of how bad it’s gotten.

  61. David, re. 64

    “It’s a business model.”
    No, it’s a blog and you are a commenter.

    “A person, in theory, can go to the Internet, shop for a home, get a mortgage, have it written up and presented, order title, then closed by a virtual escrow office.”

    This could be done in theory for years now. There are some who like to see real estate reduced to a simple transaction, however, it will never be. The fact is, it does get more complicated every year.

    “Claiming that you are something other than a business model isn’t fair.”

    I’ll claim it for them. I am just a commenter and I can assure you that this is a blog.

    “We are an Agency state. Yes Real Estate agents should be competent. I think Brokerages have a responsibility to over see the agents who do transactions in their names. I don’t see that happening. Brokers send agents to training courses.”

    I’m sorry you’re not seeing broker oversight. Frankly, I am. We’ve spent the entire spring in mandatory classes and seminars dissecting the recent changes. In addition we’ve spent considerable weekly meeting time on the changes. Our broker let it be known that any agent not taking a distressed homeowner class would not be able to write a deal in his company. Granted some companies lack oversight, however NWMLS fines and DOL are making it harder and harder for them. And by the way, exactly what is wrong with a good class or a training course? Can I ask you if you’ve ever taken a CRS class or any other quality class recently?

    “We are at a point where attorneys need to be involved because agents can’t negotiate an Agreement.”

    I do not see it this way at all. Yes, there have been changes, however agents who keep up with the changes are fine. Those who don’t, practice at their peril. It’s always been that way.

  62. David,

    6 of the 14 authors here are agents from different companies. It’s NOT a business model and it’s NOT a “group” effort to BE something. We are individual authors on a Group Blog, and we do not consult with one another with regard to what we may or may not write about. And none of the agents have any ownership of the site. Dustin owns it. He’s not even in the real estate industry, per se.

    If we are about anything collectively, we are about being honest and transparent as much as possible. Each of us has a different truth 🙂 We have few “rules”. No blatant self promotion, for authors or commenters. No attacking people vs. ideas.

    I guess you can hate anyone who may appear to charge less than you do (no one really knows for sure), but that just makes you look bad. Using the word “discounter” is a put down. At least recognize that. If everyone started charging 2% more, you would be “a discounter” by comparison. The word “discounter” is used to suggest that someone is or some Company is somehow lesser.

    We all know that every Company comes with it’s own greater and lesser in the mix of many agents, regardless of amount charged. The fallacy is that all who charge more are worth more, and all who charge less are worth less. The reality is that each of us can be worth more or less on any given day, depending on the circumstances at hand, and the particular needs of each person.

    “We are an Agency State” ONLY if the purchaser of the service agrees. We are by default an Agency State EXCEPT where the parties agree in writing to be something else.

    People want more choices. They don’t want the State to regulate to the degree that it decreases their choices, and increases their cost.

    I love our State Laws as they give people the highest level as the default, lacking another agreement between the parties. But please don’t suggest that our State does not permit the free will of its residents to change that to whatever they want. Even God doesn’t do that.

  63. david — I am not a discount brokerage. I am an attorney.
    Everyone else — I suggest you are giving mr. losh a little too much credit. He strikes me as the type to disagree simply for the sake of disagreeing — he’s not overly concerned with the merits of the argument or responding to the points made by other participants in the conversation (as I indicated in #49).

  64. Kary — we generally use the NWMLS forms as there is usually an agent involved on the other side of the transaction. We have our own “forms” that we can use as well. As for “tweaks” to the forms, we generally draft those on an as-needed basis depending on the circumstances.

  65. Craig, you fool! Don’t you know that if you used non-standard forms on an agent they’d have to send their client to an attorney, and you could further promote the wasteful spending of money on attorneys? 😉 😀

    Seriously, thanks for the answer. On the tweak thing I was just wondering if you saw some basic deficiencies of the NWMLS forms.

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