Top 5 Tips For Realtors To Avoid a Lawsuit

Lori, welcome to the show. We are excited to have you on Top 5 to talk to us about how not to get sued. I gave a little bit of background, but tell us what you do kind of in a nutshell when it comes to a day in the life of Lori Levy at Texas Association of Realtors. Oh, goodness gracious. I do a lot of different things, which keeps it exciting. I've been here 16 years, and I came over from the Capitol. I was a staffer for 10 years, and I came over here to be the legislative advocacy attorney. And that was a whole lot of fun. Got to work with the government affairs team and, you know, public policy issues. Got to be a policy wonk. And when I was promoted to general counsel, I always joked that I traded the fun stuff, the front and center stage stuff for the back room stuff.

Employee policies and dealing with all of that. But honestly, it's a lot of fun. I oversee the hotline where we're getting, I think the average is like 65 calls a day from agents across the state. We have our professional standards program under the NAR Code of Ethics, where we receive complaints and arbitration requests. We have our forms library, which Chance has been a part this year. You've helped us with updating our forms. I actually looked at my Facebook memories this morning, and our first meeting was a year ago today. Oh, gosh, yeah. How about that? It does take a long time to do that. So thank you for your commitment to that. But also, I do things like this, giving presentations and legal updates and making sure our members have information.

I help with the articles we write for our Texas Realtor magazine and just making sure our members have access when they need to deal with other members, whether it's complaints or other issues, but also have information and legal updates. Perfect. And we thank you for that. Well, you're welcome. Yeah, it's a big job. And there's trying to say, here's five ways not to get sued is like saying, you know, here's five ways to make a grilled cheese sandwich when there's a million ways to make a grilled cheese sandwich. Well, now I'm just hungry. Yeah, right. Because you're saying, you like to say. It's not about not getting sued. It's about what to do when you do get sued. Right. And anybody can sue for anything, anytime, right?

That's exactly what I was going to say next. We also have an E&O task force that meets each year with our E&O partners. Those are companies that want to have access to our members to sell them insurance. But in order for that access, they give us information. And the claims don't tend to change over the years. Property management's always up there. Anytime you're dealing with other people's money, that kind of thing. But I believe the average number of years an agent had been in the business before they got sued was seven to ten years. So it's not the new agents. Yeah. We're actually doing an event tomorrow about license complaints with the director of enforcement at TREC. And the number of TREC's pretty similarly for license complaints. It's about seven and a half years.

Interesting. And people tend to file complaints with TREC. If it falls under code of ethics, they'll also try to file a complaint here and file a lawsuit. There's so many different avenues that people have to deal with misconduct or what they think is bad behavior. Exactly. So let's use that as our jumping off point, shall we? So our first point in talking about things you can do to minimize your risk, I guess is probably the better way of saying it, is when it comes to competency. Yeah, competency is a big one. We could spend a couple hours talking about it. But I just had a couple of examples. So I wanted to start off with competency. In the past year, we've talked a lot about geographic competency.

TREC has been on that issue to ensure that agents know their area, know their community, aren't just working a deal across the state where they don't know about soil issues or things like that. But competency generally, you know, with the number of people that have been getting their license over the last three to five years, got a lot of new folks in the industry. And broker supervision issues come up. Is the broker actually supervising their agents? Are they helping the new agents? And so competency always remains an issue. But we got a call on the hotline the other day, I think it was about two weeks ago, that I just thought was interesting. It's a residential sales transaction. And the seller provided the seller's disclosure notice. And the buyer refused to sign it.

And so the listing agent thought that the seller could terminate the contract. Buyer must have been in breach because they didn't sign that seller's disclosure notice. And that is absolutely not true. No requirement that a buyer signed that they've received the seller's disclosure notice. And I just thought, where did that come from? Where did this agent get that idea? Did they talk to their broker before they called us? I hope it was an agent. It might have been a broker they called. But just things like that, understanding the forms, the contracts, you know, taking all, obviously all the required courses that you have to take, but also learning on your own. Read past the blank. Yeah. I thought that was an interesting example of incompetency, especially if they're advising their client in that respect.

Right. The other issue that I feel like comes under competency, it's a good example. We're getting a lot of questions about financing, buyers wanting to change financing in the middle of a transaction for some reason for the past four to six weeks. We have hotline meetings every week where we talk about what the issues are so we can kind of gauge what's going on out there. It's been buyers that want to change financing, which is fine. They can do that. But agents don't know how to deal with that situation. They kind of have that freak out moment like, oh, we're halfway through this transaction. What do I do now? So one of the questions. I can tell you what's happening is in this crazy environment, they're putting down that it's a conventional loan when they know damn well it's FHA or VA. Yep.

Just so they can win. And then they come back in. I had one of my agents yesterday call me. Like, hey, we just got an FHA appraisal on a conventional third party finance addendum. What do I do? Exactly. And you, I know, know what it means when you switch to FHA and VA. You've got the amendatory clause, which is paragraph four and third party, which adds some limitations. And not to mention that that appraisal, if it doesn't make value, now stays for 120 days. Yep. That too. A couple of interesting questions we got on that. Was the seller, do they have to allow the buyer to switch financing? And the answer is no. And unless they agree to that in third party, what box is checked, they don't have to allow for that.

But the next question is, oh, so a seller, I can terminate because the buyer is no longer going after the finance and we agreed they would. Buyer is not in breach yet. Right. Only at the point that the buyer can't close would the buyer be in breach. So if they want to go after a different financing and secure that and they can close, you go forward. Yeah. But when it comes to things of competency, you know, my kind of go-to when I'm talking to my agents is, if you don't know what you're doing, just don't do it. Just don't do it. I mean, it sounds really simple. But when you attach dollar signs to it and when you attach pride and or ego to it, it becomes a little bit of a different situation for some people. But, you know, if your broker can't help you, if there's another agent in the office that can help you, you know, I'll be the first to tell you, I'm not an expert in farm and ranch real estate.

But I have experts in my brokerage that do farm and ranch all day, every day. And so if one of my agents calls me, I'm probably going to put them on the phone with that person and let them help them because I trust them and know that they're competent in that. But I'd rather have them call than try to do it themselves and then call once there's a problem. Good. Yeah, exactly. And I think this is a good example of why real world experience, practical experience in the field is important. I think you can take a class and feel like, oh, I can fill out the third party financing addendum. But then what happens when these other things come up that you weren't expecting? How are you going to behave then? That's where the experience and the talking to someone who has that experience can really keep you out of trouble.

And if we've learned anything over the last few years, it's that nothing is nothing's normal anymore. Everything's unpredictable every day, it seems like. I think, you know, at the end of the day, we just have to keep, we have to remember our fiduciary. That's right. I was going to make a joke. People keep talking to me about the crazy market or when they find out what to do, they ask about the crazy market. And we need to just stop using that term. It's just the market. Yeah. The crazy is applied. Awesome. All right. Our number two bullet point here is, and I know that this has been a topic of conversation recently, especially at the Real Estate Commission, is wholesaling. Wholesaling. A lot of people might not even know what that is.

That's where I wanted to start with. What is a legal definition or what is your definition of what a wholesaler is or is not? I'm glad you rephrased that because I think there's more than one definition out there. But when we talk about it in terms of our real estate practice in Texas, I am a wholesaler. And to me, the term doesn't match what it means. To me, it doesn't have a logical connotation. But I have an interest, meaning I'm a buyer. I have a contract on a property. So I have an interest in that. I don't own it yet. But I'm going to turn around and market that to other buyers. So when I'm offering that, there are actually rules in place right now as far as advertising and disclosure, especially if I'm a licensed agent.

I have to make sure I disclose to other potential buyers. I don't actually own this thing yet. I have the opportunity to purchase it. And that is what I'm offering you, basically to assign my contract to you. That is what wholesaling is. In exchange for some sort of value. For value. Okay, so that's important, Chance, because like I said, there is a rule in place right now for disclosure. If you are the wholesaler, and that's whether you're licensed or not, there are requirements for you to disclose that, what you have to offer to other buyers. But I've always thought there's another issue here, because when you're assigning it or giving that right to someone else, you're probably making some money off of that. That seller, the original seller who entered into that initial contract with you, the wholesaler, where are they in this?

Aren't they wondering how it is you make money off of this contract? And maybe in this market, which we won't call crazy, but where properties are so limited, there is value in that. Maybe that is a true statement. But there's always a but, I did see recently that there was a lawsuit filed out in the Hill Country. It's been moved to a San Antonio court. But the seller, an original seller, I'll call them, has sued their listing broker because of the wholesaling issue. Now, this case is a little bit interesting because there was the seller and the buyer, and then there was a second buyer. And that second buyer was actually a subsidiary of the listing brokerage firm that represented the seller.

So, there's a little bit of potential for fiduciary violations there, perhaps. Now, there was disclosure. This was known before closing. But that seller, they're making that argument of, if there was that much value in this property for you to sell it at that higher amount, why wasn't I receiving that value? Why didn't you tell me I could receive that value? So, that's where I think that wholesaling discussion is going to go, these sellers that are on the front end who are missing a piece of their value. So, if I'm a real estate agent and I'm going to enter into the business of wholesaling, because, you know, everything that HGTV makes look sexy, agents want to get in on that.

You know, if I want to get into that sort of investment property buying world and part of that becomes wholesaling, what are my obligations as a Texas Realtor? And I would assume that those rules probably mirror lots of other states as well, if we have people listening out of state. But if I'm a Texas Realtor, what are my obligations? Well, really, it can be summed up as disclosure. Anytime that you, as a licensed broker or agent, are working on your own behalf, whether it's your property or your spouse's property or a business entity, and I think it's 10% or more if you have that much ownership in it, there's always that disclosure requirement. And then, like I said, there's the additional disclosure requirement in a wholesaling situation when you are advertising property that you do not own, that additional disclosure.

But you have to, and I think this case that I just mentioned is going to highlight this, think about your fiduciary obligations to a client that you represent in a transaction or other obligations of fairness and things like that to customers out there. Anytime that you are dealing in real estate as a licensed agent on your own behalf, you're going to be held to a higher standard. And like I said earlier, there's that court of law that people can go to, there's TREC for filing complaints, and there's also the code of ethics, which holds our members to a higher standard. So there's different avenues that people who feel that they've been harmed by you, different avenues for them to access. And as we kind of bring this one to a close, this bullet point to a close, I will just, for the purposes of disclaimer, say that we're recording this in April of 2022.

And there's a heck of a lot of talk going on around the Texas Real Estate Commission, if you're listening to this and you're a Texas agent. So these rules may change, and you need to make sure that you're aware of them when they do, which is always in an email. So read your emails. That's right. We could have a whole episode on that, couldn't we? On emails? Just reading emails. Well, you know what the E in email stands for, right? Evidence. That's right. But that can be good and bad. I'm waiting for my Lori Levy good facts make for good defense line at some point here. I'll try to fit it in. There we go. Because that's what I always use when I talk about you when we're talking is, listen, if you have a substantial conversation with somebody, you need to follow it up with an email.

That way you have good facts. That's right. I used to say it in the negative, bad facts make for bad case law. But I like how we're turning it into a positive. Good facts. That's right. Keep you out of trouble. Yep. Okay. So our third bullet point here is intermediary. And speaking of good facts, intermediary, document everything. Just document. We are actually doing an article on intermediary in the next magazine. So I guess it'll be the May issue because we're already in April. A very big spread with a flow chart. Because in the flow chart is basically, am I an intermediary or not? Because people don't always know. You might be dealing with a customer who's not a client.

But our brokers tend to get confused on when it rises to the level of intermediary. So we want to remind everybody what intermediary is. And I hope everybody knows it's when you're representing both sides of a transaction. And I feel like the questions may be coming up more. There may be a lot of in-house deals now just because of the swiftness of the market. And so we're getting a lot more questions on the hotline about what intermediary is and how to do it. I always take the opportunity when talking about intermediary to remind people that buyer's representation agreement. I know not everybody uses them. You've got somebody that comes in and wants to go see some properties. You get out there and you're doing it. But that buyer's representation agreement protects you in so many different ways, but especially an intermediary.

Because it's got that initial information that's got to be in there, that notice about the potential for intermediary. Yep. We always talk about by the time you get to the notice of intermediary, that should be the third time people are hearing the word intermediary. That's right. About brokerage services, whatever the representation agreement is, and then. Well, and I was going to mention that notice as well because people get confused. They think they can use that at the beginning when they realize, oh, we're going to be an intermediary. And they get that out. You've got to make sure that should be that third time. IABS form in a representation agreement. And the other thing, and maybe this would be good food for the article, what I run into with people who don't understand intermediary well often is they think that just because someone is unrepresented, that that automatically creates an intermediary situation, which is not the case.

And so that's what I've had to introduce, and this may be good for the article, introduce the representation disclosure document that we have. Right. And have them understand that this person is unrepresented. You're not representing both sides. Have them sign this document that says you only represent the seller, and that's that. Exactly. And guess what? That's already in the article. Oh, well, there you go. That is a huge issue statewide. Because more often than not, that's when I get it. In fact, we just went through, in full candor, we just went through a license complaint because of that very issue. And it ended up getting dismissed, but it was a good teachable moment for our agent so that she would understand in the future that just because somebody is unrepresented doesn't automatically create an intermediary situation.

That's right. It does not. And it doesn't have to. Right. And that's very confused. The other confusing issue I hear about are the appointments and who can be appointed. If you are the broker, you cannot be appointed. You cannot appoint yourself to one side. No. Two agents or two associated, I always use the phrase, associated license holders now, because you might have an associated broker that works with your firm. But as long as you have two licensed individuals, you can make appointments, each of those to a party. Yep. That one always gets people, too. And, you know, to quote our good friend, Avis Lukash, there are a lot of myth understandings about that form. And so having a good explanation is super helpful because people get confused very.

And, you know, we as Realtors tend to overthink shit anyway. We make things more complicated oftentimes than they need to be. And really, it's not that hard. I'm surprised you didn't say that about lawyers. So I thought we were the ones that overthought stuff. No, no, no. Y'all just talk about it more so you have billable hours. It's different. You get two of us in a room, you get three opinions. So there you go. That's right. Number four is understanding the financing and appraisal addendum of forms. Man, if I had a dollar for every question I've gotten on the appraisal addendum over the last three years, I'd have, I wouldn't be rich, but I'd have some dollars. I can't believe how old that form is already.

I would have sworn, you know, COVID messes up your timeline anyway, but I would have sworn it was a year and a half old because we're still dealing with it as if it's a new form as far as understanding it, educating. I will say, since we're just hitting the high points here, we got a lot of articles that we've written on that appraisal addendum and third party. If you go to texasrealestate.com in the search bar, put in appraisal addendum, it will pull them up. I go there when I'm on the phone with somebody asking a question just to make sure I'm saying things right. But we've got a lot of articles we've done on this. And I just can't say it enough that understanding both of those two forms and how they work together are where people are getting into trouble. Our hotline calls are through the roof on this issue, especially with what we talked about earlier.

People, buyers switching financing, buyers wanting to come in with the sweeter offers. So they're using conventional, even though they're going to switch to FHA, something like that. It's creating all sorts of havoc with understanding third party and appraisal addendum. Yep, absolutely it is. And I mean, I don't want to belabor the point here, but I just, I hate that form with all of my soul. Because I think that if we wrote our contracts better, we wouldn't have to worry about that form. But, and the other thing I dislike about it, especially in a market where we're having appraisal issues some of the time, is when you put a lower number than the sales price in there, or you put a price that's not, you know, it's not all the way there because you're just trying to say, okay, as long as it appraises for this.

To me, you're giving the appraiser permission to appraise low. Ah, there you go. Well, and let's remind our folks that are watching this that that appraisal addendum, there's three options on there. And this is going to sound so basic, but it's the number one question we get of, well, it's the number one answer we have to provide. Let me say, options one and two favor the seller. Option three favors the buyer. And guess what? We're not getting a lot of questions about, oh, we checked box three, because that box is not being checked right now. And I doubt number two is being checked a whole lot right now. No, not very often. But one and two favor the seller. The question I get is, despite the fact that it says, for use for conventional loans only, right there underneath the title, the questions I get are, how do I write this for FHA and VA?

It doesn't exist. Cannot. And what if they entered with conventional and added this addendum and then the buyer is switching? It just creates a lot of murkiness that I hope our experienced agents are knowing how to get through and helping the newer and experienced agents get through that. Yeah, yeah. Can we go, I know we were harping on the appraisal addendum form, but can we talk on the financing form for a minute? Because it's also something that I hear a lot of questions about, is the difference between property and personal approval. Oh, yeah. That issue has been around for at least 16 years, because I've been here that long. And we did update that, or Trek did update that language, gosh, 10 years ago, maybe.

And it helped us explain it, but I don't think it helped members understand it. That property approval is very different from buyer approval, and you can have one without the other. The question that we usually get is the buyer, let me say this the right way, the buyer not subjecting themselves to approval. They're willing to, they can get that loan, and they're going to go forward. Sellers think, oh, good, you know, there's not going to be an out here. But then that property doesn't get approved, whether it doesn't meet the appraisal requirement or some other issue, insurability or something. That buyer is still going to have an out under property approval if the lender will not lend for some reason based on that property. Not just the buyer and their requirements to get a loan.

And that does get confused as two separate issues wholly, with different timelines. We get a lot of questions on that when it happens. The other question. It happens. Yeah. The other question we're getting these days are hard money loans and how third party fits in with that. And it just doesn't. Third party financing is when you've got somebody else, a bank, financing that loan that's tied to a mortgage. It's tied to that property. An investor or any other buyer that's coming either with cash or maybe they are getting a loan or something else, but it's not tied to that property. There's not those same protections for that buyer. There's also not the appraisal issues. I do think TREC is looking at that as the appraisal issues for hard money loans or buyers that are bringing cash, cash offers.

But right now, that third party financing addendum would not be of use to a buyer that is bringing cash. And two, I will say to their credit, several of the larger hard money lenders, the ones that are truly doing flip type loans, you know, not the power buyers that we're seeing, like Homeward and Ribbon and those guys. They've already kind of covered all of that in their documents. But the true investment, hard money. To their credit, I have seen more and more of them coming up with some special provisions language, having their attorneys write some special provisions language or write an addendum that kind of explains what's going on here. Well, that's good.

That's helpful. It is, because, you know, they do those drive-by appraisals, and I use appraisal very loosely there because it's not USPAP. You know, it's usually an agent who has access to the MLS that drives by and checks it out to make sure that it'll actually make the after repair value. They use that loosely termed an appraisal, and then they come back three days before closing, and they won't lend on it, or they won't lend as much on it than the buyer wants out, and they don't have it out. Because essentially, it's a cash deal. Right. Yeah. The other issue we see on third party is, I think the use, it's interesting because FHA and VA aren't as popular right now because the buyers don't think they're going to be seen as a viable option for that seller.

So they might be coming in under conventional, but at the same time, we are getting a lot of questions on FHA and VA right now. So I think they are being utilized, and the listing agents are calling us going, well, wait, how do I protect my seller? Because that paragraph four, which is required by federal law, required by FHA and VA, says you can't waive that right. And so the seller is going to feel stuck. And we can't give specific legal advice on the hotline, so that's a hard one to answer. But there's certainly some things agents can do for a seller in that situation where the buyer wants to enter that contract with FHA and VA, just negotiating, ask for more option money. Ask for some kind of commitment from the buyer.

It can't be part of the contract, but come on, have that conversation. The thing, the FHA and VA loan, in either case, you can bring more money to the table. You just can't guarantee it in writing. That's the other question. The buyer can bring more money. And we try, we tried, like, I hired my attorney, and I said, write me some language. And we took it to our underwriters at the lenders that we use to try and come up with something. And universally, we were shot down. Like, there's no way you're getting around that provision, that FHA, VA provision. So, so much for that. So, now it's just a, can you provide proof of funds that they can go over?

Can you write a better contract? Can you minimize contingencies? Can you put down, like you said, more, more option, you know, make non, non-refundable earnest, whatever that looks like. Right. And go from there. Well, and that's where you. Because VA loan is such a good loan. It is. And that right there, everything you just said is why it's so important for brokers to understand that and educate their agents. On the hotline, we're not going to give you that advice. Here's what you can do. We're not there to help you get a transaction done. We're there to answer legal questions. And so, that was, that's how you and I can work together to educate folks. Perfect. All right. Number five. We kind of are lumping a few things in here, but I'm guessing that they're all things that get a lot of calls, that y'all get a lot of calls on.

Because I know there's stuff that I get a lot of calls on. Is this where I lumped in not reading contracts and responding to inquiries and not practice of law? Sorry, I didn't have it in front of me. You know, things don't change. The questions that, you know, when people call the hotline, it's always a different story, but it boils down to the same question. And it's always that they either didn't read or didn't understand. But also, responding to inquiries, I want to talk about that, especially under broker responsibility, which, Chance, I know you've been involved in those discussions. You're leading those discussions. There is a case. It's over now. It's the most interesting case I've seen. And it's Aflalo v. Harris, and you might have heard me talk about it if you've heard my presentations over the last three years.

I won't go into that case. We don't have time today. But the issue was seller's disclosure notice and the seller checked yes to present flood insurance coverage. And on our form, after that, it said, if checked yes, attach Texas Realtors Form 1414. And that wasn't done. And so that was kind of the basis for the buyer trying to get out of the contract, the seller suing for specific performance, and created this six-year legal entanglement that the only winners were the attorneys representing the party. Because the buyer's contention was that it wasn't a complete disclosure, right? Correct. Yeah. But I bring it up here to make the point that I think I read this in all of those materials. At some point, that buyer's agent reached out to the listing agent to say, hey, where's 1414?

And I don't think that call was ever returned or dealt with. And so if there had been a policy, perhaps, or broker supervision or something to say, you know, respond to the inquiries received, that lawsuit might have never, ever gone anywhere. But it's funny that you would bring that up right now, because next Monday, I will be proposing to the commission a new rule that mirrors the two-day, the two business or the two calendar day rule in the broker responsibility code to make that applicable to all license holders in the state. So that is part of our agenda for my group next week is that rule shouldn't just be for brokers.

It should be for anybody with a license. They should have to respond within two days. Yeah. And just think about all the controversies that can be resolved before they ever get started. Yeah. As it turns out, communication usually solves those problems, just like in anything else in life. Maybe not always, but I bet enough that it's worth our time. Right. All right. Let's talk about unauthorized practice of law as part of this, part of this bullet point. And what's the definition? For me, I typically say, tell my agents, when you get into if this, then that language, you are in trouble. If you're just stating fact, if you're just making a statement, and you've been directed to do that in writing, you're okay. But when you start trying to tie a result to an action, then you're in trouble.

And I feel that a lot of our members are confused. They think of unauthorized practice of law as drafting an agreement when it's not just that. It's that if you're having that discussion with your client, the if this, then that discussion that you just talked about, that is also practicing law. If you're interpreting an action, you're telling a client what their legal obligations would be under this language that is not part of the promulgated forms and that you've never seen before, that kind of thing. That's why we don't tend to like language that we don't know where it came from. That's why there are rules around where the language can come from, who can draft it, and how it can be used. Because it puts you all as the agents at risk when you're trying to understand it and explain to your client what that means.

If your principal directs you in writing to put something into the contract, you can. Or if they direct you in writing to strike something from the contract, you can. But it has to be in writing from them. And then you can do it. Outside of that, you really shouldn't be doing anything. That's the easy solution. Just don't write stuff. Just don't do it. Yeah. Have an attorney do it. If it's worth, if it's that big a deal to your client, it's worth them spending a few hundred bucks to have an attorney write something. And I think that folks are, they don't like that answer always. They feel like they have a license. They should be able to help their client. But it's, that is, we're actually in the process. I'm working with the group at Trek to try to better define unauthorized practice of law. So it's not such a slippery slope so that we absolutely understand.

And maybe that'll make it more amenable to tell your clients you really need an attorney to do this. I'll tell you, sometimes it's not even the agent. Sometimes it's the client doesn't like it. They're like, what are you doing for? Right? I hired you to do this stuff. Well, okay. But I'm not an attorney. Yeah. There are limits. Exactly. There really are. So the other example, I'm sorry, but the other example that I put there was escalation clauses. We just, so many of the questions we get are about escalation clauses. Yeah. The one thing I'll say about escalation clauses, and I'll keep it short, is that they're really not a contractual provision. They're an offer provision. Once the other party accepts that offer, you need to know what that number is, not what you're willing to escalate to, because that's a murky number.

And in order for there to be a contract that is respected by a court, the parties have to know what they're agreeing to. So what is that number? And that's what's going to go in the contract that is signed. So it always makes me nervous that you're accepting an offer that includes an escalation clause, and you go to sign the contract with the final sales price in it. And people kind of go, oh, wait, I didn't really want to. I didn't really want to spend that much. And then what happens? You know, you don't really have a deal until it's signed. Yeah. We kind of talk about the same thing with just with multiple offers in general, especially when we're representing a buyer is, you know, you have to go back before you go crazy. And talk about what were our goals when we started this process, and what were we trying to achieve, and are we comfortable making this?

Because a lot of time, and, you know, the analogy I draw is, my wife loves to go to tree pack auctions. And she loves to win things there. Not realizing that when she wins, I have to pay for it, right? And so we get the same sort of mentality, and this auction mentality with multiple offers is pride and ego get involved, and people want to win. Is that the right thing? And a lot of times, after they win, they get that buyer's remorse of, okay, well, this is actually more than we wanted to spend. Well, and I think you were part of this chance when we updated our information for, general information for buyers and sellers about market. I forgot how we said it, that prices fluctuate, market prices fluctuate.

Because in this market, we're afraid that, you know, you as a buyer's agent are telling your client what an appropriate offer would be. And then who knows what's going to happen the next day in the market, the ups and downs of it. And when you're in multiple offer situation, you see those numbers going way over what that property is going to be appraised for. That's right. That's absolutely right. And, you know, the fear would be that in a couple of years, if we start to see a turn down in pricing, or even just a really a leveling so that they're not seeing the same appreciation, that somebody's going to call us and be like, hey, you told me this was a good deal. That's right. At the time, it might have been. So, yeah. That's right. All right. So, that technically wraps up our Top 5. But in true Lori Levy fashion, we have a top six.

So, we're going to add a bonus one and just talk about antitrust because there's a lot of big lawsuits going on. And so, I want to hear Lori's take on what's happening in the world around us. There are a lot of lawsuits going on nationally. We have not seen any knock on wood here in Texas where parties, whether buyers or sellers, are suing MLS's associations and brokerages, some large brokerages, as well as NAR itself. They are a defendant in quite a few suits. Sellers have been upset that they paid the buyer's agent's commission. They didn't feel like that was appropriate or that they had a choice. And so, there are law firms out there that will take these cases and go look for other plaintiffs.

And what they try to do is put what's called a class together. You, as a seller, may have only overpaid, in your mind, $600, $1,000, whatever it is. It's an amount that you're not going to go after because it's not worth your time and money to go after that small amount. But as a class where you have one law firm representing a class of people that's represented by a few plaintiffs to make the decisions, that makes it worth the law firm's time and can cause quite a bit of hardship and expense for defendants in those situations. And a class was just approved this week in one of the lawsuits. I bring this up not to scare people. There's, as we started out in the beginning, you can get sued at any time for anything.

Lawsuits are going to happen. We do have a good business climate and legal landscape here in Texas. But I use these lawsuits, and we call them the antitrust lawsuits because that's what the plaintiffs are claiming, that there's antitrust. The NAR or the MLS rules or the brokerage is creating a situation where there's no competition out there, and that is antitrust. So, I bring this up to remind you of your value in that relationship. You, as the agent, you, as the agent, you need to make sure that you're having those conversations, especially on the front end when you're talking about commission, how you will earn your commission, how you will market a seller's property, the value of the MLS, how bringing the highest and best offers or getting the highest and best offers for that property.

Don't forget to sit down and have those conversations so that your clients understand how value is determined, how we get the best offer in for our sellers, how you earn your commission, why the MLS requires unilateral offers of commissions to buyer's agents. Have those discussions, have those discussions, make sure that you understand all that. You can find a lot of information on this on the NAR website at competition.Realtor. It's just good to be reminded that when you have those conversations up front, just like we said, communication really helps in these situations so that buyers and sellers don't feel that remorse later about whatever it is and feel like they were never told something, they didn't understand something, or you never had a conversation with them.

Have those conversations and guess what else you should do? Document that you had those conversations. That's right. Good facts make for good defense. That's right. Yeah, we've been talking a lot about this and this value. What is the value of the agent? And I'm not going to go into the whole claims and these antitrust lawsuits because I don't want to. Number one, we could be here all day. Number two is, yeah, I think there's something of a chicken and an egg argument there that who's really actually paying that. Because one could argue just as easily that the buyer is the one paying for both of them versus the seller paying for both of them. And so whether or not we make a move towards decoupling that, I believe that agents are going to have to be better at talking about all the things that they do during the course of a transaction and building the value in the work that they provide.

And I don't think that naturally we do a very good job of that and I think there's a number of reasons for that. I think, you know, part of it is just human psychology. We're not big on bragging on ourselves. Part of it is the fact that we don't really sell. We don't teach sales in real estate. We teach transactions. And so we don't have a good grasp on how to communicate that value proposition. And then, you know, I think that there's just an element of, I don't want to say laziness, but it's just easier to post the fun stuff that we do than talk about the stuff that's really hard. Yeah. I mean, the hard stuff is actually where the value lies. And it's there. It just needs to be communicated. Yep.

Absolutely. 100%. So, awesome. Thank you, Lori. Thank you. This was fun. This was a lot of fun and really great information. So, if you're a Texas Realtor and you go to texasrealestate.com, all of the FAQs and the legal hotline are there for you to use anytime. If not, Google it and you'll probably find it anyway because, you know, we're cool at sharing. So, thank you again, Lori. This was amazing. Thank you if you were watching. We appreciate you stopping in and listening to another episode of Top 5. We'll see you next time.