Once again, I had a couple of issues come up this week that I see on a regular basis. The first related to the delivery of your AVID, and its impact on the buyer’s cancellation rights. As you know, while the AVID is required by Compass in all transactions, it is not actually required by law. Instead, the only disclosure form that statute requires is the TDS. Despite that fact, most of you do your disclosures on the AVID because it is a good form and results in better disclosure. It reminds you where to look and gives you sufficient space to make the proper disclosure. But, as I said above, it is not required by law.

As a result, in order to satisfy your statutory duties, most of you complete the AVID and then check the box in section III or IV of the TDS that says “See attached Agent Visual Inspection Disclosure (AVID Form).” By checking that box, and attaching the AVID, you are satisfying your statutory obligations. The problem I see, however, is when that box is checked and the TDS is signed, but the AVID has not yet been delivered. There are two important things to remember in this context. First, because the AVID is specifically referenced in and attached to the TDS, it becomes a part of the TDS and must be delivered in order for the TDS requirement to be met. Next, the TDS carries with it a three day right to rescind after delivery. As a result, when the AVID is part of the TDS, its delivery also results in a buyer cancellation right. Recently, we had a transaction where the listing agent’s AVID was delivered separate from the TDS and two weeks later. The question was whether that delivery gave the buyer a new three day cancellation right. And because the “See attached [AVID]” box was checked, the answer was yes and the buyer cancelled the deal. The lesson here is simple: your AVID is part of the TDS and creates a buyer cancellation right. As a result, like the TDS, the AVID must be delivered as early in the transaction as is possible. The last thing the listing agent wants to do is create a cancellation right by holding on to the AVID for too long.

Next, I had a situation where our agent acted perfectly legally, and with a proper understanding of the RPA, yet still had to deal with lawyers and an unpleasant dispute. In that case, we were listing a single family residence that featured a home theater. During escrow, the seller told our listing agent that he wanted to take the chairs in the theater at close of escrow. Our agent reviewed paragraph 8 of the RPA and confirmed that chairs which were not attached to the property (these were not) are not included in the sale. In truth, there is nothing that comes close to including non-attached theater chairs in the deal. In order to be extra safe, however, the agent contacted me and I confirmed her conclusion: the chairs were not included. I went one step further, however, and recommended that she should tell the buyer that the chairs would be taken so they knew what would happen at closing. Of course, that conversation never took place. Instead, the chairs were moved out the day before close of escrow and after the buyer’s final walk through. As you can imagine, the buyer was very upset. They believed that this was all intentional and that the seller and listing agent said nothing about the chairs in order to defraud them. They claimed that we left the chairs until the last minute so they couldn’t hold up closing after the walk through. And, through their lawyer, they demanded that we and the seller buy them new chairs.

As I said above, while legally our client was correct, that sometimes is not enough. As we have discussed in the past, it always in everyone’s best interest to avoid legal disputes, even if we are in the right. Whenever lawyers get involved and point a finger at you, it interferes with your business. You are put on the defensive and feel attacked. Often, it affects your production. So, when possible we want to avoid the fight, even if we are right. In this case, that could have been done with the conversation I recommended. That way, we would have known what the buyer’s position was and could have educated them about the contract before closing. In any case, they would not have been surprised and would not have thought that we were hiding something from them.

So, if your goal is not only to be right, but also to avoid conflict, you need to manage the parties’ expectations. If you do, no one will be surprised and feel that they were taken advantage of. Rather, they will know what is coming and will not be unpleasantly surprised by something at closing. In your business, surprise is a bad thing. So do whatever you can to avoid it because, even if you are right, the fight is not worth it.

As always, please feel free to contact me with any questions you may have. Sam