This may be the calm before the storm.
 
Complaints against real estate professionals last year dropped more than 30% from 2007, according to the Federal Trade Commission.

Its findings are based on data from the Better Business Bureau and other consumer-oriented agencies nationwide.
The N.C. Real Estate Commission also says complaints against agents in the state declined last year. Tom Miller, the commission’s legal counsel, says complaints during the preceding three years were up almost 40%, but they “slacked off” during 2008.

At first glance, the number of complaints against agents seems intertwined with the success of the housing market. In other words, when sales increase, so do complaints against real estate agents.

Miller says the spring season will be a test of this relationship. “It remains to be seen what will happen for the next part of the year, which is usually the busy season for complaints, corresponding, of course, to the busy season for home sales.”

In the current economy, however, it will not be surprising to see complaints and lawsuits increase as home buyers struggle with making mortgage payments and housing sales bottom out.
 
Falling values, rising litigation?

In California, which faced decreasing property values well before North Carolina did, a home buyer made national news in 2008 when she sued her real estate agent for allegedly luring her into buying an overpriced property. The agent fought the lawsuit, drawing on support from many in the industry, and ultimately prevailed.

Late last year, a buyer filed suit in Guilford County, alleging she had been lured into an overpriced home. When she was unable to make the mortgage payments and the bank foreclosed, she filed suit against the listing agent. In the suit, she alleged the seller and listing agent conspired to overprice the home and so she ultimately did not receive what she bargained for.

Such a suit could be a sign of things to come. As more home buyers struggle to make ends meet and to keep their homes, they may find that they paid too much for too little. They may seek recourse against the agents who handled their transaction.

Two key steps to limit liability

Time will tell whether the number of complaints is tied to the success of the national and local housing markets. There is little if nothing agents can do to minimize their liability for past conduct. But there are two important steps they can take to reduce their exposure in future transactions.

First, the mantra “location, location, location” should be changed to “document, document, document.” More than half the lawsuits filed against agents and brokerages could likely have been avoided by simply papering the file.

Real estate agents are obligated to disclose all material facts about a property, which include such things as known structural defects. Many times the existence of these conditions and how to remedy them are discussed between the agent and the client, but the conversation is never confirmed in writing. This creates a “he-said, she-said” battle when the buyer later claims not to have known about such defects or claims the agent was going to ensure they were repaired. Sending a confirming e-mail would take a few minutes and would avoid months of litigation.

Second, agents should trust their gut. Many lawsuits could be avoided if agents had listened to that inner voice that warned them early on in a transaction.

From difficult clients to strange financing arrangements and other things that just do not feel right, agents must be alert to red flags. Many times, it will be OK for an agent to terminate an agency relationship without proceeding. Commissions are nice, particularly in the current climate. But avoiding lawsuits is even better, no matter the state of the economy.

Following these two steps can save agents great time and expense. As for past transactions, while there may indeed be a storm of grievances and complaints brewing, North Carolina generally follows a three-year statute of limitations. It may be another year or two before we know for sure.