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Confirm Who is Signing Agreements to Avoid Forgery

By Lisa Scoble posted 05-24-2023 11:32 AM


When it comes to real estate, communication is key. But have you thought about making sure you're communicating with all parties involved? Learn from this real estate broker's mistake of not communicating with a silent partner. 


A real estate broker was working with an owner who was anticipating growth in his manufacturing business. To accommodate this growth, the broker listed the owner's light industrial property so the owner could relocate across town and accommodate any business growth. Several months went by before a buyer emerged and submitted an offer through his own broker. Extensive negotiations took place, but eventually the parties agreed to move forward and enter into a contractual agreement. 


The owner of the property had a silent partner. This partner was completely unaware that their property was about to be conveyed. 


The broker allowed the owner to sign both the listing agreement and purchase agreement on behalf of his partner. 


After the sale agreement was executed, the owner finally informed the silent partner that he sold their property and asked the partner to attend closing in order to sign the necessary documents. Since the partner had not been informed of the sale, he refused to close and sign the documents notifying the real estate brokers that the sale would not go forward. 

Once the buyers were notified, they sued the owner and silent partner for specific performance under the contract. In turn, the silent partner sued the listing broker alleging that he had acted negligently by allowing and accepting forged signatures. The owner and listing agent paid a six-figure settlement to the buyer, ultimately settling the case. The settlement was paid to the buyer in order for them to walk away from what was otherwise an invalid contract. Without this resolution, the buyer would have lost a significant amount of money "paid" to an architect to develop plans to retrofit the building's interior.


In this case, it's clear that getting the proper signatures or initials on all documents could have helped protect the real estate broker and his clients. 

Many real estate errors and omissions claims can be avoided by simply exercising care with your clients. This entails knowing who your clients are and properly communicating to each one of them. Document any and all communication from the comparative market values to what they should expect during the listing period and after the property goes under contract. Good communication skills and the implementation of other risk reduction methods into your daily routine will help avoid paying costly settlements and attorney fees.

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The purpose of this article is to inform and insulate real estate professionals from potential monetary claims and professional grievances. The fact patterns are from actual claims against real estate agents. While the author is an experienced claims representative, the opinions expressed herein are general in nature, not fact nor state specific; and therefore, should not be taken as a substitute for legal advice from an attorney licensed in your state. This article was produced in conjunction with AXA XL and is not to be taken as legal advice.