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Brokers disagree over whether standard forms are fair to homebuyers A CONTRACT DISPUTE


"Buyer, at buyer's expense, . . . ."

If you're buying or selling a house, you'll find that phrase in several places of the standard contracts and addenda used by most real estate agents the Baltimore area. The phrase usually suggests it's customary for the buyer to arrange and pay for a handful of inspections -- for example, for termites, a contaminated well or radon -- before a real estate deal goes through.

But some real estate agents, especially those who represent buyers, say such contracts are unfair to buyers. Preprinted wording makes it difficult to negotiate items that should be open to negotiation, they say. And nearly everything is negotiable.

"If I'm a buyer, it's inappropriate for me as the buyer to have to spend my money to prove what you as the seller say to me is says William E. Lamb Jr., who operates a buyers' brokerage called Buyers 1st in Annapolis. "If the negotiation breaks down as a result of your unwillingness to fix your well, I can be out $600 or $700, and you can walk away from the contract. And that's wrong, from a buyer's point of view."

Mr. Lamb has asked the Maryland Association of Realtors and the Greater Baltimore Board of Realtors to reword standard contracts and make them fair to both buyers and sellers. Many agents favor using a standard contract because they say its familiarity makes the transaction go more smoothly.

Large realty firms often have their own contracts, but other companies rely on the local Realtor board to provide them with sanctioned forms.

Arthur E. Davis III, MAR president and an agent with Chase Fitzgerald & Co. Inc. in Baltimore, said neutralizing the wording in standard contracts is probably a good idea. He said he appointed members to a statewide task force in May to look into the issue.

As to why it hasn't been done before, he said: "I don't think people have stopped to think about it until now."

Mr. Lamb has another view. "We've all been duped," he said.

In most areas of the country, agents traditionally have worked for sellers. But brokers now increasingly represent buyers. "Buyer agency" is now so popular, conventional real estate firms that formerly worked for sellers now have buyers' brokerage divisions, too. Within the last three years, Mr. Lamb said, all major real estate brokers in the Baltimore area have begun offering buyer agency and seller agency services.

"It is inconceivable for me to believe that all those people who are professionals in this field and spend hours of staff time to represent buyers, haven't at least thought about the fact that the standard contract represents the seller," Mr. Lamb said.

Sandra Blaker of Columbia-based Homeowner Consultants Inc. agreed that the standard document favors the seller. But that is as it should be.

"It does favor the seller but it is supposed to because the fiduciary responsibility is to the seller," Ms. Blaker said.

Homeowner Consultants represents both sellers and buyers in real estate transactions. When one of its agents represents a buyer, they change the contract to favor the buyer.

But Mr. Lamb said crossing out offending words in the contract may leave sellers with the subtle impression that buyers are trying to back out of their responsibilities.

"Every time they see 'buyers' crossed out and 'sellers' put in, it raises their hackles," he said. "If you use the [standard] forms at all, you're handicapping the buyer."

In his practice, Mr. Lamb uses the Anne Arundel Board of Realtors' standard contract of sale, which he says is fairer to buyers than the Baltimore board's contract. But he includes an addendum that attempts to equalize the wording in the standard contract.

James P. O'Conor, chairman of the board of O'Conor Piper & Flynn Realtors based in Baltimore, said his firm began offering buyers' brokerage services as well as traditional seller representation about a year ago. It developed its own contract at the same time. Mr. O'Conor said the company now uses the same basic contract for both buyers and sellers.

"I'm very comfortable that our contracts are very well prepared and that we offer both buyers and sellers a very equitable and proper contract," he said. If inequities exist in the standard contract offered by Realtor boards, it's only because "buyers' agency" is new. Kinks will be smoothed out over time, he said.

Fairfax, Va.-based Long & Foster Realtors also offers buyers' brokerage services as well as traditional seller representation. Both buyers' brokers and sellers' agents at the company use contracts of sale prepared by local Realtor boards.

"We believe very strongly in using board contracts because that is the standard of trade and everyone is familiar with it," said Susan Norwitch, Long & Foster's assistant general counsel. "Otherwise you're asking agents to absorb all different types of forms."

She agrees the standard contracts do seem to have some inequities in them. "From the point of view of a buyer agency, certain clauses could be more favorable for the buyer," Ms. Norwitch said. "But for everything you can point out that is slanted toward the seller, you could find other things that are slanted toward the buyer."

Making the sale contingent on whether the buyer can sell existing property first favors the buyer, for instance.

"I do not think it is a real big problem, but I do think, now that buyer agency is getting as common as seller agency, you're seeing the boards looking hard at those contracts," she said.

Jackie Allen, president of the Anne Arundel Board of Realtors and an agent with Prudential Preferred Properties in Annapolis, said her board is trying to create a new standard contract. It may have blanks or boxes to fill in or check off. Ms. Allen said such a neutral listing would be fairer to both parties.

Nancy Hubble, GBBR president and agent with W. H. C. Wilson & Co. Real Estate in Baltimore, said the Baltimore board has no plans to change the wording in its standard contract this year.

"I'm not saying we wouldn't," said Ms. Hubble. "Every year, the board hires attorneys and we prepare the new contract to take care of changes made by the General Assembly. If anyone has any suggestions -- the idea is to send suggestions in -- they are taken by the forms committee, and then the decision is made for the next year.

"The contract is fairly equitable," she said, as long as all parties know about regional conventions -- like who usually pays for the termite inspection, or transfer taxes and stamps. And it is equitable as long as all parties know most things in the contract are negotiable.

"I'm not sure that everyone knows that," she admitted. "But buyers are getting more educated all the time and many of them know the right questions to ask, and we try to do counseling sessions."

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