Shut up and sign: "Don't ask, don't tell" comes to real estate.
If you've read my recent articles, you know that my pet peeve these days is borrowers who don't read the fine print in their loan paperwork and then, when it bites them in the backside, complain, "No one told me!".
Not that I'm entirely unsympathetic, and not that I always read the fine print myself. My car lease is almost up, and when I looked at the paperwork recently I discovered (or refreshed my memory) that I'll pay the credit company a $300 "disposition fee" when I turn in that faithful black Mercedes next February. I like to think that I knew this when I signed the lease. I probably did, and just forgot about it over the next four years. But maybe I never knew, because I'm sure I didn't read all the fine print before I signed. Not that I'm complaining about the $300. It was a good lease, and in this case the fine print gave more than it took.
Which brings me to the other day (nice segue!) when a client and I met a pest inspector I often use. This guy gets around, so I asked him how the real estate markets were faring elsewhere in Silicon Valley. Yes, lots of foreclosures in some areas, he said. People who didn't know what they were getting into, he said. I launched into my spiel about reading the fine print. Sure, he said, but no one reads the fine print. You use someone you trust and you do what he says. When I bought my house, he said, my agent told me, Shut up and sign. I'll tell you what'll hurt you.
Now, this vendor is a bright guy. He's been around the block a few times. And "shut up and sign" worked for him. And for many, I think.
But it made me wonder if perhaps we've reached a delicate equilibrium—an uneasy standoff, perhaps even a tacit truce—in the war between consumer rights and industry CYA. And in this case, the tie goes to the industry.
We've long since reached a saturation point: we "overdisclose" to consumers. Not that consumers don't have the right to hear and read everything we throw at them. Not that consumers don't need to hear and read everything we throw at them. It's just that consumers don't want to, and can't, hear and read everything we throw at them. Because what we throw at them is beyond the limit of human endurance.
Want numbers? In our office's listing package are 19 forms containing 39 pages which every seller must sign, plus a few more that not every seller has to sign, plus a few more intended for the seller's disclosure package that buyers will have to sign. Our office's package for buyers has 17 forms with 33 pages. But that doesn't include another one, two or three city and regional disclosure forms. It also doesn't include the seller's disclosure package that the buyer has to plow through and sign or initial, typically anywhere from an inch to several inches thick depending on how obsessive the seller's agent and brokerage is and on whether the home is a condo with homeowners association documents or a single-family home. Our office is about average, according to the 2007 Realtor® Technology Survey, which shows 40 per cent of respondents using 11 to 20 required documents to complete transactions in their markets across the country. Over 15 per cent of respondents use 21 to 40 documents, and well over 5 per cent use 41 to 61+.
I know your eyes glazed over just reading that paragraph. Mine did. Imagine how you'd do reading all those documents. After a hard day at work. And before dinner. Under the considerable stress of buying or selling a home.
Uncle!
So I often find myself in the odd position of insisting, against my clients' will, that I inform them. Because it's the rare consumer who will willingly sit through the piles of disclosures involved in today's real estate transaction. In fact, in nine years it's only happened to me twice, and both times the clients were engineers, as a group known for their obsessive attention to, and odd relish for, detail. Both times it took us four or five intense hours to plow through the paperwork, then write the offer. Most people can only handle an hour or two of this kind of detail before they get restless and their minds begin to wander—and we still have an hour or two to go.
Hence the popularity of "shut up and sign" among both agents and clients.
So we're right back where we started—shut up and sign—except that to get there, consumers spent millions of dollars successfully and unsuccessfully suing brokerages, and brokerages spent millions of dollars crafting disclosures to keep consumers from successfully suing brokerages. Every year we have another form or two for consumers to sign and another page or two attached to an existing form for consumers to review and approve.
That's all good, but only if you believe that markets can be perfected through the successive accretion of legislation and case law, and only if you don't believe in the law of diminishing returns. Because every year it's more and more unlikely that a) the average agent will have the time, inclination and ability to tell consumers everything they're mandated to tell them, and b) the average consumer will have the time, inclination and ability to ask all they need to know. And somewhere, buried under that flood of well-intentioned and modestly useful disclosures, is a nugget or two of information that's genuinely critical. But the consumer stopped listening half an hour ago.
But at least now, when the consumer says, No one told me, the brokerage can point to the fine print that did tell him, and then point to his signature underneath.
Where will it end? It won't. It can't. Both sides—the plaintiffs' attorneys and the brokerages' attorneys—have too much momentum and too much at stake. And while this once may have been all about the consumer, today it seems to have turned into an endless self-perpetuating skirmish, World War I-style trench warfare in which a battalion occasionally breaks through but is always thrown back with heavy loss.
The recent call to shorten and simplify loan paperwork is encouraging but, even if it succeeds, some new lawsuit against a lender will inevitably birth some new lender-generated form and, soon, the borrower and loan agent will be back swimming in fine print and paperwork. In my own industry, it goes without saying that the days of the one-page purchase contract—let along the handshake deal—are long gone, but at this rate there'll come a day when we'll all wax nostalgic about the days when it took just two or three hours to cough up an offer.
Will I ever adopt "shut up and sign"? Maybe when writing an offer means packing like I'm going to Boy Scout camp.