Text of Chapter 12 The Brokerâ€™s Role in the Transfer of Real Estate MN License Rules for...
Chapter 12 The Brokers Role in the Transfer of Real Estate MN License Rules for Brokers
Know Your Terminology Agent vs. Broker. The term agent is based on the legal relationship of agency where a person hires another to act as her agent. A broker is an intermediary that brings together buyers and seller often an agent of either the buyer or the seller. Broker vs. Realtor An agent becomes a Realtor when she becomes a member of the National Association of Realtors. Its a collective trademark, like a union might use. They are subject to a code of ethics.ethics. Listing agent vs. selling agent. Sellers agent vs. buyers agent Dual agency vs. one-party agency Buyer broker vs. seller broker
Types of Listings and Listing Terminology Open listing. Broker only paid if broker activities lead to sale. Could have multiple brokers engaged. Exclusive agency listing. One broker gets listing but seller can find his own buyer. If the seller enlists another broker, then the seller must pay two commissions if the other broker sells the property. Exclusive right to sell or exclusive listing to sell. Broker gets commission even if seller finds a buyer directly. Multiple listing. A service for brokers. Dual agency Ethical Issue: Is it possible for a dual agent to represent both sides? Ethical Issue: Tom is an agent of the Daytons, a couple looking to purchase a home. Tom finds a home that is perfect that is not for sale and approaches the owner Look, you have what they want. You can pretty much get your asking price. It helps me because I am on commission. Is this behavior okay?
Types of Listings and Listing Terminology Subagency. A broker that lists a property on the MLS is the listing broker but if another broker then leads a buyer to the property because of the MLS listing that broker is a subagent of the listing broker. This often causes confusion because both the buyer and seller likely believe the subagent represents the buyer not the seller. Cooperating broker. A special category of subagent that is not by definition loyal to the seller. Net listing. A special method to pay the agent/broker. The commission is anything received above a set amount. Designated Agency. When one agency represents both the buyer and seller by appointing two different agents, one to represent each, and properly disclosing the relationship.
The Listing Agreement Evidence of agreement Oral agreements will not allow for commissions in most states Signature (authentication) Authority to sign as owner, agent, executor, administrator Expiration date Amount of commission When a commission is due and owing Ready, willing, and able buyer No deal, no commission Ethical Issue: Sisson owned a sports bar and contacted Stewart about selling the restaurant. Stewart agreed to do so for a 10% commission. The deal was an oral deal. Sisson eventually sold the bar without Sissons involvement. Does Sisson owe Stewart 10%?
Code of Ethics (long code this is just some highlight) The NATIONAL ASSOCIATION OF REALTORS Code of Ethics: What Does it Mean for Consumers? 6 1. Be honest with all parties in the transaction not just with you, as his or her client, but also with the other real estate practitioner and his or her clients. Promote the interests of your client. For example, if REALTORS represent a buyer with a spotty credit history, they cant be dishonest with sellers about this fact. At the same time, REALTORS can help their buyer clients collect and assemble information, such as credit reports and audited tax returns, to demonstrate that the buyer has addressed the problem and improved their situation. 2. Put your (clients) interests ahead of his or her own, at all times. A REALTOR makes every effort to understand the housing needs of his or her client, thoroughly researches available inventory, and shares all relevant information with the buyer so that he or she can make an informed decision. This service is provided regardless of the compensation available. 3. Disclose all pertinent facts regarding the property and the transaction to both buyer and seller. If a REALTOR believes information provided by a seller is questionable, the REALTOR is obligated to investigate. REALTORS should recommend that buyers consult their own experts, such as home inspectors, to address concerns. For example, if a home seller asks his or her REALTOR to conceal the fact that the roof leaks, the REALTOR cannot comply; if the seller insists, the REALTOR should end the business relationship with that seller. 4. Be truthful in all communications with the public. When REALTORS distribute newsletters, create Web sites, or place advertisements, they must be careful not to represent other real estate professionals work product as their own. If recently sold or listed properties in the community are publicized, it must be clear whether the REALTOR was actually involved in the transaction, or whether that data came from the local multiple listing service or other source. This ensures that the public understands the REALTORs experience and can make an informed decision when choosing real estate representation. http://www.realtor.org/realtororg.nsf/pages/codeofethics-consumerquestions
Broker Duties Fiduciary to principal Duty of loyalty Duty of disclosure Duty of competence Duty of care Duties (some statutory) on earnest money
Disclosure Issues for Brokers Misrepresentation Intentional misrepresentation Fraud Nondisclosure Sales puffing Safety standards Statutory duties of disclosure and nondisclosure End-of-Chapter Q: 1, p. 317: Misrepresentation of length of time home has been on the market.
A Checklist for Brokers on Disclosure 1. Ask about the property repair record. 2. Ask about the utilities. 3. Ask about the condition of appliances, roof, walls, and basement. 4. Include pertinent information about physical condition in the listing agreement. 5. Make an independent investigation of the property, carefully looking for recent cover- ups, redecorating, and hidden defects. (continued on next slide)
A Checklist for Brokers on Disclosure 6. Consider a warranty policy for the home. 7. Consider having a professional home inspection. 8. Make no statement that is not based on your firsthand information or knowledge. 9. Have available a list of addresses and phone numbers for municipal, state, and country offices, so that the prospective buyer may make independent checks on information. (continued on next slide)
Likens v. Pricketts Properties (#X) 943 (NE 2 nd 816 Ind App 2011) Agent of Buyer Also Agent of Seller? Likens Listed Home Through an Agent. Likens hired Leiter to seller their home. Buyer Had Separate Agent Stump/Pricketts Properties. Gredys hired Jack Stump to help them buy a property. Buyers Agent Stump Works Directly with Sellers. Stump contacted the sellers directly and told them I know I work differently from other realtors I try to satisfy both sides and keep the experience of buying and selling enjoyable. The sellers had no reason to worry this deal was going to close and was a good deal. Purcahse Agreement. The purchase agreement had a clause that correctly defined that the seller had an agent and the buyer had an agent. $10,000 Earnest Money. Buyer provided a bank letter of gurantee for the $10,000 down payment which Stump gave to sellers. The letter turned out to be a forgery created by the buyers. Sale Falls Through. The sale did not happen and the Likens sued the buyers agent, Stump, and his company, Pricketts property. The sellers lost another good deal during this time that the sellers agent was trying to get them to accept. ISSUE: What duty of care does Stump owe the sellers? 11
Ben Farmer Realty, Inc. v. Owens (#3) 649 SE2d 771 (GA App 2007), p. 285 NOT IN BOOK Agreement to run from Sept 26, 2004 through April 15, 2005. Owens directed Farmer to sell it for $479,900 or more and Farmer would get 6% commission. Owens cancelled contract in Oct, 2004 and put the house on the market himself for $725,000. Farmer pulled for sale sign and the lock box. Farmer found a buyer for $479,900 and demanded commission. Was the contract terminated? 12
MN Disclosures Client v. Customer Client: Real estate agent helps negotiate price. Customer: Is shown houses and given help with the mechanics but not price. If a Client you sign one of the following: Contract for Exclusive Right to Represent Buyer or Contract for Nonexclusive Right to Represent Buyer You may also sign: Addendum to Buyers Representation Agreement (if agency is not exclusively for buyers). Business Relationship Disclosure. If the firm has a relationship with title companies, others. Agency Disclosure to Buyer and Seller at Time of Offer to Purchase. A reminder of dual agency. 13
MN Disclosures Model 14
MN Disclosures Listing Agreements 15 Must be in writing Must include a definite expiration date. A description of the real property. The list price and any terms. The amount of compensation or commission A clear statements as to the events that will entitle the broker to compensation. Information regarding an override clause Dual agency disclosure, if applicable. The following: NOTICE: THE COMPENSATION FOR THE PURCHASE, LEASE, RENTAL, OR MANANGEMT OF REAL PROPERTY SHALL BE DTERMINED BTWEEN EACH INDIVUDAL BROKERA ND THE BROKERSS CLIENT. MN Statutes Chapter 82 82.66, Sub 1