Brokerage Advertising Flashcards
A blind ad is an ad in which a license holder attempts to promote or solicit real estate activity without disclosing the fact that they are a license holder. Blind ads are illegal in Arizona.
Blind Ads
Blind ads omit language and are therefore misleading. There are also other types of misleading language, one of them being puffing. Puffing or puffery is the making of exaggerated claims (technically opinions) in order to achieve a sale or some other objective.
You’ve probably noticed puffing in advertisements that use adjectives to describe the high quality of something as a way of generating buyer interest. Some examples:
The backyard offers an absolutely breathtaking view.
The swimming pool has the most beautiful stonework.
This is one of the finest homes in the area.
Really, puffing is just another form of marketing.
Puffing
Puffing and Misrepresentation
Puffing is not actually considered misrepresentation and is therefore legal. It’s simply marketing. It presents opinions rather than facts and is usually not considered a legally binding promise.
But brokerages should watch out and make sure they, and their agents, know the difference between puffing and misrepresentation.
Let’s look at some examples.
Puffing: A Home With a View
For example, let’s say your brokerage is advertising a three-bedroom log cabin in Arizona. It’s located near Canyon Lake, across the street from the lakefront properties.
Its front windows have a view of the lush trees surrounding the lakeshore and its back windows face another row of homes.
For the log cabin, this would be in an advertisement utilizing puffing:
This home has an absolutely breathtaking view.
And this would be in an illegal advertisement guilty of misrepresentation:
This lakefront home has an absolutely breathtaking view of the calm, wavy shores of Canyon Lake.
A Home With a View: The Difference
See the difference, Anthony?
Customers can interpret the view to be breathtaking or average, but that depends on the customer.
But, no matter how you look at it, the home does NOT have a view of Canyon Lake (even though it is close to the lake).
Notes
Introducing the FTC
You’ll see me mention the Federal Trade Commission (the FTC) multiple times on the next few screens. That’s because the FTC enforces consumer protection laws on a national level. (The FTC also enforces federal anti-trust laws, as you’ll learn about later).
FTC Privacy Rule
Under this rule, a property manager or a landlord can share a tenant’s information with that tenant’s prospective employer, a police officer, another rental housing owner or manager, or a consumer reporting agency. However, they must have the tenant’s written consent.
EXAMPLE
Alice, a property manager, receives a call from a prospective employer wanting information on Jill, one of her tenants. Because Alice has Jill’s written consent, Alice can share this information.
Telephone Consumer Protection Act (TCPA)
The Telephone Consumer Protection Act (TCPA) regulates telephone solicitations (for our purposes, calls that solicit participation in a real estate transaction) and applies to:
Autodialers
Fax machines
Voice messaging systems
Do Not Call Registry
The most important component of the TCPA is the Do Not Call Registry, which regulates telemarketing calls from commercial organizations (such as brokerages). This registry mandates that if a customer does not want you to call them and registers themselves with the Do Not Call Registry, your brokerage MUST remove their name from the brokerage call list within 31 days. The TCPA also states that:
Brokers must search the Do Not Call Registry to see if a consumer is registered before calling that consumer. They should search and update their call lists every quarter, at least.
Calling hours must be limited to between 8:00 a.m. and 9:00 p.m.
These telemarketing regulations will apply to you and your brokerage, so hold the phone and listen up! 📞
The Federal Trade Commission (FTC) keeps tabs on this registry and enforces it, so they’ll know if you’re adhering to the rules (or not).
Unsolicited Advertisements
The TCPA’s goal is to keep some auditory peace and limit unsolicited advertisements. But what, exactly, qualifies as an unsolicited advertisement?
An unsolicited advertisement is any material advertisement offering a good or service (like a property or property management services) that is put upon another person without either that person’s consent, permission, or invitation.
EXAMPLE
When thinking about unsolicited advertisements, consider Randy. Randy shows up only to parties he is NOT invited to. Randy’s special talent is really boring, self-centered patter, so you can imagine how popular he is.
Randy is like a walking, talking, unsolicited advertisement. You don’t want Randy showing up at your birthday party, and it would be nice if you could put Randy on a Do Not Call (or Come to My Party) Registry.
National Advertising Laws
So, that was national advertising law! Let’s now look at the advertising regulations in Arizona license law.
No Blind Ads
We’ve already gone over this, but it bears repeating: A salesperson or broker acting as an agent cannot advertise property in a manner that implies that no salesperson or broker is taking part in the offer for sale, lease, or exchange.
In practice, this means that a license holder must reveal their license status in an ad.
Designated Broker Supervises All Ads
The designated broker must supervise all advertising, for real estate, cemetery, or membership camping brokerage services.
You already know this from the last level!
Online Advertising Counts
The use of an electronic medium, such as the internet or web site technology, that targets residents of Arizona with the offering of a property interest or real estate brokerage services pertaining to property located in Arizona constitutes the dissemination of advertising.
That’s a wordy summary of the license law, but it simply means what you already know: online advertising is advertising.
Think of it this way: The Arizona Administrative Code rules apply to ALL real estate advertisements.
Licensee as Principal
During your career as a license holder, it may happen that you buy, sell, or lease your own property. What should you say when you write the ad?
Any salesperson or broker advertising their own property for sale, lease, or exchange must disclose their status as a salesperson or broker, and as the property owner, by placing the words “owner/agent” in the advertisement. This includes on “for sale” signs!
EXAMPLE
Frank, a broker, is selling his home. He writes an ad that states, “Home for sale by owner! 3BR, 2B. Contact Frank Smith for more details. Owner/agent.”
By including “owner/agent,” Frank makes it clear that he is a license holder.
No Misrepresentations
A salesperson or broker must ensure that all advertising:
Contains accurate claims and representations, and
Fully states all of the facts.
A salesperson or broker may not misrepresent the facts or create misleading impressions.
Remember, as we talked about previously, misrepresentation (that is, lying) is not okay, while puffing is acceptable.
Advertising Another Broker’s Listing
A licensee who advertises property that is the subject of another person’s real estate employment agreement must display the name of the listing broker in a clear and prominent manner.
“Another person’s real estate employment agreement” simply means that this property is represented by a firm other than the licensee’s.
In practice, this means that if Agent Raquel is advertising a property listed by another broker, she needs to include that broker’s name in the ad.
Acre Rule
A licensee may not use the term “acre,” either alone or modified, unless referring to an area of land representing 43,560 square feet.
This goes back to being accurate and factual in all advertisements. Let’s say you are advertising a lot that is 80,000 square feet. Don’t call it two acres. Instead, do some math:
80,000 sq. ft ÷ 43,560 sq. ft = 1.84 acres
Say that the lot is 1.84 acres.
Get Consent Before Placing Signs
Before placing or erecting a sign stating that a specific property is being offered for sale, lease, rent, or exchange, a salesperson or broker must secure the written consent of the property owner. The sign must be promptly removed upon request of the property owner.
EXAMPLE
Agent Artie just signed a listing agreement with Yolanda. Even though Artie is now representing Yolanda in the sale of her home, she still gets written consent before putting the “For Sale” sign up in Yolanda’s yard.
Arizona Consumer Protection
The Office of the Arizona Attorney General is responsible for protecting the public from consumer fraud.
Consumer fraud, as defined by Arizona law, is any deception, unfair act or practice, false statement, false pretense, false promise, or misrepresentation made by a seller or advertiser of merchandise.
“Merchandise” may include any objects, wares, goods, commodities, intangibles, real estate, or services.
In addition, concealment, suppression, or failure to disclose a material fact may be consumer fraud if it is done with the intent that others rely on such concealment, suppression, or nondisclosure.
The Arizona Attorney General has the authority to bring actions alleging violations of the Consumer Fraud Act and other state and federal consumer protection laws. A private citizen can also bring an action for a violation of the Consumer Fraud Act within one year from the date the claim arises.
Arizona Advertising Regulations
What’s a trade name? What’s a franchise name? And what kind of advertising regulations exist for them? I’ll explain!
Trade Names
A real estate firm often wants to use a trade name in order to conduct business. This is a name other than the name that the firm was originally licensed in.
For instance, say a firm was originally licensed as “Tiffany Hendricks Realty Inc.” The firm, though, decides to conduct business under the trade name “Tiff’s Realty.” (It will need to register the trade name with the ADRE.)
Under Arizona regulations, the firm’s name and the trade name need to be displayed in advertising and on signs.
EXAMPLE
An agent works for Tiff’s Realty, which is the trade name for a firm licensed as Tiffany Hendricks Realty Inc. All ads include both names.
Franchise Names
When it comes to real estate, you probably already know what a franchise is. It’s one of those nationally recognized brokerages, like Keller Williams.
Under Arizona regulations, the name of the umbrella franchise and the name of the individual office need to be displayed in advertising and on signs.
EXAMPLE
An agent works for Cricket Realty, which operates under the franchise Weller Killiams. All ads include both names.
Legend
Besides the above regulations, the broker must include the following legend, “Each (TRADE NAME or FRANCHISE) office is independently owned and operated” in a manner to attract the attention of the public. The broker can also use a similar legend approved by the ADRE.
Trade and Franchise Names
Let’s move on to more Arizona regulations. Our next topic is promotional activities!
A promotion is basically when some kind of goody is offered. For example, when an apartment complex offers a “Look and Lease” promotion, this means that anyone who rents right after looking at the unit will receive some special benefit, like the first month of rent off.
Promotional Activities
Let’s talk more about timeshare advertising! It’s our last topic of the chapter – what a trip it’s been, am I right, Anthony?
Filing Regulations
If the ADRE request it, a timeshare developer must file with them a copy of any promotional and advertising materials used in connection with the sale, lease, or use of timeshare interest. They must do this within 10 days after the request.
If the ADRE makes this request, they must then approve or deny the use of the promotional material within 15 days of receiving it.
If the ADRE denies the use of the material, they must state why, in writing. They may also grant provisional approval if the timeshare developer makes certain corrections.
No Misrepresentation
Any advertising, communication, or sales literature of any kind, including oral statements by salespeople or any other person, may not contain:
Any untrue statement of material fact
Any omission of material fact which would make a statement misleading
Any statement or representation that the timeshare interests are offered without risk, or that loss is impossible.
Any statement, representation, or pictorial presentation of proposed improvements that do not clearly indicate that the improvements are proposed
Any statement, representation, or pictorial presentation of nonexistent scenes that do not clearly indicate the scenes do not exist
Similarly, all promotional and advertising material must clearly indicate that the material is being used to promote the sale, lease, or use of an interest in a timeshare plan.
Consistency with Prior Notices
All promotional and advertising material must be consistent with the notice of intention and the public report previously submitted to the ADRE.
Responsibility Does Not Fall on Publishers
The owner or publisher of a newspaper, magazine, or any other printed publication does not bear responsibility for the content of the ad. This applies as long as they have no knowledge of the intent, design, or purpose of the advertiser.
Telemarketing
We’ve touched on this previously in the course, but certain kinds of telemarketing activity do not require a real estate license.
An employee does not need a real estate license if their primary activities are limited to:
Soliciting initial interest
Scheduling or confirming persons for appointments
Handing out promotional literature or explaining promotional incentives
Broker Supervision of Unlicensed Employees
For unlicensed telemarketing or promotional employees who solicit interest in the actual purchase, lease, or use of timeshare interests, the employee must be employed and supervised by a real estate broker licensed in Arizona. These conditions apply:
Supervision must be performed directly by a broker or a licensed real estate salesperson under the supervision of the broker.
An unlicensed employee must not engage in discussions about any details or benefits of the property transaction being promoted, including dimensions of the property, contract terms, discounts, exchange benefits, price, and financing.
The amount and manner in which an unlicensed employee is individually compensated may not be based, in whole or in part, on the completion of a timeshare transaction.
The ADRE may exempt an out-of-state timeshare developer from the requirement of designated broker supervision if equivalent supervision exists.
Timeshare Advertising and Promotions
Drawings and Contests
We already went over this more generally, but let’s now get more specific.
A timeshare developer may hold a drawing or contest to solicit interest in or promote timeshare interests if:
The timeshare plan has a current public report in effect.
The developer is not the subject of an ongoing investigation by the ADRE, unless the ADRE gives written permission to the developer to hold a drawing or contest.
The developer discloses the extent to which the drawing or contest is limited in time and scope, and the geographic location in which eligible recipients reside.
The developer discloses the estimated odds of winning and all other material terms of the drawing or contest.
No fee is charged to any person who participates in a drawing or contest.
No participant in a drawing or contest, as a condition of participation, is required to attend a timeshare sales presentation or take a site tour.
The developer is in compliance with all applicable federal, state, and local laws involving drawings or contests.
The developer is responsible at all times for the lawful and proper conduct of any drawing or contest.
The developer submits the details of the drawing or contest, including the method of awarding any offered.
EXAMPLE
Elsa, our intrepid timeshare developer, wants to hold a drawing for free cruise tickets in order to promote interest in her latest timeshare properties. She’s submitted that public report and all details of the drawing to the ADRE. She’s not under current investigation by the Department – not our squeaky clean Elsa!
Plus, Elsa has disclosed that the drawing will take place on April 5, 2021 at 2pm at her Phoenix office, and that six people will be chosen. She reveals the odds of winning, states that the drawing is free, and does not require anyone to attend a timeshare presentation in order to participate in the drawing.
Good job, Elsa! The drawing for the cruise tickets follows all correct procedures.
120-Minute Rule
A premium may be given to people who visit timeshare properties or who attend a timeshare presentation.
No one is required to attend any presentation or tour for longer than 120 minutes (that is, two hours) to receive the premium.
The developer must make a complete and clear written disclosure that minimally includes detailed information about:
Any premium offered as an incentive. This includes its estimated retail value and any conditions that must be met or limitations that apply to receive the premium.
The 120-minute limit placed on a site tour or sales presentation to each timeshare prospect before any presentation or tour.
EXAMPLE
As much as Elsa likes to talk, she knows she must limit each timeshare presentation which offers a premium for attendance to less than 120 minutes.
Redemption Certificate
Let’s say a prospect has been offered a certificate to redeem a good or service in exchange for their attendance of a timeshare presentation or tour.
If the good or service is not provided within the stated time frame, the developer needs to provide the goods within 15 days of notification of nonreceipt of the goods. It can also be a substitute of equal or greater value.
If the developer can’t offer the good or services within 15 days, they need to pay the timeshare prospect an amount equal to the promised goods or services.
Timing of Disclosures
Disclosures about terms of promotions must be provided before the prospective purchaser is required to pay any money or attend a sales presentation in connection with the advertising promotion.
Notes on Time Shares
🎵 It’s the end of the chapter as I know it! And I feel fiiiiiiine.🎵
Did you like that R.E.M. riff? Sometimes a robot’s just got to rock out, you know?
Okay! Chapter over. But before you go, let’s review some of the important terms, concepts, and principles you’ve learned along the way.
Key Terms
Here are the key terms you learned in this chapter:
blind ad
an ad in which a license holder attempts to promote or solicit real estate activity without disclosing the fact that they are a license holder; illegal in Arizona
puffing
the making of exaggerated claims (technically opinions) in order to achieve a sale or some other objective
Key Concepts & Principles
Here are the concepts and principles you’ll want to master from this chapter.
No Blind Ads!
This law is important because it makes sure the buyer is not “blind” to the fact that the seller is a licensed professional.
If not for this law, the license holder could conceivably carry out the transaction as a “for sale by owner” sale between two private, unrepresented parties. In reality, it would be a two-party transaction overseen by one license holder (which would, technically, be undisclosed dual agency).
Remember, here’s what a blind ad looks like.
An ad for a home with only an image of the house, a phone number, and the words “buy this home today!”.
Puffing
Puffing is not actually considered misrepresentation and is therefore legal. It’s simply marketing. It presents opinions rather than facts and is usually not considered a legally binding promise.
You’ve probably noticed puffing in advertisements that use adjectives to describe the high quality of something as a way of generating buyer interest. Some examples:
The backyard offers an absolutely breathtaking view.
The swimming pool has the most beautiful stonework.
This is one of the finest homes in the area.
National Advertising Laws
The Telephone Consumer Protection Act (TCPA) regulates telephone solicitations. The most important component of the TCPA is the Do Not Call Registry, which regulates telemarketing calls from commercial organizations (such as brokerages).
The CAN-SPAM Act was created to govern the use of commercial email advertising.
The Junk Fax Prevention Act governs the use of fax advertisements.
Arizona Regulations for Advertising & Promotions
Here are some highlights:
The designated broker supervises all ads.
A licensee advertising their own property must disclose their status as a licensee and as the property owner by placing the words “owner/agent” in the advertisement.
A licensee must ensure that all advertising contains accurate claims and representations, and fully states all of the facts.
A licensee who advertises property that is the subject of another person’s real estate employment agreement must display the name of the listing broker in a clear and prominent manner.
A licensee may not use the term “acre,” either alone or modified, unless referring to an area of land representing 43,560 square feet.
A licensee must get consent before placing signs in a person’s yard.
Arizona license law states that advertisements by salespersons and brokers must, in a “clear and prominent manner,” identify the employing broker’s name (or their “doing business as” name) as contained on the employing broker’s license.
A premium may be given to people who visit timeshare properties or who attend a timeshare presentation. No one is required to attend any presentation or tour for longer than 120 minutes to receive the premium.
Chapter Summary
