I need to Get Flashcards
1
Q
ABC Real Property DisclosureIf a licensee represents a selle
ABC Real Property Disclosure
A
- **If, after disclosure form is received by the buyer, a new defect is discovered, or a defect becomes worse; it must be conveyed to the buyer in writing. At this time, if the seller does not agree to repair or replace the defect, the buyer may**
- Rescind (withdraw/cancel) the contract, or
- Close escrow and accept the defect without further recourse. o Parties not required to fill out form are: Co-owners of property (spouses/relatives). Brand new property constructed by a licensed contractor. A sale facilitator that takes temporary possession or control of the property. o Consequences for failure to provide form to buyer are: Before closing, buyer can cancel sale without penalties. o If a defect without a contractual agreement to fix, is found by or reported to the buyer before closing, the buyer has 4 working days from notification to present a written, notarized letter to the escrow holder or if no escrow; the seller or listing agent: Canceling the sale; or Accepting the property with no further recourse. o Within 1 year after discovery of the defect or 2 years after closing, whichever occurs later; if the seller did not fully disclose information on the form, the buyer is entitled to: 3 times the amount needed to repair or replace the defective part of the property; and Court costs; and Reasonable attorney‟s fees. o The seller is not liable if they relied upon information provided by: An officer or employee of Nevada. Any political entity of this state performing their regular duties. A contractor, engineer, land surveyor, certified inspector, or pesticide applicator licensed in Nevada. o If a seller did not occupy a property for greater than 120 days from the completion of substantial construction, the seller shall: Provide a copy of Nevada law clarifying liability when there is injury or wrongful death caused by deficiency in construction. If requested in writing no later than 5 days after signing the sales agreement; notify the buyer of any soil report within 5 days. The buyer has 20 days to cancel the sales agreement, based on the reports above. Sign a written document that is signed by the buyer, waiving rights to rescind the sales agreement based on reasons in this section.
2
Q
ABC Real Property DisclosureIf a licensee represents a selle
Seller‟s Real Property Disclosure Form information
A
- If put in writing, signed and notarized; a buyer may waive their rights to this form.
- Needs to be filled out by the seller – without the agent‟s help.
- Defect is defined as a condition that materially affects the value of the property.
- The buyer must receive this form at least 10 days before conveyance. o If the disclosure form is not given to the buyer, the buyer may cancel the contract before it closes –without penalties.
- **If, after disclosure form is received by the buyer, a new defect is discovered, or a defect becomes worse; it must be conveyed to the buyer in writing. At this time, if the seller does not agree to repair or replace the defect, the buyer may**
- Rescind (withdraw/cancel) the contract, or
- Close escrow and accept the defect without further recourse. o Parties not required to fill out form are: Co-owners of property (spouses/relatives). Brand new property constructed by a licensed contractor. A sale facilitator that takes temporary possession or control of the property. o Consequences for failure to provide form to buyer are: Before closing, buyer can cancel sale without penalties. o If a defect without a contractual agreement to fix, is found by or reported to the buyer before closing, the buyer has 4 working days from notification to present a written, notarized letter to the escrow holder or if no escrow; the seller or listing agent: Canceling the sale; or Accepting the property with no further recourse. o Within 1 year after discovery of the defect or 2 years after closing, whichever occurs later; if the seller did not fully disclose information on the form, the buyer is entitled to: 3 times the amount needed to repair or replace the defective part of the property; and Court costs; and Reasonable attorney‟s fees. o The seller is not liable if they relied upon information provided by: An officer or employee of Nevada. Any political entity of this state performing their regular duties. A contractor, engineer, land surveyor, certified inspector, or pesticide applicator licensed in Nevada. o If a seller did not occupy a property for greater than 120 days from the completion of substantial construction, the seller shall: Provide a copy of Nevada law clarifying liability when there is injury or wrongful death caused by deficiency in construction. If requested in writing no later than 5 days after signing the sales agreement; notify the buyer of any soil report within 5 days. The buyer has 20 days to cancel the sales agreement, based on the reports above. Sign a written document that is signed by the buyer, waiving rights to rescind the sales agreement based on reasons in this section.
3
Q
Additional disciplinary matters:
A
(1) Injunctions, (2) Brokers attending Commission meetings, and (3) The Education Research and Recovery Fund (ERRF) are the final three disciplinary topics. The Nevada Real Estate Division may request that the court system grant a judgment or order against a person (licensee or non-licensee), if the Division believes that a person has violated or is about to violate any of the provisions of NRS 645. The order or judgment will demand that the person „cease and desist‟ of the illegal activity. (1) What is an Injunction? An Injunction: o Stops a licensee from continuing an illegal violation. o Is issued in the name of the Real Estate Division by district court.(2) BOTH Broker‟s at Commission Disciplinary Hearings or $2,000 fine A licensee‟s present broker of record AND the broker that the licensee was associated with when a legislative violation occurred (if they have changed offices since the infraction) are required to attend any disciplinary hearing before the Commission concerning that licensee. This regulation can cost a broker $2,000 if they choose not to comply. (3) Real Estate Education, Research and Recovery Fund (ERRF) Upon payment of a license fee, either for an original license or a renewal of a license; a licensee will notice an accounting for a charge called Real Estate Education, Research and Recovery Fund (ERRF). This fund is used for payment to parties possessing a judgment issued by the court system and injured by a licensee. It is also slated for use by the Division for licensee education, and real estate studies. Nevada law and regulations dictate very specific rules with regards to its us
4
Q
Brokerage Agreement
What was the Real Estates Comission intent of Brokerage agreement?
A
- The intent of the Real Estate Commission in NAC 645.613 was to require proof a client agreed to sign the brokerage agreement.
- Specifically, the Commissioners did not want only “the clicking of an acceptance box,”28 either on the internet or in an e-mail, to create a binding brokerage agreement
- Completion of the contract’s purpose: The purpose of any brokerage agreement is the employment of a broker by a client to perform real estate related services for compensation.
- Though a brokerage agreement ends, each party may continue to have certain responsibilities stemming from the contract.
- Some of these, such as the licensee’s duty of confidentiality, are statutorily identified as extending past the revocation or termination of the brokerage agreement - in the case of confidentiality, it is one year. NRS 645.254 (2).
- With an oral brokerage agreement, if the contract does not have a termination date it will remain effective for a “reasonable time.”
- All written brokerage agreements must have a set termination date.3
- Each exclusive representation brokerage agreement is required to be in writing and have a definite, specified and complete termination date agreement is required to be in writing and have a definite, specified and complete termination date.
- A brokerage agreement may end upon the occurrence of a specific event. For example, a seller may be attempting to sell a home due to a job transfer
- The listing contract has both a specific termination date and alternatively, a clause that provides the brokerage agreement will terminate 24 hours after the seller gives the broker proof of her transfer date.
- The listing contract has both a specific termination date and alternatively, a clause that provides the brokerage agreement will terminate 24 hours after the seller gives the broker proof of her transfer date.
- An unconditional release is when both the broker and the client mutually agree to terminate the brokerage agreement and end the relationship.
- The termination of the brokerage agreement does not release the broker from certain statutory duties such as confidentiality.
- A client has the right to refuse to work with any specific broker-salesman or salesman; however, as the brokerage agreement is with the broker, the brokerage agreement continues in force.
- When this happens, the broker may transfer the client to another agent or release the client from the brokerage agreement.
- The seller could terminate the brokerage agreement based on the impossibility of performance. The performance need not be totally impossible, only highly impractical.
- Breach: The brokerage agreement may be terminated when either party breaches it.
- Recording a Lis Pendens: The brokerage agreement is a contract for services. The only way to enforce its terms is either through ADR or court action. U
- Unfortunately, some licensees believe they can record a lis pendens to stop the ex-client’s escrow when there is a dispute about compensation or the brokerage agreement.
- As an employment contract, the brokerage agreement is not a claim for title to, or possession of, real property. T
- For example, by “operation of law” a duly executed brokerage agreement may be avoided by a client who is a minor.
- Nevertheless, the broker may still have rights under the original brokerage agreement for the collection of compensation.NRS 148.420 & NRS 148.330.
- The broker has rights under the original brokerage agreement and could sue the estate should it not pay her.
- If the broker-salesperson or salesperson dies, the brokerage agreement continues in place because the brokerage agreement is with the broker. I
- If the broker dies, historically, the brokerage agreement automatically ends; however, by regulation, another licensed broker may act in the deceased’s broker’s place for up to sixty (60) days after the original broker’s death.
- b. After Termination - When the brokerage agreement terminates, the broker must stop representing the client, remove any personal property from the seller’s property (such as signs), account to the client for all funds, keep the client’s confidences, and do nothing to harm the ex-client or interfere with the transaction even if the broker believes he or she is still owed a commission. NRS 645.252 (1)(e), NRS 645.310 (1), NRS 645.254 (2).
- This is a contract clause that gives the broker the right to collect a commission for a set time after the brokerage agreement ends. To collect a commission, the broker must have introduced the property or buyer to the client during the brokerage agreement period. U
- Unless the brokerage agreement allows for the broker to collect if the broker is the procuring cause, upon the end of the broker protection period, the seller may sell the property to a buyer procured by the broker and not owe the broker a commission.
- An open brokerage agreement is where the broker has no exclusive representation of the client – the client may hire any number of other brokers.
- An open brokerage agreement allows the seller to sell the property without owing a commission. The courts favor the client in determining the level of representation. The more “open” the contract, the better for the client.
- Open brokerage agreements may be oral or written. All oral brokerage contracts are considered “open.” All written brokerage agreements are also presumed to be open unless the contract’s terms or title state it is exclusive
- Implied Brokerage Agreements: Though not favored by the courts, under some circumstances, a court will find a broker is owed compensation under an implied brokerage agreement.
- In Morrow v. Barger, (1987),48 the court found an implied brokerage agreement after the written listing ended. Claire Morrow was a broker who had a written open listing with the Bargers to sell their ranch. During the listing period, Morrow showed the property to three potential buyers. When the written brokerage agreement ended, the sellers instructed Morrow to continue marketing the property – which she did. After a while, the sellers stopped communicating with Morrow. Eventually, Morrow learned that the Bargers personally sold the property to all three buyers in a complicated escrow. Morrow sued for her commission and won. The court said Morrow had an implied open listing; therefore, she was entitled to a commission
- b. Specific Terms - The law identifies only four provisions that must be included in an enforceable exclusive brokerage agreement. These are: 1. The agreement must be in writing; 2. It must be signed by both the broker and the client or their authorized representatives; 3. The contract must have a definite termination date; and 4. The agreement may not require the client to notify the broker of the client’s intention to cancel the exclusive features of the brokerage agreement once the agreement is terminated NRS 645.320
- By and large, other than certain requirements for specialized brokerage agreements, all other contract terms are negotiable.
- c. Buyer’s Brokerage Agreements – In a written buyer’s brokerage agreement, all the required terms of the exclusive listing agreement apply. 54 Additionally, though not law, the Real Estate Division has identified various elements that, at a minimum, should be in a buyer’s brokerage agreement. These include: “specified terms, duration, compensation, services agreed upon, and the ability of a client to cancel for non-performance. … Any special services, circumstances and/ or conditions should be spelled out in the agreement.
- d. Missing Elements = No Compensation – If an exclusive brokerage agreement is not in writing or if it is missing a necessary legal provision, the broker will be unable to collect a commission.
- A faulty exclusive brokerage agreement cannot become an open brokerage agreement. Failure to include a fixed termination date makes the agreement voidable by the client and removes the broker’s ability to claim payment under alternative legal theories of compensation.5
- a. By Other Brokers – Once a valid exclusive brokerage agreement is in place, a licensee may not, for personal gain, induce any party to break that contract in order to substitute a new agreement. A licensee who violates this statute may be subject not only to civil action from the harmed broker, but the Real Estate Commission may impose a $10,000 fine and other administrative sanctions. NRS 645.630 (1)(l).
- The brokerage agreement is an employment contract between the client and the broker.
- A seller and buyer cannot, in their purchase agreement or through escrow instructions, attempt to modify the terms of the brokerage agreement without the consent of the broker
- Unless specifically agreed to in the brokerage agreement, a seller cannot refuse to pay a broker because the property was listed at one price but the seller accepted a lower price. A
- A seller may not refuse an offer from a buyer, wait until the brokerage agreement has expired, and then sell the property to that buyer in order to not pay the broker’s commission.
- Most listing agreements have the compensation paid directly by the client. Most buyer brokerage agreements are oral and have the compensation paid by a third party, usually the listing broker.
- With most brokerage agreements, the broker provides the written agreement and often any dispute over contract terms is decided in the client’s favor.
- The client cannot refuse to accept offers above the net price waiting for the brokerage agreement to terminate and then accept a lower offer. I
- Quantum meruit cannot be used to collect compensation when there is a faulty exclusive brokerage agreement.
- To be protected by the commercial claim law, the brokerage agreement must be in writing and state what services the broker will provide and what disposition the client desires: for example, sale, purchase, exchange or lease of the commercial real estate NRS 645.8705.
- Since a brokerage agreement is an employment agreement, it is a contract for services and not a claim on the real property. If the owner breaches the brokerage agreement, the broker’s remedy is a claim upon the owner’s net proceeds - in other words, a claim over the owner’s personal property. The claim is not a claim or lien upon the seller’s real estate and does not attach to the real property.NRS 645.8761
- An agent for the broker may not waive the broker’s claim right even if that agent is otherwise authorized to bind the broker to the brokerage agreement.
- Any waiver of the broker’s right must be done by the broker on or before the date the brokerage agreement is signed.
- Any brokerage agreement that requires a client to provide money up-front for brokerage services qualifies as an advance fee agreement.NRS 645.002 & NRS 645.004. 102. NRS 645
- Though no specific forms are currently required, the Real Estate Commission is authorized to establish forms for advance fee brokerage agreements. It may also require reports and forms for the review and audit of advance fee agreements NRS 645.324
- An advance fee brokerage agreement must be in writing with a detailed description of the broker’s services and a date of performance. The broker must identify the total amount of the advance fee and when payment is due.1NAC 645.675.
- No Guarantee: Additionally, the brokerage agreement cannot imply or guarantee there are tenants or buyers immediately or soon to be available, nor that the property will be purchased, sold, exchanged or leased due to the broker’s services.
- Unlike many contracts, there can be no provision in the brokerage agreement that relieves or exempts the broker from those oral representations or promises.1
- The brokerage agreement may be an Exclusive Right to Sell and provide for the payment of compensation to the broker out of the proceeds of the property’s sale.
- The payment of any commission must be confirmed by the court contingent upon the sale of the property through the broker’s efforts. Even with a brokerage agreement, the court may determine which broker is the procuring cause of the sale and award that broker the commission.1
- When an estate’s personal representative signs the brokerage agreement, the representative has no personal liability to the broker and the estate itself is not liable to the broker unless a sale is made and confirmed by the court.
- Similarly, a court-appointed guardian may enter into a brokerage agreement to sell a ward’s real property. The requirements and commission restrictions are the same as for those properties being sold from probateNRS 159.1385
- Bankruptcy is federal law that can have a profound effect on the sale of real property and any brokerage agreement.
- Considered here are general rules regarding the brokerage agreement when a party files for bankruptcy under Chapter 7 - liquidation or “straight” bankruptcy.
- There are three major instances in which a broker may be confronted with a brokerage agreement subject to the bankruptcy law: 1. When the broker has an existing, valid listing agreement and the seller files for bankruptcy; 2. When the broker’s buyer-client files for bankruptcy; and 3. When the broker is hired by the bankruptcy trustee to sell the bankrupt estate’s real property.
- As such, the bankruptcy trustee or the court (they are not the same) can either accept or reject the brokerage agreement. Even if the trustee accepts the contract, the court may reject it.
- If the trustee and court accept the existing brokerage agreement, the court may modify the compensation.
- If the buyer has not executed a purchase agreement, any brokerage agreement the buyer has may be terminated since the debtor no longer has control over the assets necessary to purchase any property
- considered a “professional” and therefore, compensation under the brokerage agreement must be approved by the bankruptcy court
- By definition, a property manager’s employment agreement is not a brokerage agreement;115 it is a written employment contract between a client and broker in which the broker accepts compensation to manage the client’s propertyNRS 645.0192
- A property management agreement must be in writing - no oral agreements are enforceable. It must include the term of the employment; however, unlike general brokerage agreements that require a specific termination date, a property management agreement may contain an automatic renewal (roll-over) provision.
- If the manufactured home has been converted to real property, any legal brokerage agreement may be used.
- If the manufactured home has not been converted, the broker must make certain disclosures; 123 however, as long as the broker is also selling the underlying real property, any legal brokerage agreement may be used. 1
- A broker’s employment contract with a client is called a brokerage agreement. All brokerage agreements, being contracts, must have the general contract elements. Other than Nevada laws, certain laws, such as the federal Real Estate Settlement Procedures Act and anti-trust laws, affect what the licensee must do or disclose in a real estate transaction.
- Special types of brokerage agreements require specific clauses or wording. Commercial brokerage, advanced fee, probate and guardianship, manufactured housing, and listing with option agreements are all specialized brokerage agreements.
- Property management agreements, though not technically brokerage agreements, are also specialized employment agreements between a client and a broker
- Brokerage agreements may be oral or written. Certain types of brokerage agreements must be in writing. For example, any brokerage agreement that authorized the broker to be the client’s sole broker, called an exclusive agreement, must be in writing. Written contracts may be created with pen and paper, or electronically.
- Exclusive brokerage agreements have several requirements. The agreement must contain a definite termination date; be signed by the broker and client or their authorized representatives; and must not require the client to notify the broker of the termination of the exclusive contract feature. In the brokerage agreement, the broker may limit his or her services; however, at no time may the broker limit the liability for statutorily required duties or services. Under Nevada law, only a broker is allowed to collect compensation. The salesperson or broker-salesperson may not receive or give compensation from or to, any person for real estate services other than the broker with whom he or she is licensed at the time of the transaction. The receipt of all compensation must be disclosed to the parties in the transaction.
- If an unrepresented buyer requests a non-listing broker to draft an offer, the broker may require the buyer to enter into a brokerage agreement. No broker is required to work for free.
- A legally appointed guardian of an incompetent ward may sign a brokerage agreement to sell or to purchase real property from the ward’s estate.40 However, this authority also requires court approval.
- The executor or administrator may sign brokerage agreements50 and sell or purchase real property with court approval.51 A devisee under a will, or an heir to an estate, does not have the right to sell real property still in the deceased’s name.
- The brokers’ authority and contractual rights are found in the brokerage agreements, not the purchase agreement
- A licensee may not disclose the client’s confidential information for one year after the revocation or termination of the brokerage agreement.
- Advertising: If the licensee has a brokerage agreement in place and advertises a property, the advertisement must identify the licensee’s licensed status. This disclosure must be made whether the licensee is acting as an agent or as a principal.61 If the licensee has an ownership interest in the property, the advertisement must disclose “for sale by owner-broker” (owner-licensee, ownersalesperson, etc.) NAC 645.610
- . Since the other party usually does not see the broker’s employment agreement (the brokerage agreement) where both the source and amount of compensation are usually identified, compensation sources are often identified in the parties’ purchase agreement.
5
Q
Agency Disclosure
When the Licensee’s relationship to a party changes.
A
6
Q
Agency Disclosure
When Licensee is acting as agent or principal.
A
7
Q
Agency Disclosure
When the Licensee has an interest in the transaction or the property.
A
8
Q
Agency Disclosure
Licensee has an interest in any escrow business or company.
A
9
Q
Agency Disclosures
Agency Disclosure
Referral to certain settlement services providers.
A
- Affiliated Business Arrangement Disclosure Statement
- Affiliated Business Arrangement (ABA) - RESPA restricts a Licensee/ Broker from receiving a referral fee from a settlement service provider unless the Broker has an ABA with the provider. IF there is an ABA, the Broker must disclose in writing the nature of the ABA relationship, a written estimate of the fees, and a notice that the consumer does not need to utilize the provider.
- Broker/Licensee
- Client/consumer
- When referral is made.
10
Q
Agency Disclosure
Page 2
A
11
Q
Agency Disclosure
Advertising property when Licensee is an owner.
A
- No Mandatory Form
- A Licensee must disclose in advertisement his or her status as a Licensee
and may not use “for sale (lease) by owner” without qualifying wording such as “by Broker/agent owner”. - Licensee
- All persons
- In advertisement.
12
Q
Agency Disclosure
Page 3
A
13
Q
Agency Disclosure
Agency for Clients with conflicting interests.
A
14
Q
Agency Relationship
Agency Relationship
A
- Implied agency is where the licensee acts as the agent of the client with the intention of representation and the client tacitly accepts those services even though there is no expressed (oral or written) brokerage agreement
-
In 2007, the Nevada legislature defined “agency” for real estate licensees as the relationship between a principal and an agent arising out of a brokerage agreement in which the agent is engaged to do certain acts on behalf of the principal in dealings with a third partyNRS 645.0045
- Therefore, to create an agency relationship, there must first be a brokerage agreement.
- A licensee who refers a client to another licensee does not create an agency relationship with the person being referred if the licensee’s only activity was the referral. However, a referring licensee must still be careful not to create in the clients’ minds the perception that the licensee continues to represent them
- Authorization to Negotiate - To forestall implied agency, a licensee is prohibited from negotiating a sale, exchange or lease of real estate with another broker’s client unless that licensee has received written authorization from the other broker for such direct communication. 32 By law, such direct communication does not create an agency relationship between the authorized broker and the other broker’s client. 33
- An agency relationship may end but each party may continue to have certain rights stemming from that relationship. Some of those rights, such as the licensee’s duty of confidentiality, are statutorily identified as extending past the revocation or termination of the brokerage agreement - in the case of confidentiality it is one year
- A client or broker can “fire” the other at any time. The Nevada Supreme Court stated “[a]bsent a contractual provision to the contrary, an independent contractor/principal agency relationship is terminable at any time at the will of the principal or the agent.”
- Disclosures concerning a licensee’s agency status must be made to all parties to the transaction as soon as practicable.74 Nevada requires each licensee to disclose to each client and any unrepresented party the parameters of the licensee’s agency relationship on a state mandated form. 75. NRS 645.252 (3)
- Before an agency relationship is established the broker is required to provide the client with a state mandated form called the “Duties Owed by a Nevada Real Estate Licensee” (Duties Owed)
- The appropriate agency disclosure forms (Duties Owed and Consent to Act, if applicable) must be used in all real estate agency relationships regardless of the type of representation (single, multiple, or assigned) or the type of real estate transaction (purchase, lease or property management).
15
Q
Brokerage Agreement
Brokerage Agreement???
A
- Who Pays – For a valid brokerage agreement, the client does not need to be the one who pays the broker.
- Brokerage Agreements are employment contracts and like other contracts, they have the same formation requirements.
- Brokerage agreements may be oral or written.NRS 645.005
- Nevada has no mandatory brokerage agreement form. Though there is no required form, Nevada’s Attorney General has stated the Real Estate Division is within its authority to adopt regulations governing the content of brokerage agreements
- Oral Contracts: Oral brokerage agreements are legal contracts in which a broker agrees to represent a client with the intention or expectation of compensation and there is no written contract. No oral brokerage agreement may be exclusive. NRS 645.320
- Written Contracts: Though it is legal to have oral brokerage agreements, all exclusive agency brokerage agreements must be in writing. Under Nevada law, written brokerage contracts have certain statutory requirements regarding terms, form, and distribution NRS 645.320.
- 2 To verify compliance with these laws, the Real Estate Division requires each brokerage agreement be kept by the broker for five years from the date of closing or last activity on the tr ansaction.NAC 645.650.
- Intend to be Bound: Before entering into any electronically created brokerage agreement, the licensee should be aware of an issue concerning NRS 719, the statutes regulating electronic contracts, and NAC 645, the administrative code regulating real estate licensees
- The intent of the Real Estate Commission in NAC 645.613 was to require proof a client agreed to sign the brokerage agreement.
- Specifically, the Commissioners did not want only “the clicking of an acceptance box,”28 either on the internet or in an e-mail, to create a binding brokerage agreement
- Completion of the contract’s purpose: The purpose of any brokerage agreement is the employment of a broker by a client to perform real estate related services for compensation.
- Though a brokerage agreement ends, each party may continue to have certain responsibilities stemming from the contract.
- Some of these, such as the licensee’s duty of confidentiality, are statutorily identified as extending past the revocation or termination of the brokerage agreement - in the case of confidentiality, it is one year. NRS 645.254 (2).
- With an oral brokerage agreement, if the contract does not have a termination date it will remain effective for a “reasonable time.”
- All written brokerage agreements must have a set termination date.3
- Each exclusive representation brokerage agreement is required to be in writing and have a definite, specified and complete termination date agreement is required to be in writing and have a definite, specified and complete termination date.
- A brokerage agreement may end upon the occurrence of a specific event. For example, a seller may be attempting to sell a home due to a job transfer
- The listing contract has both a specific termination date and alternatively, a clause that provides the brokerage agreement will terminate 24 hours after the seller gives the broker proof of her transfer date.
- The listing contract has both a specific termination date and alternatively, a clause that provides the brokerage agreement will terminate 24 hours after the seller gives the broker proof of her transfer date.
- An unconditional release is when both the broker and the client mutually agree to terminate the brokerage agreement and end the relationship.
- The termination of the brokerage agreement does not release the broker from certain statutory duties such as confidentiality.
- A client has the right to refuse to work with any specific broker-salesman or salesman; however, as the brokerage agreement is with the broker, the brokerage agreement continues in force.
- When this happens, the broker may transfer the client to another agent or release the client from the brokerage agreement.
- The seller could terminate the brokerage agreement based on the impossibility of performance. The performance need not be totally impossible, only highly impractical.
- Breach: The brokerage agreement may be terminated when either party breaches it.
- Recording a Lis Pendens: The brokerage agreement is a contract for services. The only way to enforce its terms is either through ADR or court action. U
- Unfortunately, some licensees believe they can record a lis pendens to stop the ex-client’s escrow when there is a dispute about compensation or the brokerage agreement.
- As an employment contract, the brokerage agreement is not a claim for title to, or possession of, real property. T
- For example, by “operation of law” a duly executed brokerage agreement may be avoided by a client who is a minor.
- Nevertheless, the broker may still have rights under the original brokerage agreement for the collection of compensation.NRS 148.420 & NRS 148.330.
- The broker has rights under the original brokerage agreement and could sue the estate should it not pay her.
- If the broker-salesperson or salesperson dies, the brokerage agreement continues in place because the brokerage agreement is with the broker. I
- If the broker dies, historically, the brokerage agreement automatically ends; however, by regulation, another licensed broker may act in the deceased’s broker’s place for up to sixty (60) days after the original broker’s death.
- b. After Termination - When the brokerage agreement terminates, the broker must stop representing the client, remove any personal property from the seller’s property (such as signs), account to the client for all funds, keep the client’s confidences, and do nothing to harm the ex-client or interfere with the transaction even if the broker believes he or she is still owed a commission. NRS 645.252 (1)(e), NRS 645.310 (1), NRS 645.254 (2).
- This is a contract clause that gives the broker the right to collect a commission for a set time after the brokerage agreement ends. To collect a commission, the broker must have introduced the property or buyer to the client during the brokerage agreement period. U
- Unless the brokerage agreement allows for the broker to collect if the broker is the procuring cause, upon the end of the broker protection period, the seller may sell the property to a buyer procured by the broker and not owe the broker a commission.
- An open brokerage agreement is where the broker has no exclusive representation of the client – the client may hire any number of other brokers.
- An open brokerage agreement allows the seller to sell the property without owing a commission. The courts favor the client in determining the level of representation. The more “open” the contract, the better for the client.
- Open brokerage agreements may be oral or written. All oral brokerage contracts are considered “open.” All written brokerage agreements are also presumed to be open unless the contract’s terms or title state it is exclusive
- Implied Brokerage Agreements: Though not favored by the courts, under some circumstances, a court will find a broker is owed compensation under an implied brokerage agreement.
- In Morrow v. Barger, (1987),48 the court found an implied brokerage agreement after the written listing ended. Claire Morrow was a broker who had a written open listing with the Bargers to sell their ranch. During the listing period, Morrow showed the property to three potential buyers. When the written brokerage agreement ended, the sellers instructed Morrow to continue marketing the property – which she did. After a while, the sellers stopped communicating with Morrow. Eventually, Morrow learned that the Bargers personally sold the property to all three buyers in a complicated escrow. Morrow sued for her commission and won. The court said Morrow had an implied open listing; therefore, she was entitled to a commission
- b. Specific Terms - The law identifies only four provisions that must be included in an enforceable exclusive brokerage agreement. These are: 1. The agreement must be in writing; 2. It must be signed by both the broker and the client or their authorized representatives; 3. The contract must have a definite termination date; and 4. The agreement may not require the client to notify the broker of the client’s intention to cancel the exclusive features of the brokerage agreement once the agreement is terminated NRS 645.320
- By and large, other than certain requirements for specialized brokerage agreements, all other contract terms are negotiable.
- c. Buyer’s Brokerage Agreements – In a written buyer’s brokerage agreement, all the required terms of the exclusive listing agreement apply. 54 Additionally, though not law, the Real Estate Division has identified various elements that, at a minimum, should be in a buyer’s brokerage agreement. These include: “specified terms, duration, compensation, services agreed upon, and the ability of a client to cancel for non-performance. … Any special services, circumstances and/ or conditions should be spelled out in the agreement.
- d. Missing Elements = No Compensation – If an exclusive brokerage agreement is not in writing or if it is missing a necessary legal provision, the broker will be unable to collect a commission.
- A faulty exclusive brokerage agreement cannot become an open brokerage agreement. Failure to include a fixed termination date makes the agreement voidable by the client and removes the broker’s ability to claim payment under alternative legal theories of compensation.5
- a. By Other Brokers – Once a valid exclusive brokerage agreement is in place, a licensee may not, for personal gain, induce any party to break that contract in order to substitute a new agreement. A licensee who violates this statute may be subject not only to civil action from the harmed broker, but the Real Estate Commission may impose a $10,000 fine and other administrative sanctions. NRS 645.630 (1)(l).
- The brokerage agreement is an employment contract between the client and the broker.
- A seller and buyer cannot, in their purchase agreement or through escrow instructions, attempt to modify the terms of the brokerage agreement without the consent of the broker
- Unless specifically agreed to in the brokerage agreement, a seller cannot refuse to pay a broker because the property was listed at one price but the seller accepted a lower price. A
- A seller may not refuse an offer from a buyer, wait until the brokerage agreement has expired, and then sell the property to that buyer in order to not pay the broker’s commission.
- Most listing agreements have the compensation paid directly by the client. Most buyer brokerage agreements are oral and have the compensation paid by a third party, usually the listing broker.
- With most brokerage agreements, the broker provides the written agreement and often any dispute over contract terms is decided in the client’s favor.
- The client cannot refuse to accept offers above the net price waiting for the brokerage agreement to terminate and then accept a lower offer. I
- Quantum meruit cannot be used to collect compensation when there is a faulty exclusive brokerage agreement.
- To be protected by the commercial claim law, the brokerage agreement must be in writing and state what services the broker will provide and what disposition the client desires: for example, sale, purchase, exchange or lease of the commercial real estate NRS 645.8705.
- Since a brokerage agreement is an employment agreement, it is a contract for services and not a claim on the real property. If the owner breaches the brokerage agreement, the broker’s remedy is a claim upon the owner’s net proceeds - in other words, a claim over the owner’s personal property. The claim is not a claim or lien upon the seller’s real estate and does not attach to the real property.NRS 645.8761
- An agent for the broker may not waive the broker’s claim right even if that agent is otherwise authorized to bind the broker to the brokerage agreement.
- Any waiver of the broker’s right must be done by the broker on or before the date the brokerage agreement is signed.
- Any brokerage agreement that requires a client to provide money up-front for brokerage services qualifies as an advance fee agreement.NRS 645.002 & NRS 645.004. 102. NRS 645
- Though no specific forms are currently required, the Real Estate Commission is authorized to establish forms for advance fee brokerage agreements. It may also require reports and forms for the review and audit of advance fee agreements NRS 645.324
- An advance fee brokerage agreement must be in writing with a detailed description of the broker’s services and a date of performance. The broker must identify the total amount of the advance fee and when payment is due.1NAC 645.675.
- No Guarantee: Additionally, the brokerage agreement cannot imply or guarantee there are tenants or buyers immediately or soon to be available, nor that the property will be purchased, sold, exchanged or leased due to the broker’s services.
- Unlike many contracts, there can be no provision in the brokerage agreement that relieves or exempts the broker from those oral representations or promises.1
- The brokerage agreement may be an Exclusive Right to Sell and provide for the payment of compensation to the broker out of the proceeds of the property’s sale.
- The payment of any commission must be confirmed by the court contingent upon the sale of the property through the broker’s efforts. Even with a brokerage agreement, the court may determine which broker is the procuring cause of the sale and award that broker the commission.1
- When an estate’s personal representative signs the brokerage agreement, the representative has no personal liability to the broker and the estate itself is not liable to the broker unless a sale is made and confirmed by the court.
- Similarly, a court-appointed guardian may enter into a brokerage agreement to sell a ward’s real property. The requirements and commission restrictions are the same as for those properties being sold from probateNRS 159.1385
- Bankruptcy is federal law that can have a profound effect on the sale of real property and any brokerage agreement.
- Considered here are general rules regarding the brokerage agreement when a party files for bankruptcy under Chapter 7 - liquidation or “straight” bankruptcy.
- There are three major instances in which a broker may be confronted with a brokerage agreement subject to the bankruptcy law: 1. When the broker has an existing, valid listing agreement and the seller files for bankruptcy; 2. When the broker’s buyer-client files for bankruptcy; and 3. When the broker is hired by the bankruptcy trustee to sell the bankrupt estate’s real property.
- As such, the bankruptcy trustee or the court (they are not the same) can either accept or reject the brokerage agreement. Even if the trustee accepts the contract, the court may reject it.
- If the trustee and court accept the existing brokerage agreement, the court may modify the compensation.
- If the buyer has not executed a purchase agreement, any brokerage agreement the buyer has may be terminated since the debtor no longer has control over the assets necessary to purchase any property
- considered a “professional” and therefore, compensation under the brokerage agreement must be approved by the bankruptcy court
- By definition, a property manager’s employment agreement is not a brokerage agreement;115 it is a written employment contract between a client and broker in which the broker accepts compensation to manage the client’s propertyNRS 645.0192
- A property management agreement must be in writing - no oral agreements are enforceable. It must include the term of the employment; however, unlike general brokerage agreements that require a specific termination date, a property management agreement may contain an automatic renewal (roll-over) provision.
- If the manufactured home has been converted to real property, any legal brokerage agreement may be used.
- If the manufactured home has not been converted, the broker must make certain disclosures; 123 however, as long as the broker is also selling the underlying real property, any legal brokerage agreement may be used. 1
- A broker’s employment contract with a client is called a brokerage agreement. All brokerage agreements, being contracts, must have the general contract elements. Other than Nevada laws, certain laws, such as the federal Real Estate Settlement Procedures Act and anti-trust laws, affect what the licensee must do or disclose in a real estate transaction.
- Special types of brokerage agreements require specific clauses or wording. Commercial brokerage, advanced fee, probate and guardianship, manufactured housing, and listing with option agreements are all specialized brokerage agreements.
- Property management agreements, though not technically brokerage agreements, are also specialized employment agreements between a client and a broker
- Brokerage agreements may be oral or written. Certain types of brokerage agreements must be in writing. For example, any brokerage agreement that authorized the broker to be the client’s sole broker, called an exclusive agreement, must be in writing. Written contracts may be created with pen and paper, or electronically.
- Exclusive brokerage agreements have several requirements. The agreement must contain a definite termination date; be signed by the broker and client or their authorized representatives; and must not require the client to notify the broker of the termination of the exclusive contract feature. In the brokerage agreement, the broker may limit his or her services; however, at no time may the broker limit the liability for statutorily required duties or services. Under Nevada law, only a broker is allowed to collect compensation. The salesperson or broker-salesperson may not receive or give compensation from or to, any person for real estate services other than the broker with whom he or she is licensed at the time of the transaction. The receipt of all compensation must be disclosed to the parties in the transaction.
- If an unrepresented buyer requests a non-listing broker to draft an offer, the broker may require the buyer to enter into a brokerage agreement. No broker is required to work for free.
- A legally appointed guardian of an incompetent ward may sign a brokerage agreement to sell or to purchase real property from the ward’s estate.40 However, this authority also requires court approval.
- The executor or administrator may sign brokerage agreements50 and sell or purchase real property with court approval.51 A devisee under a will, or an heir to an estate, does not have the right to sell real property still in the deceased’s name.
- The brokers’ authority and contractual rights are found in the brokerage agreements, not the purchase agreement
- A licensee may not disclose the client’s confidential information for one year after the revocation or termination of the brokerage agreement.
- Advertising: If the licensee has a brokerage agreement in place and advertises a property, the advertisement must identify the licensee’s licensed status. This disclosure must be made whether the licensee is acting as an agent or as a principal.61 If the licensee has an ownership interest in the property, the advertisement must disclose “for sale by owner-broker” (owner-licensee, ownersalesperson, etc.) NAC 645.610
- . Since the other party usually does not see the broker’s employment agreement (the brokerage agreement) where both the source and amount of compensation are usually identified, compensation sources are often identified in the parties’ purchase agreement.
25
Q
Property Disclosures
Page 3
A
26
Q
Property Disclosures
Any construction, remodeling, repair or other improvements on a Single-family residence (SFR).
A
- No Mandatory Form; however, NRS 624.520 has suggested wording for Notice.
- Informs owner of the Nevada“Recovery Fund” available to the property owner when a residential contractor fails to perform qualified services adequately. Notice must identify NRS 624.400 to NRS 624.560. Real Estate Licensee should be aware of this notice when representing a seller or buyer and there has been construction or contractor services on the property.
- Contractor
- Owner
- At time of signing contract.
27
Q
Property Disclosures
Page 4
A
28
Q
Property Disclosures
Page 5
A
29
Q
Property Disclosures
Page 6
A
30
Q
Property Disclosures
Page 1
A
31
Q
Property Disclosures
Page 2
A
32
Q
Property Mangaement Disclosures
Page 1
A
