V. REAL ESTATE PRACTICE Flashcards
The broker will be liable for all the professional acts or occupational activities of licensees he sponsors. This is called the Broker’s
SCOPE OF EXPERTISE:
Training and supervision are in the best interests of both the broker and sales agent.
A licensee should practice within his area of competence.
An agent should always refer a client to another professional if the licensee is not competent to protect the client in a specific situation. Attorneys, accountants, inspectors, surveyors, engineers, and appraisers are just some of the specialists we rely on in the practice of our profession.
Practicing with due diligence is a requirement of a competent agent. Due diligence is defined as:
- A fair, proper, and due degree of care and activity.
An expressed or implied requirement in certain real estate contracts stating that a person use good faith efforts to perform obligations under a contract.
A buyer who makes an offer contingent on obtaining financing must use due diligence in
seeking such financing.
- A time period in which a buyer is given the opportunity to have experts
inspect the property, examine the title, and review the leases to determine whether the property matches the buyer’s needs.
UNLAWFUL PRACTICE OF LAW
Licensees are specifically prohibited from practicing law without a law license.
Examples of this behavior would include giving legal interpretations of documents involved in a transaction:
Preparing legal documents, such as wills, contracts, deeds, or deeds of trust, advising a client on how to take title.
Discouraging clients from seeking the advice of an attorney in negotiations which involve special terms and conditions.
*If a client wishes to add terms, conditions, or contingencies to a contract, always recommend they talk to an attorney to prepare the correct wording. If a client insists on using his/her own wording or contract form, as long as what they want is legal, you must obey your client.
When advising a client to see an attorney, it should be done before a client signs anything he/she does not understand.
The purpose of the LISTING AGREEMENT is to place a seller’s property on the market and find a buyer.
Requirements of a VALID listing include:
- Signatures of all the owners and the listing licensee
- Legal description of the property
- List price – this must be set by the seller
- Definite starting and termination date
- Broker compensation
There are four types of listing agreements:
- Exclusive Right To Sell - The broker is the exclusive agent and receives the commission
even if the seller sells the property himself. - Exclusive Agency - The broker is the exclusive agent and receives the commission unless
the seller sells the property himself. The seller competes with the broker. - Open listing - The owner reserves the right to list with as many brokers as he chooses. He
also reserves the right to sell the property himself and avoid paying a commission. FSBO - Net Listing - All money over the amount the owner wants for the sale of the property is
treated as the broker’s commission.
Most exclusive listings are placed in the MLS (Multiple Listing Service) to:
Provide broad exposure of the property in the market.
Licensees must follow the rules of the local MLS, which is owned and operated by the Board of Realtors.
If a client does not want their property in the MLS, an agent must observe the wishes of the client.
This is an employment contract wherein the broker will be the buyer’s agent.
BUYER/TENANT REPRESENTATION AGREEMENTS
The purpose is to find a suitable property for the buyer.
The buyer’s broker must protect the buyer’s interests at all points in the transaction.
The specific services provided to the buyer should be spelled out. Compensation issues should be addressed.
The agreement must have a starting date and a termination date.
All listings (and buyer representation agreements) are taken in the name of the broker and become the broker’s property.
If a sales licensee leaves his sponsoring broker, he also leaves (or loses) any listings or buyer representation agreements he procured under that broker.
All agency agreements must be in writing to satisfy the Statute of Frauds.
Listing or buyer representation agreements will automatically terminate on the agreement termination date.
They are also terminated by:
- Fulfillment of purpose
- Abandonment or cancellation by the broker
- Revocation by your principal
- Mutual consent
Acts of law including:
- Bankruptcy of the seller or the broker, or foreclosure
- Death – although sales contracts and leases survive death, service contracts are terminated
by the death of either party. The death of the salesperson will not terminate a listing. - Destruction of the property or condemnation under Eminent Domain
- A change in property use by outside forces, such as zoning
Many listing agreements and Buyer Representation agreements have a protection period for the broker.
The length of the protection period is negotiable.
During the protection period, even though the listing has expired, the broker may still be entitled to a commission if all the criteria are met.
He/She is a GENERAL agent with a broad scope of responsibilities and liabilities.
PROPERTY MANAGER
A management agreement is used to create this relationship and define the role and
responsibilities of the agent and the owner.
Property managers’ roles cover four basic areas of responsibility. These are:
A. Finances and marketing of the property – Often, the property manager will have
access to a cash/checking account to pay operating expenses and deposit rents and a
separate trust account to hold tenant security deposits.
*Generating income is considered the key responsibility of the property manager.
*He or she must make periodic reports to the owner.
*The property manager will develop an operating budget to give the owner an idea of the
net income to expect. Net income is effective gross income minus operation expenses.
*Operating expenses will be provided to the owner. These are recurring expenses necessary
for the monthly operation and maintenance of a property. They include fixed
expenses such as taxes and insurance and variable costs such as utilities, payroll, and
reserves for repairs, replacement, and maintenance.
*Operating expenses DO NOT INCLUDE mortgage payments/debt reduction, depreciation, and capital improvements/expenditures.
B. Tenant relationships and occupancy - Meeting tenant needs and requests will help
ensure high occupancy rates.
C. Managing the facility – A good property manager’s concerns include maintenance
and safety.
D. Administration of the lease agreements and risk management (insurance) -
*Property and Casualty insurance will be necessary to compensate any individuals who may be injured on the property.
*Contractors or employees who handle cash or the private property of tenants should be bonded (under surety bond)
In a condominium complex, each unit owner will have his/her own policy to cover
the unit.
The complex will have a policy to cover all the public or common areas such as elevators,
hallways, parking lots, etc.
Prohibits discrimination based on RACE or COLOR.
There are no exceptions or exemptions to this law.
The Civil Rights Act Of 1866
Forbids discrimination on the basis of race, color, NATIONAL ORGIN, and RELIGION.
The Federal Fair Housing Act, known as the Title VIII of the Civil Rights Act of 1968
A 1974 amendment added sex as a protected category.
This act was amended in 1988 to include family composition and the handicapped. That amendment
went into effect in 1989. (Family composition may be referred to as familial status.)
- Familial status means a minor living with a parent or guardian. Familial status also includes
a pregnant woman. - Handicapped means mental or physical impairment – alcoholics or recovering drug users and
AIDS victims are included in the list. A handicapped tenant may modify an apartment to
meet his needs at his own expense but must be willing to restore the apartment before moving
out, again at his own expense, if the landlord requires it. An apartment complex can advertise
the existence of handicapped-accessible units on site.
Violations include charging higher security deposits, segregating any one category from any other,
or refusing to permit a handicapped tenant to modify rental space.
Age is not covered in Fair Housing. This is to allow for senior housing. Senior housing properties are sometimes described as having a Familial Status Exemption.
There are two ways that a community can qualify as senior housing.
- 100% of the units must be occupied by someone 62 or older.
- 80% of the units must be occupied by someone 55 or older.
Senior housing communities can refuse to sell or rent to those who do not meet the age requirement or to families with children.
Note that no one is protected based upon their occupation.
The law forbids discrimination and discriminatory practices in connection with the LEASING
or SELLING of residential real estate not only by owners, but also by lenders, investors, builders,brokers, and real estate organizations and services.
A landlord can refuse to lease to a mentally handicapped tenant who is a danger to himself and others. Since there is no federal standard for determining mental handicap, a landlord has to rely on a background check.
There are some exceptions to the rules, but Real Estate Licensees are NEVER exempt
Exceptions include:
- FSBO of a single-family home when the owner owns no more than three homes at a time, and no discriminatory advertising is used.
- Rental of an owner-occupied 1-4 family home when the services of a broker are not used, and no discriminatory advertising is used.
- Churches owning rental property may restrict occupancy to members of the congregation, as long as membership in the congregation is open to all.
- Private clubs owning lodgings may restrict occupancy to members as long as the lodgings are not operated commercially.
