Ways to Avoid Misrepresentation Flashcards
Property Condition
most states require the seller of a residential property to deliver to the buyer a written disclosure or disclaimer about the property’s condition, including any material defects the owner knows about. the disclosure is usually required before any purchase contract is accepted. a second disclosure may be required at closing. the licensee should always obtain the parties’ signatures acknowledgment receipt of these disclosures
Lead-based paint and other disclosures
Federal law required sellers of houses built before 1978 to make a lead-based paint disclosure before accepting an offer to purchase. the licensee must tell the seller about this requirement, give the seller the proper disclosure form, and make sure that the buyer receives it.
Scope of Expertise
Real estate licenses are not, by nature, financial consultants, accountants, appraisers, soil scientist, well diggers, lawyers, decorators, contractors, builders, plumbers, carpenters, inspectors, prognosticators, and a number of other kinds of experts. however, in todays’s competitive environment, consumers often demand much more from a licensee than the traditional basic services. an agent who fails to live up tp prevailing standards may be held liable for negligence, fraud, or violation of state real estate license laws and regulations
At the same time, agents must be particularly careful about the temptation to misrepresent themselves as experts and offer inappropriate expert advise. disclaimer and referral are always the best risk control procedures to forestall an accusation of misrepresentation from a consumer who claims to have been harmed by reliance on the licensee’s non-existent expertise. the exact nature of the service to be provided should be stated as clearly as possible in the listing agreement
Nature and accuracy of the listing agreement
in most states, a listing agreement is enforceable only if it is in writing. most states forbid net listings, because they violate the requirement that a valid listing agreement must specify a selling price and the agent’s compensation. the licensee, in accordance with the duty of due diligence, must verify the accuracy of the statements in the listing regarding the property, the owner, and the owner’s representations. especially important facts for a broker or agent to verify are:
- the property condition
- ownership status
- the clients authority to act
Comparative Market Analysis (CMA)
in preparing a comparative market analysis, licensee should gaud against using the terms “appraisal” and “value” which are reserved for the use of certified appraisers. misuse of these terms could lead to a change of misrepresentation oneself as an appraiser. in discussing listing properties with clients or appraiser. in discussing listing properties with clients or customers, real estate licensees should be careful to use guarded terms such as “recommended listing price,” “recommended purchase price,” recommending purchase price’” and recommended listing price range.”
Estimate of Closing Costs
in preparing an estimate of closing costs for a seller or buyer, there is the risk of forgetting something, leading to an unpleasant surprise when the consumer suddenly faces unexpected costs or conditions. licensees should use their broker’s form, if there is one, and make it clear to the consumer that it is only an estimate of likely costs, not a statement of actual costs. in some state, brokers and agents do no prepare closing costs estimates, leaving that task to the lender
Documentation and Record Keeping
documentation provided evidence of compliance with laws and regulations. it proves what clients and customers and licensees said and did in a transaction. some documentation is required by law
the components of a thoroughly documented paper trail include:
- policy and procedure manuals
- standard forms
- communication records
- transaction records
- contracts
- accounting
- other important documents
Policy Manual
A written and uniform enforced company policy lets everyone in the firm known what to expect before problems arise. the policy manual should cover the company’s rules in such areas as floor duty privileges, assignment of relocation properties to agents, referrals between agents within the company, and requirements for continuing education, sales meeting participation, and property tours
Procedure Manual
a company procedures manual should spell out how to handle every aspect of the company’s business that agents and brokers need to know- from handling consumers’ funds and documents, conducting consumer transaction, dealing with MLS-related matters, and placing signage, to all procedures prescribed by state or federal law, especially license, banking and fair housing laws. Adherence to a procedure manual reduced the risk that an individual will inadvertainly commit an unlawful act. whenever will inadvertently commit an unlawful act. whenever changes are made to policy or procedures manual each agent should sign the revised manual as evidence that the agent has examined it
Standard Form
standard forms save time and protect against the unauthorized practice of law. since they are most after prepared by lawyers familiar with the market areas, they can address contingencies that are common in the area in a Manne that reflects the real estate laws of the state. in the other hand, a licensees often needs to adapt a standardized form for a client by assisting with filing in blanks, notifying terms, and attactching addenda. the licensee must always remain aware of the limitations the state has places on such activities
Communication Records
soem communication with transaction parties are good and necessary for business. Other are required by ale, such as certain disclosures. A transaction checklist is a good tool for managing risk associated with the failure to make required communications from co-op agents
retaining evidence that information has been communicated Is a nessavssary procedure. Electronic communication should be archived or suitable electronic media. copies of mailed or faxed communications should be maintained in the transaction folder
Transaction Records
state law requires licenses to document transactions. firms are required to keep written recorded of all real estate transactions for a number of year (usually three to five) after closing or termination. required records typically include:
- listing agreements
- offers
- contracts
- closing statements
- agency agreement
- disclosure documents
- corresponding and other communication records
- notes and any other relevant information
Accounting
In addition to the accounting records, there is the requirement to maintain written accounting of escrow funds. for each transaction, property, and principle, escrow records will include:
- depositor
- date of deposit
- date of withdrawal
- payee
- other information deemed pertinent by the real estate commission
Other Documents
Additional documents may be required by law or regulation, or should be kept simply as protection in case of disputes and lawsuits. These would include copies of advertising materials, materials used in training agents, records of compliance with continuing requirements, safety manuals, and anything else that shows how the firm conducts its business and safeguard its staff as well as the right of consumers
