(Daniel, Please insert Sect. 12 - 00 Beginning Slide)
Chapter 12 - Practices and the Law
Advertising Regulations
The State does not require licensees or firms to send in copies of their ads for approval. The State does monitor ads on a sporadic basis and certainly investigates complaints by consumers regarding advertising.
Basic requirements by the Federal Government and the State have to be met regarding the use of advertising for specific forms of real estate activities. The exception is when a licensee is leasing or selling his or her own property and discloses the license in the ad. Example: "Licensed agent wishes to sell property in Carnation."
Blind Ads - When advertising on behalf of clients, a broker/firm must include the name of the licensee sponsoring the ad. If this does not appear, it is call a blind ad and illegal.
Franchise Ads - When a broker is associated with a National Franchise Firm, the advertisement can utilize the franchise name, BUT must also specify the name of the licensee on file with the State.
Deceptive Ads - No ad can imply that the real estate firm is a research firm, publicly owned agency, or non-profit organization. Example" "We participate on behalf of the United Good Neighbors Organization."
Advertising in the Name of Another - A licensee cannot advertise in the name of a DBA or outside firm without the permission of the Director. If the Director grants permission for a DBA, the Director will make sure that it is not deceptive or similar to a competing firm.
(On the next page please insert slides - 001 & 001A)
Advertising - Use of the Internet
The same rules that we discussed above about advertising would also prove true on Internet or Web Page advertising as well.
No Blind Advertising - The Web Page must include the name of the firm the licensee is registered with as well as the office location; city, and State.
Franchise Ads - A firm must use the name that it has registered with the Department of Licensing and the main office location; city and state.
(On the next page please insert slides - 002 & 002A)
No Deceptive Pages
Full Disclosure - All forms of Internet contact with the public must include full disclosure of the information on file with the Department of Licensing. This would include communication such as email, chat rooms, discussion lists, news groupings, bulletin boards, information links, etc.
1. Exception - If disclosure is provided on pages prior to going to these areas of the Web Site, the disclosure is not required a second time.
Banner Ads - A banner (normal) ad on the Web Site or another Web Site must have a single click link to the Disclosure Page. The only exception is if disclosure is provided in the Banner ad.
(On the next page please insert slides - 003 & 003A)
Timely Use of the Internet
Use of the Internet must be kept up-to-date by the licensee.
Listings - A broker/firm must remove listings that are no longer valid in a timely manner. Former listings cannot be used as a "come-on" to obtain possible buyers. All invalid listings must be removed from the Web Site as well as 3rd party Web Sites in the timely manner.
Other Firm’s Listings - A broker/firm cannot advertise listings of competing firms UNLESS gaining permission from the listing firm.
No Misleading Advertising - A broker/firm cannot utilize advertising that is deemed misleading. It will be the Department of Licensing that will determine if a Web Page is misleading.
(On the next page please insert slides - 004 & 004A)
Competitive Market Analysis (CMA)
CMA - When working with a seller, a licensee can help the seller determine the sale or listing price of the property by using a competitive market analysis or CMA. This is done by comparing the prices of properties that sold, properties up for sale, and those properties that did not sell. Comparisons have to utilize properties that are similar in location, size, age, style, and amenities to the seller’s property. This process is similar to an appraisal, but it is far less formal and does not take into consideration other considerations that a licensed appraiser would use.
Furthermore, an appraiser will not utilize the offering price of similar homes in an area. An appraiser will not utilize the price of similar homes that did not sell in an area. The appraiser will only use the price that homes have sold for in a given area.
Market Value (Price) - The market price is the most probable price the property would be sold for under normal conditions on the open market. Hopefully, the CMA that you come up with will be in the right price range. The market price will be the starting point from which buyers will come forward with an offer.
Assessed Value - The assessed value is the amount of value that the county will base its property tax on. Since assessments are not completed by the County each year, the assessed value is usually lower than the CMA that you would come up with.
Appraised Value - When an appraiser comes out, his/her appraisal value might be lower, at, or below the CMA market price that you came up with. Hopefully, it will be around the same value as you determined. Remember, appraised value will be based on actual sales in the area the property is located in.
(On the next page please insert slides - 005 & 005A)
Listing Agreements
Types of Listing Agreements - The following are the different types of listing agreements that a seller and managing broker can enter into.
Listing Rule- The more likely the managing broker is to receive a commission, the more likely the managing broker will spend time on promotion and advertising.
1.Open Listing - An open listing (open season) is exactly that. All licensed managing brokers in the State as well as the owner have the right to sell the property. The listing is OPEN. A commission is only paid to a managing broker if that managing broker sells the property. No amount of commission is paid to any other managing broker.
No Commission - The owner does not have to pay a commission if the owner sells the property himself/herself.
Unilateral - This is our unilateral (one-sided) contract that we discussed earlier. The managing broker is not required to perform. He/she simply promises to try to find willing and able buyers. The seller must perform if the managing broker finds that buyer.
(On the next page please insert slides - 006 & 006A)
Forms of Listing Agreements
2.Exclusive Agency Listing - Only one managing broker has the right to sell the property as the seller’s agent and receive a commission. Only one managing broker is the "exclusive agent". A managing broker is more willing to pursue advertising and promotion if he/she knows that if anyone other than the owner sells the property, the managing broker will receive a commission.
Owner Can Sell - Under the exclusive agency agreement the owner, the principal, retains right to sell the property themselves and pay no commission to the exclusive managing broker. The owner must sell to a person that was not contacted by, referred by, or solicited by the managing broker.
Problems - The seller cannot interfere with the managing broker's agency efforts. The seller cannot infringe on the managing broker’s contacts. Example: The managing broker holds an open house for the seller with lots of people walking through. If any of these people come back to the seller/owner and want to buy, the seller would have to pay the managing broker a commission. Some sellers don’t want to pay a commission under this scenario.
(On the next page please insert slides - 007 & 007A)
Forms of Listing Agreements
3.Exclusive Right to Sell / MLS Form - This is the most common form of agency listing. This is the listing form utilized by the MLS member managing brokers. In order to be listed on the MLS, the listing must be in this form. There is only one managing broker that has the exclusive right to commission for a stated period. The managing broker receives a commission no matter who sells the property during the listing agreement period.
Owner Sale - The owner cannot avoid paying a commission if a sale occurs or could have occurred. Even if the seller sells the property, a commission is due the managing broker. Even if the seller decides to take the property off the market, a commission might still have to be paid.
Example: Managing Broker V has an Exclusive Right to Sell listing
agreement with client H. V brings a buyer who is willing to pay the full
asking price for the listed property of H. H now owes a commission to V.
If H doesn’t sell the house, H stills owes a commission. The broker
performed, the seller did not.
Commission - As long as the broker performs his/her requirements under this listing agreement to bring a willing and able buyer paying the asking price, a commission is owed the broker.
(On the next page please insert slides - 008 & 008A)
Mold Explained
Molds are part of the natural environment. Molds reproduce by means of tiny spores; the spores are invisible to the naked eye and flow through outdoor and indoor air. Mold may begin growing indoors when mold spores land on surfaces that are wet. There are many types of mold, and none of them will grow without water or moisture.
Concentration of mold spores in the air can cause toxic damage to the human lungs when breathing the air. In addition, the mold spores inside the lungs can then cause toxin levels to go into the body.
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Indoor Air Quality or IAQ
The Department developed these guidelines to promote practices that prevent or reduce the contamination of indoor air, thereby contributing to a safe, healthy, productive, and comfortable environment for building occupants. Benefits of good IAQ may include improved health of occupants, decrease in the spread of infectious disease, protection of susceptible populations, increased productivity of occupants, improved relationships/fewer complaints, reduction in potential building closures and relocation of occupants, less deterioration of buildings and equipment, reduced maintenance costs, and decreased liability and risk.
Mold is Material Information
Known material information must be disclosed in a transaction.
Seller - Seller must disclosed defects to the buyer on Form 17 Seller’s Disclosure Form.
Licensee - If a licensee is aware of material defects such as Mold, the licensee must divulge such information to the involved principals.
NOTE: Concealment or misrepresentation of a material fact by a licensee will cause action by the DOL.
(On the next page please insert slides - 010 & 010A)
Disclosure Practices - Tenant / Landlord
Mold Disclosure
To minimize the occurrence and growth of mold in the Leased Premises, Tenant hereby agrees to the following:
1. Moisture Accumulation
Resident shall remove any visible moisture accumulation in or on the Leased Premises, including on walls, windows, floors, ceilings, and bathroom fixtures; mop up spills and thoroughly dry affected area as soon as possible after occurrence; use exhaust fans in kitchen and bathroom when necessary; and keep climate and moisture in the Leased Premises at reasonable levels.
2. Apartment Cleanliness
Resident shall clean and dust the Leased Premises regularly, and shall keep the Leased Premises, particularly kitchen and bath, clean.
3. Notification Of Management
Resident shall promptly notify management in writing of the presence of the following:
(i) A water leak, excessive moisture, or standing water inside the Leased Premises;
(ii) A water leak, excessive moisture, or standing water in any community common area;
(iii) Mold growth in or on the Leased Premises that persists after the resident has tried several times to remove it with household cleaning solution, such as Lysol or Pine-Sol disinfectants, Tilex Mildew Remover, or Clorox, or a combination of water and bleach;
(iv) A malfunction in any part of the heating, air conditioning, or ventilation system in the Leased Premises.
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Mold - Lease Addendum
4. Liability
Resident shall be liable to Owner for damages sustained to the Leased Premises or to Resident’s person or property as a result of Resident’s failure to comply with the terms of this Addendum.
5. Violation Of Addendum
Violation of the Addendum shall be deemed a material violation under the terms of the Lease, and Owner shall be entitled to exercise all rights and remedies it possesses against Resident at law or in equity.
6. Addendum Supersedes Lease
In case of a conflict between the provisions of this Addendum and any other provisions of the Lease, the provisions of the Addendum shall govern. This LEASE ADDENDUM ON MOLD is incorporated into the lease executed or renewed on ______day of ______, 20______between Owner and Tenant.
(date) ( month) (year)
DATED this ______day of ______, 20______.
(date) (m onth) (year)
______
Owner/Agent Tenant
______
Tenant
______
Tenant
LEASE ADDENDUM ON MOLD
Lease Addendum on Mold
Revised 10/2005
Reviewed 1/2009
Owner/Agent and Tenant are each advised to seek independent legal advice on matters arising from use of this form.
(On the next page please insert slides - 012 & 012A)
Lead Paint Disclosure
FEDERAL LEAD-BASED PAINT HAZARD REDUCTION ACT
Buyer Requirements - The Act requires the lead-based statement to be signed by the purchaser/buyer acknowledging that he/she:
1. Read Statement - The buyer has read and understands the Lead Warning Statement.
2. Received Pamphlet - The buyer received the lead hazard pamphlet.
3. 10-Day Inspection - The buyer was given the required 10-day (unless otherwise agreed to) opportunity to conduct risk assessment or inspection of the property.
Real Estate Licensee - If a real estate agent/licensee is contracted on the sale, he/she is required to ensure that his/her client complies with this law. The licensee cannot FORCE the client to comply. The licensee must make sure that the client is aware of their responsibilities under this Federal Regulation.
Licensee - If a licensee is aware of "material" defects such as Lead Paint, the licensee must divulge such information to the involved principals.
NOTE: Concealment or misrepresentation of a material fact by a licensee will cause action by the DOL.
(On the next page please insert slides - 013 & 013A)
Lead Paint - MLS Form 17
On the Sellers Disclosure Form 17, the following questions are answered by the seller for a home that was constructed in 1978 or earlier:
For Section A, the seller either checks that lead paint is known OR checks that lead paint is not known.
For Section B, the seller states and/or provides existing reports or records regarding the lead paint and its status OR states that no reports or records are available.
(On the next page please insert slides - 014 & 014A)
Seller’s Disclosure Form 17
Environmental Disclosure MLS Form 17
:
First of all, you are not required to look up any of these questions regarding environmental considerations. You are a marketer and not an investigator.
7. Environmental considerations are important for the well being of the buyer.
Section A - Standing water and moisture is the cause of Mold. Answering "Yes" to this question is a red flag.
Section B - Fill material question. If the property has fill material it could contain toxic dump material and/or unstable land for support of the subject home.
Section C - Past damage that has not been corrected is important. This is especially true for fire damage and earth movement.
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Form 17 (Continued)
Section D - Property that has wetlands and a shoreline is highly regulated by the State. Further development of the property would be questionable.
Section E - Toxic materials are the concern here. This is especially true of asbestos, formaldehyde insulation, and underground storage tanks.
Section F - Commercial use could present problems with the presence of toxic materials and dumped items.
Section G - Groundwater that rises up and damages foundations and floods basements.
Section H - This is concerned with overhead wires that can cause cancer as well as buried "hot" wires that are not known.
Section I - The main concern here is the manufacturing of Meth on the property. The materials and the cooking process are highly toxic and damaging.
Section J - Towers can interrupt the service of cell phones, antenna equipment, and a person’s body.
Licensee - If a licensee is aware of "material" defects such as Environmental Problems, the licensee must divulge such information to the involved principals.
NOTE: Concealment or misrepresentation of a material fact by a licensee will cause action by the DOL.
(On the next page please insert slides - 016 & 016A)
Relationships with Competitors
The next thing we're going to look at regarding ethical and legal considerations are the relationships that you face with competitors. In all professional business forms there is competition. With the real estate profession we have several different aspects that we have to consider when doing business in the competitive business market. These include state regulations, association membership requirements, procedures as a member of a multiple listing service, affiliate firm procedures, and now agencies of the Federal government.
Most of these requirements delve into the area of professional services that is provided the public. Whether it is procedures and handling client funds or protecting the agency status of agents with their clients, the main goal is to provide professional services that protect the public.
The Federal government gets involved when business pursuits cross state boundaries or involve what are called anti-trust activities. Over the course of the past four years the Justice Department of the Federal government has been looking into anti-trust activities of the real estate profession.