Ch. 5 Real Estate Practice

Due Diligence

defined as

a fair, proper, and due degree of care and activity.

due diligence begins after contract has been signed and acceptance communicated, if buyer finds problems with property they have the right to withdraw from purchase prior to expiration of the due diligence period

requirements of a valid listing

signatures of all the owners and listing agent

legal description of the property

list price- set by the seller

starting and termination date

broker compensation

four types of listing agreement

Exclusive Right to Sell

Exclusive Agency

Open Listing

Net Listing

Exclusive Right to Sell

broker is the exclusive agent and receives commons even if seller sells property himself

this is the type of listing a broker wants

Exclusive Agency

broker is the exclusive agent and Reeves commissions unless the seller sells the property himself

seller competes with broker

this listing is often used by builders

open listing

no MLS

owner reserves the right to list with as many brokers as he chooses

also reserves the right to sell the property himself and avoid paying commission

only the broken who brings a written contract will get paid

net listing

all money over the amount owner wants for sale of property is treated as the brokers commission

• is illegal in some states

• states have strictly regulated it bye eating maximum commissions

MLS

Multiple Listing Service

all agency agreements must be in ……. to satisfy the Statute of Frauds

writing

Operating expenses DO NOT INCLUDE

mortgage payments or debt reduction

depreciation

capital improvements or expenditures

ways a employment contract can terminate

-termination date

-fulfillment of purpose

-abandonment or cancellation by the broker

-revocation by your principle

-mutual consent

-acts of law

protection period for the broker

listing has expired, broker may still be entities to a commission if all criteria are met

civil act right of 1866

prohibits discrimination based on race or color

Federal Fair Housing Act AKA Title VIII of the Civil Right Act of 1968

forbids discrimination on the basis of race, color, national origin, and religion

1974 amendment added….?

sex as a protected category

act amended in 1988 included?…..

family composition and the handicapped

handicapped

mental or physically impaired

alcoholics or recovering drug users and AIDS victims are included in the list ja

what is not covered in the Federal Fair Housing Act?

Age is not covered due to senior housing

rules to qualify for senior housing

100% units occupied by someone 62 or older

80% units occupied by someone 55 or older

under the Federal Fair Housing Act no one is protected based upon…?

occupation

a landlord can refuse to lease to….?

party who has been convicted of using or selling illegal drugs

mentally handicapped tenant who is in danger to himself or others

blockbusting/panic peddling

causing panic selling by homeowners

steering/channeling

directing buyers into or away from certain areas because of their race, color, etc.

Equal Housing Opportunity Poster

must be displayed in his or her office

if not can be considered prima facie evidence of discrimination

when complaint is made to HUD, how does HUD handle the situation?

HUD will try mediation to resolve the problem before pursing the matter in court

Victims have up to how long to seek mediations thought HUD

1 year

how long do victims have to file a complaint with the courts?

2 years

Americans with disability act

was passed to prohibit discrimination against individuals with special needs by denying them the full and equal enjoyment of goods, facilities, privileges, etc.

Federal DO NOT Call Registry

cold calling to telemarketing by an agent, they must comply with this registry

administered by the FTC (federal trade commission)

agent may call party whose number is on the registry for 90 days after party first contacted license holder

90 days= call back period

when emailing for marketing real estate you must put what as the top line of the email?

must put as the top line of email “Solicitation for Real Estate Business”

body of email must have an “opt-out” choice

Trust accounts

if broker accepts earnest money or deposit and act as an escrow agent, money must be deposited in a special trust account set up for this purpose

who’s name should the broker account be in?

the brokers name

all clients funds can be kept in the same account as long as written records are maintained

brokers should keep copies of all documents involved in the business for what minimum?

minimum of 4 years

Vicarious liability

broker is held responsible for the actions of brokers sponsored agent, even if broken themselves didn’t do anything

Sherman and Clayton Anti-Trust Acts

passed to preserve business competition by prohibiting monopolies, monopolistic practices, restraint of trade.

are commissions always negotiable?

yes, they are.

there is no standard or fixed rate

is competing broker-to-broker commission discussions prohibited?

yes, they are prohibited

the agent should make every effort to be knowledgeable about the conditions of the property, what does this conclude?

this helps to avoid exposure to lawsuits

all material facts about the property must be disclosed

-death on property due to material defect, violent crime (murder)

what is not required by the agent to disclose about conditions of the property?

death by natural causes or suicide

what is the agent not allowed to disclose about conditions of the property?

death due to HIV/ Aids

stigmatized

a property where there has been a murder or alleged haunting

also if property is in the vicinity of the residence of a sexual offender

Megans law

federal law requiring all sates to release info to public about known convicted sex offenders

agents are not required to disclose information but should refer buyers to local sourced if asked

puffing

marketing

uses adjectives and opinions rather than details or facts

ex: the most beautiful landscaping

Errors and Omissions Insurance

insurance protects both broker and sales licensees form a legal claim or liability for mistakes, errors, negligance

General liability insurance

may include bodily injury or property damages caused by direct or indirect actions of the insured.

protects a company assets if someone is injured on company property

most often appears in homeowners insurance policies

business entities (broker candidates only)

sole proprietorship- a single person

partnership- may contain all general partners or combination of general and limited partners

general partner

a co-owner who can enter into contracts on behalf of the partnership

fully liable for all partnerships debts

can be a person or company

limited partner

investor with no say in the operation of the partnership, liability is limited to the amount of their investment

LLC

limited liability company

S Corporation

small corporation designed to remove self-employment tax and reduce personal liability