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© 2013 Rockwell Publishing Washington Real Estate Practices Lesson 3: Listing Regulations
© 2013 Rockwell Publishing Real Estate Law Washington real estate law determines: how commissions are paid who “owns” a listing
© 2013 Rockwell Publishing Real Estate Law How commissions are paid Agent’s commission must come from her brokerage. Seller pays brokerage and brokerage pays agent a portion of that amount.
© 2013 Rockwell Publishing How Commissions Are Paid Different brokerages If buyer was represented by different brokerage: buyer’s brokerage will receive part of commission, and buyer’s agent will be compensated by his brokerage.
© 2013 Rockwell Publishing How Commissions Are Paid Same brokerage If two agents working for one brokerage share credit for sale, brokerage must arrange commission split. One agent cannot compensate another.
© 2013 Rockwell Publishing Real Estate Law Suing for a commission If seller owes commission but refuses to pay it, brokerage may sue to enforce listing agreement. Agent can’t sue seller directly, but can sue brokerage if designated broker fails to pay agent part of commission.
© 2013 Rockwell Publishing Real Estate Law Ownership of listing Only brokerage can deal directly with principal, so listing agreement “belongs” to brokerage. When signing listing, agent should fill in brokerage’s name, and then sign his name as agent for brokerage.
© 2013 Rockwell Publishing Real Estate Law Ownership of listing If agent quits working for brokerage and begins working for another brokerage, listing stays with first brokerage.
Summary Real Estate Law Paying a commission Commission split Suing for a commission Ownership of listings © 2013 Rockwell Publishing
Distressed Property Law In 2008, Washington passed the Distressed Property Law. The law protects homeowners in financial distress from exploitive foreclosure rescue schemes.
© 2013 Rockwell Publishing Distressed Property Law Generally, real estate agents providing routine real estate brokerage services are exempt from the law’s requirements. This exemption doesn't apply if an agent actually participates in a distressed home conveyance.
© 2013 Rockwell Publishing Distressed Property Law Distressed home conveyance: when buyer: buys property from distressed homeowner (one facing foreclosure), allows homeowner to stay in home for more than 20 days past closing, and promises to convey property back to homeowner (or promises homeowner a share of the proceeds from property’s resale).
© 2013 Rockwell Publishing Distressed Property Law If agent participates in this type of transaction, he must complete a distressed home consultant agreement with homeowner that describes the additional services to be provided. An attorney should draft the consultant agreement. It should be attached as an addendum to the listing agreement.
© 2013 Rockwell Publishing Distressed Property Law Many standard listing agreement forms now include clause stating that licensee will not assist in a distressed home sale without a separate written agreement.
Summary Distressed Property Law Distressed homeowner Distressed home conveyance Distressed home consultant Distressed home consultant agreement © 2013 Rockwell Publishing
Antidiscrimination Laws Important fair housing laws: Fair Housing Act (federal) Washington Law Against Discrimination Washington Real Estate License Law Americans with Disabilities Act
© 2013 Rockwell Publishing Federal Fair Housing Act Protected classes Federal Fair Housing Act enacted in 1968 to prohibit discrimination in housing based on: race color religion sex national origin disability familial status
© 2013 Rockwell Publishing Federal Fair Housing Act Protected classes Disability: any physical or mental impairment that substantially limits one or more major life activities.
© 2013 Rockwell Publishing Federal Fair Housing Act Residential transactions Act applies to sale or lease of: residential property vacant land for construction of residential buildings
© 2013 Rockwell Publishing Federal Fair Housing Act Residential transactions Along with transactions, applies to: advertising financing real estate brokerage activities in connection with residential real estate transactions There are several exemptions, but never applicable when real estate agent is involved.
© 2013 Rockwell Publishing Federal Fair Housing Act Prohibitions Act prohibits the following when based on protected characteristics: refusing to rent or sell residential property after receiving bona fide offer refusing to negotiate for sale or rental of residential property changing terms of sale or lease for different buyers or renters using advertising that indicates preference or intent to discriminate
© 2013 Rockwell Publishing Federal Fair Housing Act Prohibitions representing property is not available for inspection, rent, or purchase when it is available discrimination by residential lender limiting participation in MLS coercing or intimidating anyone for exercising her rights under Fair Housing Act
© 2013 Rockwell Publishing Federal Fair Housing Act Blockbusting, steering, redlining In particular, Fair Housing Act prohibits: blockbusting steering redlining
© 2013 Rockwell Publishing Federal Fair Housing Act Blockbusting Blockbusting: agent encourages people to list homes by predicting members of another race (or another protected group) are moving into neighborhood.
© 2013 Rockwell Publishing Federal Fair Housing Act Blockbusting Agents profit from blockbusting by: purchasing vacated properties at reduced prices, or collecting commissions on induced sales.
© 2013 Rockwell Publishing Federal Fair Housing Act Steering Steering: channeling buyers or tenants to or away from particular neighborhoods because of race (or another protected characteristic).
© 2013 Rockwell Publishing Federal Fair Housing Act Steering Agent cannot advise buyer to buy or not buy based on neighborhood’s racial or ethnic composition. Avoid unsolicited statements about neighborhood’s racial or ethnic composition.
© 2013 Rockwell Publishing Federal Fair Housing Act Redlining Redlining: lender’s refusal to make loan, based on ethnic or racial composition of property’s neighborhood.
© 2013 Rockwell Publishing Federal Fair Housing Act Redlining Lender may reject loan application for property in neighborhood where values are declining. Decision must be based on objective economic criteria.
© 2013 Rockwell Publishing Federal Fair Housing Act Enforcement Fair Housing Act enforced: by Department of Housing and Urban Development through its Office of Fair Housing and Equal Opportunity HUD may refer cases to state’s Human Rights Commission.
© 2013 Rockwell Publishing Federal Fair Housing Act Enforcement Violations of act may result in: injunction ordering stop to violation, payment of damages and attorneys’ fees to injured party, and payment of civil penalty to government.
© 2013 Rockwell Publishing Federal Fair Housing Act Enforcement Civil penalty as high as: $16,000 for first offense up to $65,000 for subsequent offenses
Summary Fair Housing Act Fair Housing Act Blockbusting Steering Redlining Penalties © 2013 Rockwell Publishing
Washington Antidiscrimination Law Real estate agents must comply with state antidiscrimination laws, which include: Washington Law Against Discrimination Washington Real Estate License Law
© 2013 Rockwell Publishing WA Law Against Discrimination Washington Law Against Discrimination is stricter than the federal Fair Housing Act. Covers a broader range of activities and protects more classes of people.
© 2013 Rockwell Publishing WA Law Against Discrimination Law prohibits any discrimination based on: race creed color national origin sex marital status sexual orientation familial status disability use of trained guide or service dog military status
© 2013 Rockwell Publishing WA Law Against Discrimination Prohibited acts Law prohibits wide range of discriminatory practices in: employment insurance credit transactions places of public accommodation and amusement in regard to all types of real property
© 2013 Rockwell Publishing WA Law Against Discrimination Prohibited acts It is against the law to: refuse to engage in a real estate transaction discriminate in terms/conditions of real estate transaction discriminate in providing services/facilities related to real estate transaction refuse to receive or fail to transmit a bona fide offer refuse to negotiate
© 2013 Rockwell Publishing WA Law Against Discrimination Prohibited acts claim property is not available for inspection, sale, rental, or lease when it is available fail to tell prospect about property listing publish an ad, notice, or sign that indicates an intent to discriminate use application form or make any record or inquiry indicating intent to discriminate take a listing with an understanding that someone may be discriminated against
© 2013 Rockwell Publishing WA Law Against Discrimination Prohibited acts expel a person from occupancy discriminate in negotiating, executing, or financing a transaction engage in blockbusting include a condition, restriction, or prohibition based on a protected class in a written agreement discriminate in any credit transaction through different terms and conditions
© 2013 Rockwell Publishing WA Law Against Discrimination Exemptions The law has very few exemptions, and none of them apply to a real estate agent engaged in professional activity.
© 2013 Rockwell Publishing WA Law Against Discrimination Enforcement The Washington Human Rights Commission enforces the state antidiscrimination laws. Individual may file complaint with the commission within one year of discriminatory action.
© 2013 Rockwell Publishing WA Law Against Discrimination Enforcement Commission investigates all complaints and will try to resolve problem by conference, conciliation, and persuasion. If cannot be resolved, a hearing is scheduled with administrative law judge.
© 2013 Rockwell Publishing WA Law Against Discrimination Enforcement Administrative law judge can: issue cease and desist order, provide affirmative relief, award compensatory damages, and/or impose civil penalty.
© 2013 Rockwell Publishing Washington Real Estate License Law Real estate agents must also comply with antidiscrimination provisions of license law and regulations.
© 2013 Rockwell Publishing Washington Real Estate License Law Licensee’s violation of fair housing or civil rights law is grounds for disciplinary action. The Department of Licensing can suspend or revoke the license of a brokerage that discriminates against protected class member in sales or hiring activity.
© 2013 Rockwell Publishing As with any license law violation, individual licensees face a fine of up to $5,000 for each offense. Licensee may also be required to complete educational course on civil rights laws and nondiscriminatory real estate practices. Washington Real Estate License Law
© 2013 Rockwell Publishing Americans with Disabilities Act Americans with Disabilities Act is a federal law requiring places of public accommodation and other commercial facilities to provide equal access to disabled persons.
© 2013 Rockwell Publishing Americans with Disabilities Act Public accommodations Public accommodations = facilities open to public, including: brokerages and other office buildings stores restaurants hotels
© 2013 Rockwell Publishing Americans with Disabilities Act Modifications May require modifications to facilities, such as: ramps or elevators special bathroom stalls designated parking spaces
© 2013 Rockwell Publishing Americans with Disabilities Act Commercial properties Brokerage working with commercial property should: be aware of ADA requirements inform prospective buyers or tenants of modifications they may have to make
Summary Antidiscrimination Laws Washington Law Against Discrimination Washington Real Estate License Law Americans with Disabilities Act © 2013 Rockwell Publishing
Fair Housing Law Compliance Steering Never direct members of minority groups to minority neighborhoods. Even if done with good intentions, steering is always illegal.
© 2013 Rockwell Publishing Not illegal to truthfully answer client’s questions about residents of neighborhood, even if he decides not to look at that neighborhood because of type of residents. Fair Housing Law Compliance Steering
© 2013 Rockwell Publishing Agent can’t discourage buyer from looking within a neighborhood, but doesn’t have to show properties buyer doesn’t want to see. Fair Housing Law Compliance Steering
© 2013 Rockwell Publishing Fair Housing Law Compliance Blockbusting When listing property, never imply presence of minorities will: lower property values, make neighborhood less safe, or lower quality of neighborhood schools.
© 2013 Rockwell Publishing Fair Housing Law Compliance Refusal to list Never refuse to list property because of presence or absence of particular group. Never imply house will be easier or harder to sell because of presence of particular group.
© 2013 Rockwell Publishing Fair Housing Law Compliance Racial jokes Agent should not remain silent if potential clients or customers make such discriminatory statements. If client’s jokes or comments indicate willingness to discriminate, agent should clarify position on fair housing.
© 2013 Rockwell Publishing Fair Housing Law Compliance Explain the law In any listing presentation, agent should explain fair housing laws to seller. Comments by seller that aren’t discriminatory but refer to “preserving character of neighborhood” are red flags; agent may be better off refusing listing.
© 2013 Rockwell Publishing Fair Housing Law Compliance Advertising Advertising flyers should be sent to diverse sample of potential buyers. Don’t limit mailing flyers to persons or neighborhoods predominantly of particular race.
© 2013 Rockwell Publishing Ads shouldn’t suggest recipient can control what type of person will buy property. Phrases such as “uphold standards of community” or “preserve character of neighborhood” are suspect. Fair Housing Law Compliance Advertising
© 2013 Rockwell Publishing Advertise in newspapers of general circulation instead of limiting ads to neighborhood or foreign-language newspapers. Fair Housing Law Compliance Advertising
© 2013 Rockwell Publishing Use diverse images in choice of photos and clip art. Include Equal Housing Opportunity logo. Fair Housing Law Compliance Advertising
© 2013 Rockwell Publishing Never suggest discriminatory preference. Ads containing information with religious significance may be considered to convey religion-based preference. Fair Housing Law Compliance Advertising
© 2013 Rockwell Publishing Okay to describe accessibility features. Don’t suggest preference for adults or limitation on children. Unless property qualifies as housing for older persons under federal guidelines. Fair Housing Law Compliance Advertising
Summary Fair Housing Law Compliance Avoid blockbusting and steering Don’t refuse listings Avoid racial jokes Explain the law Advertising © 2013 Rockwell Publishing
Antitrust Laws Sherman Act Federal antitrust laws require fair business practices among competitors. Sherman Act, passed in 1890, prohibits any agreement that unreasonably restrains trade.
© 2013 Rockwell Publishing Sherman Act Penalties Penalties for violating Sherman Act: for individual, fine up to $1,000,000 and up to 10 years in prison for corporation, fine up to 100 million dollars
© 2013 Rockwell Publishing Sherman Act Prohibited acts Antitrust laws prohibit four specific practices: price fixing group boycotts tie-in arrangements market allocation
© 2013 Rockwell Publishing Price fixing: competitors cooperating in setting prices. Competing real estate brokerages may not set uniform commission rates or publish mandatory fee schedules. Commission rates must be freely negotiable between brokerage and seller. Sherman Act Price fixing
© 2013 Rockwell Publishing Agent should not: say commission rate is fixed say government, Association of Realtors®, or MLS sets commission rate say standard rate exists in community mention rates that competitors charge Antitrust Laws Price fixing
© 2013 Rockwell Publishing Agents should avoid discussing commission rates with competing agents. Designated broker may, however: discuss commission split with cooperating brokerage discuss commission rates with her own agents Antitrust Laws Price fixing
© 2013 Rockwell Publishing Antitrust Laws Group boycotts Group boycott: agreement between two agents to exclude another agent from participation in real estate activities. Violation of antitrust laws.
© 2013 Rockwell Publishing Group boycott can be based on: formal agreement carried out by large group casual discussion between two people Antitrust Laws Group boycotts
© 2013 Rockwell Publishing Because of group boycott prohibitions, MLS cannot deny membership to particular brokerage. Even agreement among several agents to not refer business to an agent perceived as unethical would be considered group boycott. Antitrust Laws Group boycotts
© 2013 Rockwell Publishing Antitrust Laws Tie-in arrangements Tie-in arrangement: agreement to sell one product only on condition that buyer purchases different product as well.
© 2013 Rockwell Publishing Example: Builder wants to buy vacant lot from developer, but developer will sell only if builder lists completed property with him. Known as list-back agreement. Antitrust Laws Tie-in arrangements
© 2013 Rockwell Publishing List-back agreements are legal if parties enter into them voluntarily. Illegal if a mandatory condition of sale. Antitrust Laws Tie-in arrangements
© 2013 Rockwell Publishing Market allocation: agreement between competing firms not to sell certain products or services, in certain areas or to certain customers. Example: Two real estate firms cannot agree to split up town, one firm taking north end and the other south end. Antitrust Laws Market allocation
© 2013 Rockwell Publishing The Washington Unfair Business Practices and Consumer Protection Act (“Consumer Protection Act”) prohibits anticompetitive practices. Covers same practices as federal antitrust law. WA Unfair Business Practices and Consumer Protection Act
© 2013 Rockwell Publishing Act bans “unfair or deceptive acts or practices in the conduct of any trade or commerce.” Also prohibits misleading or deceptive advertising. WA Unfair Business Practices and Consumer Protection Act
© 2013 Rockwell Publishing Under the Consumer Protection Act, the builder/seller of a new home gives the buyer an implied warranty of habitability. Latent defects affecting safety and livability of home violate the implied warranty. WA Unfair Business Practices and Consumer Protection Act
© 2013 Rockwell Publishing Private party suing under act may recover damages, court costs, and attorney’s fees. Court is allowed to triple the damages award. State may also bring suit against a company or individual. WA Unfair Business Practices and Consumer Protection Act
Summary Antitrust Laws Sherman Act Price fixing Group boycotts Tie-in arrangements Consumer Protection Act © 2013 Rockwell Publishing
Environmental Laws Federal and state environmental regulations may affect real estate transactions: NEPA SEPA Shoreline Management Act CERCLA Clean Water Act Endangered Species Act
© 2013 Rockwell Publishing Environmental Laws NEPA NEPA (National Environmental Policy Act) requires federal agencies to provide environmental impact statement for any action with significant effect on environment. Applies to federal development and private actions requiring federal agency approval.
© 2013 Rockwell Publishing Environmental Laws SEPA SEPA (State Environmental Policy Act) requires environmental impact statement for all acts of state and local agencies that may have a significant effect on environment. Applies to private development since construction requires building permit (granting permit is local agency action).
© 2013 Rockwell Publishing Environmental Laws Shoreline Management Act Shoreline Management Act regulates development within 200 feet of the high water mark.
© 2013 Rockwell Publishing Environmental Laws Shoreline Management Act Shoreline Management Act applies to: coastal shorelines shores of lakes larger than 20 acres streams that flow at certain rates
© 2013 Rockwell Publishing Environmental Laws Shoreline Management Act Developers of shoreline property required to obtain a substantial development permit before work begins. “Substantial” means development in excess of $6,416 or that materially interferes with normal public use of water or shoreline.
© 2013 Rockwell Publishing Environmental Laws Shoreline Management Act Violators of the act may be fined up to $1,000 per day. Court may order shoreline restored to its original condition.
© 2013 Rockwell Publishing Environmental Laws CERCLA CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) is federal law regulating liability for environmental cleanup costs. Parties responsible for cleanup of property contaminated by hazardous waste may include both current and previous landowners.
© 2013 Rockwell Publishing Environmental Laws Clean Water Act Section 404 of Clean Water Act prohibits development of wetlands without permit from U.S. Army Corps of Engineers. Wetland development may be permitted if developer creates new wetland areas elsewhere or pays into government fund that restores wetlands.
© 2013 Rockwell Publishing Environmental Laws Endangered Species Act Endangered Species Act limits property development where endangered or threatened species are present. Development may be allowed if property owner agrees to Habitat Conservation Plan and takes measures to limit harm to protected species.
© 2013 Rockwell Publishing Environmental Hazards Possible environmental hazards on property: asbestos urea formaldehyde radon lead-based paint underground storage tanks water contamination illegal drug manufacturing mold geologic hazards
© 2013 Rockwell Publishing Environmental Hazards Asbestos Asbestos was commonly used as insulation, in floor tile, and in roofing material. Harmless in original state but can cause lung cancer as it disintegrates and turns to dust.
© 2013 Rockwell Publishing Environmental Hazards Asbestos Asbestos can be dealt with through: enclosure (placing barrier between asbestos and rest of space) encapsulation (covering asbestos with adhesive that seals it off) removal
© 2013 Rockwell Publishing Environmental Hazards Urea formaldehyde Urea formaldehyde can cause illnesses such as cancer and breathing problems. May be found in pressed wood building materials and foam insulation. Urea formaldehyde materials emit dangerous gases for only a few years.
© 2013 Rockwell Publishing Environmental Hazards Radon Radon is gas that can cause lung cancer. Can seep into basements or foundations. Found wherever uranium is deposited in earth’s crust. Radon can be dealt with by sealing holes or cracks that allow it to enter house.
© 2013 Rockwell Publishing Environmental Hazards Lead-based paint Lead is toxic material particularly harmful to young children who may ingest it. Many homes built before 1978 contain some lead-based paint. Paint may be removed or covered with non-lead-based paint.
© 2013 Rockwell Publishing Environmental Hazards Underground storage tanks As underground storage tanks grow old, they may rust and leak oil into groundwater. Federal and state laws regulate storage tank removal and cleanup.
© 2013 Rockwell Publishing Environmental Hazards Water contamination Contaminated water may expose people to health hazards: bacteria or viruses nitrates lead or mercury pesticides or fertilizers radon oil from underground storage tanks
© 2013 Rockwell Publishing Environmental Hazards Illegal drug manufacturing Properties used for manufacture of illegal drugs may retain residues of highly toxic chemicals. These properties should be thoroughly tested.
© 2013 Rockwell Publishing Environmental Hazards Mold Mold is a common problem with no ill effects for most people, but can cause serious respiratory problems for some. Cannot be totally eliminated, but may be limited by: scrubbing away current growth limiting sources of moisture to prevent future growth
© 2013 Rockwell Publishing Environmental Hazards Geologic hazards Home buyers should be aware of potential geologic hazards for certain properties: landslides flooding subsidence (collapse of ground into underground cavities) earthquakes
© 2013 Rockwell Publishing Environmental Hazards Agent’s role Agent should be on lookout for potential environmental problems when viewing the property.
© 2013 Rockwell Publishing Environmental Hazards Agent’s role Advise seller to consult environmental attorney, engineer, or other professional if problems are suspected. Buyers shouldn’t buy property until necessary cleanup is completed.
Summary Environmental Issues NEPA SEPA Shoreline Management Act CERCLA Clean Water Act Endangered Species Act Environmental hazards Agent’s role © 2013 Rockwell Publishing
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