The U.S. Department of Justice (DOJ) and the NAR are engaged in an ongoing lawsuit filed by the DOJ in November 2020. The DOJ alleges, among other allegations, that some NAR rules are illegal restraints on REALTOR competition. In particular, for this conversation, the DOJ alleges that NAR’s policies prohibit transparency to the consumer regarding buyer broker commissions.
The lawsuit has already gone through multiple phases, including a settlement and then withdrawal of the settlement, so it may take a while to conclude. However, transparency to the consumer regarding payment of commissions is likely going to become the nationwide rule. In an effort to conform to the eventual practice of full transparency, GAR has rewritten the commission section of the Buyer Brokerage Agreement in a way that complies with full transparency. Buyer Agent Services are Not Free The heart of the DOJ allegation is that the practice of agents saying or inferring that the buyer broker’s fee is free to the buyer because it is paid by the seller. The broker’s fee is in the purchase price so the buyer is paying. The new language clearly states the commission amount is owed by the buyer to the buyer’s broker and then clarifies that the full amount owed is “minus any commission paid to Broker by either the seller’s broker or the seller.” The new language also includes an acknowledgment that the commission, if any, being offered by the seller’s broker is usually set forth in the multiple listing service in which the property is listed. When buyers want to see properties that offer less commission than agreed in the Buyer Brokerage Agreement, they need to understand that the difference in commission will be owed by them if that property is purchased. Both FMLS and GaMLS require the Buyer broker’s commission to be disclosed in the listing, so they are already operating with transparency and the commission to be paid is known. Sometimes the seller or seller’s agent does not list in the multiple listing services, such as some builders. Investigation will be needed, so that your buyer – and you - know the facts. Emphasize the Value You Bring This change reflects what may be the start of an eventual shift in how real estate brokers working with buyers are paid. Buyer’s brokers will need to be able to more clearly articulate the value of the services they perform to their buyer clients. Great agents that are prepared to demonstrate their services as both valuable and necessary, will continue to thrive!
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Two questions have recently come up concerning the Conventional Loan Contingency Denial Letter and Appraisal.
Question 1: Where there is a conventional loan contingency exhibit, if the appraisal has not been completed prior to the end of the appraisal & finance contingency, can the buyer terminate the contract with a loan denial letter, based upon the reason "insufficient property data?" Answer Use of Approved Lender and Loan Denial Letter was expanded in the 1/1/2022 printing to include new sections (e) and (f), reasons upon which a loan denial letter may not be solely based: (e) the Property not appraising for at least the purchase price unless this Agreement is subject to an appraisal contingency and an appraisal meeting the requirements of this Agreement has been performed; or (f) the lender not having completed underwriting the loan request. Therefore, an appraisal not being completed is not a valid reason for a denial letter during the finance or appraisal contingency. So, if an appraiser hasn’t met a loan deadline, the buyer cannot use that as a sole basis for a loan denial letter. It is not considered “insufficient property data.” Question 2: Where there is an “Approved Lender” included in paragraph 2 and the buyer chooses to use a non-approved lender, can a low appraisal ordered by the non-approved lender’s appraiser trigger the buyer’s remedies for a low appraisal in paragraph 11? That is, would the buyer still be able to ask the seller for a price reduction or terminate the contract per the Appraisal Contingency? Answer: The simple answer is yes. The forms committee intended that a buyer could ask for a reduction based on a low appraisal from an appraiser selected by any Lender, not just an “Approved Lender.” The buyer loses the ability to use a loan denial letter from a non-approved lender, but the buyer’s right to ask for a reduction in price or termination for a low appraisal stands – even if it is from the non-approved lender’s appraiser. Every Transaction Requires the ABAD
The Affiliated Business Arrangement Disclosure (“ABAD “) is a required RMAA document for all clients and customers for every transaction. This requirement is based directly on regulations of the Federal Consumer Protection Bureau, RESPA and Georgia License Law. No transaction can be completed without an executed ABAD in the file. According to Georgia License Law, it is an Unfair Trade Practice to receive anything of value for the referral of any service or product in a real estate transaction to a principal. GA Code 43-40-25-b-6 (C). The ABAD is the document that complies with this requirement. The current ABAD can be found both in the RMAA HUB under Resources Library > Office Forms and Documents > Affiliated Business Arrangements Disclosure. It can also be found in Remine when the RMAA “Package” is selected. Because vendors may change with time, the form is updated as needed. The current version of the ABAD was updated in September 2021. The previous form is no longer valid. Even if a transaction falls through, the ABAD is required. According to a 2009 decision from the US Supreme Court, just as a violation of the rights of “testers” in fair housing test cases to receive “truthful information” supports standing, so does a violation of the right to receive referrals untainted by conflicts of interest. So, even if a deal falls through, the ABAD is still required to be in the file! Separate from the required ABAD, vendors may be recommended that may not live up to expectations. GAR has provided a document that offers protection to agents in the referral of a vendor. GAR F834 can be very useful and should be considered as an additional document in transactions. It includes the following language. Furnishing of any names of vendors provided by Broker or Broker's Affiliated Licensee is done as a ministerial act and only as a courtesy to the undersigned and does not in any way constitute any warranty or representation as to the quality of the vendors, their services or subsequent reports. The undersigned acknowledges that they had the option to select any vendor of their choice and that the Broker is not responsible for any guarantees, representations, or warranties of the selected vendors they choose. For good and valuable consideration, the undersigned herewith releases the Broker and the Broker's Affiliated Licensee from any liability or claim arising out of or in connection with the services of vendor. The GAR Forms Committee has improved language for 2022, making the forms more precise and easier to use. Please review the following changes to the 2022 GAR Contracts and Forms. There are additional minor changes that are not addressed here, so be sure to review new forms before you use them! The new forms will be effective on 1/1/2022!
Very often, a Listing Agent will discount commission if there is no cooperating broker in the transaction or if listing broker’s own firm is the cooperating broker. In such cases, Article 3, Standard of Practice 3.4 directs REALTORS® requirements for disclosure. The Listing Broker must disclose such variable rate agreements to potential cooperating brokers as soon as practical.
The logic is simple. Potential cooperating brokers should be placed on a level playing field with agents from the listing agent’s own firm or the listing agents themselves. All other terms being equal, a seller is naturally going to choose the offer that nets the most money. Where the listing agent has agreed to a discounted commission if he or his firm is also the selling agent, there is a financial advantage to the seller to accept the listing agent‘s or firm’s offer over any cooperating agent’s offer. Further, the listing agent must disclose to the co-op agent the money or percentage difference between the cooperative (out-house”) transaction vs. the “in house” transaction. Then that information must be disclosed to the potential buyer by the potential co-op agent before the client makes an offer to purchase. Code of Ethics Article 3 Standard of Practice 3.4 Language REALTORS®, acting as listing brokers, have an affirmative obligation to disclose the existence of dual or variable rate commission arrangements (i.e., listings where one amount of commission is payable if the listing broker’s firm is the procuring cause of sale/lease and a different amount of commission is payable if the sale/lease results through the efforts of the seller/ landlord or a cooperating broker). The listing broker shall, as soon as practical, disclose the existence of such arrangements to potential cooperating brokers and shall, in response to inquiries from cooperating brokers, disclose the differential that would result in a cooperative transaction or in a sale/lease that results through the efforts of the seller/landlord. If the cooperating broker is a buyer/tenant representative, the buyer/tenant representative must disclose such information to their client before the client makes an offer to purchase or lease. The following example is on point. Case #3-8: REALTOR®’s Obligation to Disclose Dual Commission Arrangements REALTORS® A and B were members of the same Association and Participants in the MLS. REALTOR® A, cooperating with REALTOR® B on REALTOR® B’s listing, submitted an offer to purchase signed by buyers offering the listed price, and a check for earnest money. The only contingency was a financing contingency, and REALTOR® A shared with REALTOR® B the buyers’ loan prequalification letter. The following day, REALTOR® B emailed the offer back to REALTOR® A with “REJECTED” written on it and initialed by the seller, and explained that the seller had accepted another offer secured by one of REALTOR® B’s sales Associates. REALTOR® A inquired about the seller’s reason for rejecting the full price offer with only a mortgage contingency, and what had caused the seller to accept the other offer. REALTOR® B responded that he did not know, but with equal offers, he supposed the seller would favor the offer secured by the listing broker. Later, REALTOR® A saw the seller at a dinner party. The seller thanked him for his efforts in connection with the recent sale of the seller’s home. The seller hoped REALTOR® A understood there was nothing personal in his decision, adding that the money he saved through his “special agreement” with REALTOR® B had been the deciding factor. When REALTOR® A asked about the “special agreement,” the seller explained he had signed a listing agreement for the sale of his property which authorized the submission of the listing to the Multiple Listing Service and specified a certain amount of compensation. However, the seller stated that he had also signed an addendum to the listing agreement specifying that if REALTOR® B sold the listing through his own office, a percentage of the agreed compensation would be discounted to the seller’s credit, resulting in a lower commission payable by the seller. REALTOR® A filed a complaint with the Association of REALTORS® against REALTOR® B, alleging a violation of Article 3. After its review of the complaint, the Grievance Committee requested that an ethics hearing be arranged. REALTOR® A, in restating his complaint to the Hearing Panel, said that REALTOR® B’s failure to disclose the actual terms and conditions of the compensation offered through the MLS resulted in concealment and misrepresentation of pertinent facts to REALTOR® A and to the prospective buyers served by REALTOR® A who had, in good faith, offered to purchase the property at the listed price with only a mortgage contingency. REALTOR® A told the Hearing Panel that if he had known the facts which were not disclosed by REALTOR® B, he could have fully and accurately informed the buyers who could have taken those facts into consideration when making their offer. As it was, said REALTOR® A, the buyers acting in good faith were deceived by facts unknown to them because they were unknown to REALTOR® A. Further, REALTOR® A said that REALTOR® B’s failure to fully disclose the true terms and conditions relating to compensation made it impossible to have a responsible relationship with REALTOR® B and make proper value judgments as to accepting the offer of compensation. REALTOR® B stated that it was his business what he charged and the Association or MLS could not regulate his charges for his services. If he wished to establish a dual commission charge by agreement with his client, that was his right, and there was no need or right of the Association or MLS to interfere. The Hearing Panel agreed that it was REALTOR® B’s right to establish his fees and charges as he saw fit, and that the Association or MLS could not and would not interfere. However, the Hearing Panel noted that his complete freedom to establish charges for his services did not relieve him of his obligation to fully disclose the real terms and conditions of the compensation offered to the other Participants of the Multiple Listing Service, and did not justify his failure to disclose the dual commission arrangement. In the case of a dual commission arrangement, the listing broker must disclose not only the existence of the “special arrangement” but also must disclose, in response to an inquiry from a potential cooperating broker, the differential that would result in the total commission in a cooperative transaction. The Hearing Panel concluded that by submitting a listing to the MLS indicating that he was offering a certain amount of compensation to cooperating brokers while other relevant terms and conditions were not disclosed to the other MLS Participants, he had concealed and misrepresented real facts and was in violation of Article 3 of the Code of Ethics. The short answer is No. A tenant seeking and advertising for a roommate is not covered by the Fair Housing Act (FHA). The long answer is more complicated. It involves a 9th Circuit Appellate case that distinguishes the roommate situation from the FHA. For those of you that want the legal explanation, read on.
“Dwellings” As Defined By the Fair Housing Act The FHA is very broad-based legislation that prohibits discrimination in housing on the basis of “race, color, religion, sex, familial status, or national origin” in the “sale or rental of a dwelling.” 42 U.S.C. § 3604(b) . Dwelling is the operative word, according to the 9th Circuit decision, Fair Housing Council of San Fernando Valley v. Roommate.com, LLC, 666 F.3d 1216 (9th Cir. 2012). The FHA does not interfere with relationships inside the home. The FHA defines “dwelling” as “any building, structure, or portion thereof which is occupied as, or designed or intended for occupancy as, a residence by one or more families.” Id. § 3602(b). A dwelling is thus a living unit designed or intended for occupancy by a family, meaning that it ordinarily has the elements generally associated with a family residence: sleeping spaces, bathroom and kitchen facilities, and common areas, such as living rooms, dens and hallways. The Court concluded that there is no indication that Congress intended to interfere with personal relationships inside the home. Congress wanted to address the problem of landlords discriminating in the sale and rental of housing, which deprived protected classes of housing opportunities. But a business transaction between a tenant and landlord is quite different from an arrangement between two people sharing the same living space. According to the Court, Congress did not mean for the FHA to apply to people sharing the same living spacc. Consider, for example, the FHA's prohibition against sex discrimination. Could Congress, in the 1960s, really have meant that women must accept men as roommates? Telling women they may not lawfully exclude men from the list of acceptable roommates would be controversial today; it would have been scandalous in the 1960s. By extension, “Female seeking female roommate” would be allowable under this case. Constitutional Concerns There are also Constitutional concerns with applying the Fair Housing Act to roommate situations. The Court concluded that the roommate relationship is so personal and intimate that potential government interference with that relationship raises significant Constitution concerns, and is unwarranted. The Court reasoned that the roommate relationship falls under the ambit of the fundamental right of intimate association, which, necessarily, also includes the right not to associate. The Court extended to roommate selection the same level of Constitutional protection afforded to “marriage, child-bearing, child rearing and cohabitation with relatives.” Our roommates, the Court reasoned, have unique access to every aspect of our personal home lives, and, we, likewise, have unfettered access to every aspect of theirs. We have a right, therefore, to select our roommates based upon our personal beliefs and opinions regarding things that may be offensive, dangerous, annoying, or otherwise incompatible with our own lifestyles. Extending the FHA anti-discrimination provisions to apply to the roommate relationship would permit the government to intrude into our homes, which are “entitled to special protection as the center of the private lives of our people.” Accordingly, it is perfectly reasonable for a woman to seek only female roommates. Notes:
The Georgia Real Estate Commission regulates the use of support personal or unlicensed assistants. An unlicensed assistant is only allowed to perform ministerial duties. These are duties which do not require the exercise of the assistant's own judgment.
The RMAA Policy and Procedures Manual clearly outlines the procedures for employing an unlicensed assistant. Among other requirements, there must be a written agreement with job descriptions, method and amount of compensation, full- or part- time status, treatment of taxes, insurance, etc. For this article, we are focusing on the job description. The agreement must include specific language that the licensed assistant shall comply with all provisions of the Georgia Real Estate Commission, state, federal and other regulatory agencies and that the unlicensed assistant shall not perform any acts of a licensee. (Please refer to the RMAA Policy and Procedures Manual for more detailed information on employing an unlicensed assistant.) No person shall be discriminated against based on sex, race, age, disability, color, creed, religion, sexual orientation, national origin, familial status or any other protected class. The Company policy prohibits discrimination in either hiring or firing of personnel based on sex, race, age, disability, color, creed, religion, sexual orientation, national origin, familial status or any other protected class.
RE/MAX Around Atlanta believes that fair housing policies are not just the law of the land but simply the right thing to do. The Company maintains a strong policy upholding all federal and state fair housing laws and Article 10 of the REALTOR Code of Ethics, including review and adherence to NAR’s Fair Housing Declaration. Associates agree to comply with all applicable federal, state and local fair housing laws. Among the prohibited practices which are against this policy and the law are:
Violating the FHA could get you into serious legal trouble and cost you thousands of dollars. Here are some common fair housing mistakes you’ll also want to be aware of:
If in Doubt:
Should an Associate be accused of discrimination, the Broker will investigate. If the investigation confirms the accusation, the Associate’s actions will be reported to the Georgia Real Estate Commission for further investigation and necessary action. A basic premise to which the Company and its Associates subscribe is that individuals with similar financial resources and interests in the same housing market area have a like range of housing choices available to them regardless of their race, color, religion, sex, handicap, national origin, ancestry, age, marital status, familial status, physical or mental disability, sexual orientation, pregnancy, gender identity or any other protected class, and that information and service will be made available to enable all clients and customers of our Company to have free choice in housing opportunities. A landlord could face large fines if they are found guilty of a violation. Cases tried before a HUD Administrative Law Judge could result in penalties of up to $21,000 for a first violation. For subsequent violations, the fine increases up to a maximum penalty of $105,194. In addition to the administrative penalties, you may also be liable for paying damages and attorney’s fees to someone who has experienced housing discrimination. In the state of Georgia, brokerage law permits client relationships, customer relationships, dual agency relationships, and designated agency relationships. Client relationships, including dual agency relationships and designated relationships, can only exist when a written brokerage agreement is executed between RMAA and the client.
BUYER REPRESENTATION It is RMAA’s policy to represent each buyer with whom the Company is working as a client pursuant to a written Buyer Brokerage Agreement, and in addition the Associate must promote the interests of the buyer client by (a) seeking a property at a price and on terms acceptable to the buyer; (b) timely presenting all offers and counter offers to and from the buyer; (c) disclosing to the buyer adverse material facts which the Associate has actual knowledge concerning the transaction; (d) advising the buyer to obtain expert advice as to material matters which are beyond the expertise of the Associate; (e) timely accounting for all money and property received by the Associate in which the buyer has or may have an interest; (f) exercising ordinary skill and care in working for the buyer; and (g) complying with all laws and regulations governing real estate brokers and Associates. SELLER REPRESENTATION It is Company policy to represent each seller with whom RMAA is working as a client pursuant to a written listing agreement, and in addition the Associate must promote the interests of the seller client by (a) providing information on market statistics to the seller; (b) advising the seller in regards to property condition and pricing; (c) marketing the home to potential buyers; (d) timely presenting all offers and counter offers to and from the seller; (e) advising the seller to obtain expert advice as to material matters which are beyond the expertise of the Associate; (f) timely accounting for all money and property received by the Associate in which the seller has or may have an interest; (g) exercising ordinary skill and care in working for the seller; and (h) complying with all laws and regulations governing real estate brokers and Associates. CONFIDENTIALITY As required by the Brokerage Relationships in Real Estate Transactions Act (BRRETA), Associates must maintain confidentiality of all personal and financial information and other matters identified as confidential by the client unless otherwise required by law or if the buyer or seller permits disclosure of the information by subsequent word or conduct. An Associate should treat as confidential any information provided by the client that may reasonably be expected to have a negative impact on the client’s real estate activity. Licensees should pay attention not to make unauthorized or offhand comments about a client's situation or property in a way which could be considered a violation of the duty of confidentiality. Four areas considered of importance are:
CUSTOMER RELATIONSHIP When an Associate is acting as the seller’s listing agent only and there is not a selling broker involved, then the Associate must treat the buyer as a customer. Under those circumstances there is no agency relationship between the Associate and the buyer. Instead, the Associate will work with the buyer as a customer and must perform the following responsibilities to the buyer: (a) treat the buyer fairly; (b) not knowingly give the buyer any false information; (c) timely disclose to the buyer all adverse material facts pertaining to the physical condition of the property and improvements located on such property, including but not limited to, material defects in the property, environmental contamination and facts required by statute or regulation to be disclosed which are actually known by the Associate, and which could not be discovered by a reasonably diligent inspection of the property by the buyer; and (d) timely disclose all material facts pertaining to existing adverse physical conditions in the immediate neighborhood within one mile of the property which are actually known to the Associate and which could not be discovered by the buyer upon a diligent inspection of the neighborhood or through a review of reasonably available governmental regulations, documents, records, maps, and statistics. DUAL AGENCY AND DESIGNATED AGENCY Company policy does not allow dual agency where one Agent represents both parties in a real estate transaction without prior written approval by the Broker. A potential single Agent dual agency situation can occur when (1) a buyer comes to the listing Agent’s open house, (2) an Agent is an on-site builder representative, (3) the listing Agent receives a direct solicitation from a potential buyer from a sign-call, ad-call, or other similar contact, or (4) a buyer is interested in a for sale by owner. In situations like 1, 2, and 3, the Associate involved will represent the seller as a client, and in situations like 4, the Associate involved will represent the buyer as a client. The other party in these situations can be treated as a customer, and no single Agent dual agency should occur. Should the other party insist on client representation, Company policy is to assign another RMAA Agent from our Office to work with that party. Any compensation sharing between Agents should be agreed upon in writing in advance and a copy should be given to the Office. With this preferred policy, different Agents affiliated with our Office act as designated Agents to exclusively represent different clients in the same transaction. The Office has the right to assign such Agents in order to have a designated agency situation, rather than single Agent dual agency situation. Each Agent so assigned shall ensure that they each represent their respective clients in accordance with the Brokerage Relationships in Real Estate Transactions Act as well as the respective brokerage agreement, as discussed above. Regarding designated agency, the Company has adopted a policy that the Associate identified in the listing agreement is automatically assigned to represent the seller as a client and that the Associate identified in the Buyer Brokerage Agreement is automatically assigned to represent the buyer as a client. If, in the rare case in which dual agency is permitted in writing by a member of the Broker Team, the 2 involved clients must each consent to deal agency in writing. If the situation occurs after either the Buyer Brokerage or Seller Brokerage paperwork has been executed, then amendments to both agreements consenting to dual brokerage must be obtained by the associate. Considering the increasing emphasis in the industry on agency relationships, the Company prefers and urges that each Associate discuss agency relationships with customers and clients at the earliest possible time in the relationship to avoid later misunderstandings. All Associates must disclose not later than the time periods required by the License Law and the rules promulgated thereunder. The GAR Lease is very specific regarding the obligations of Holders of Security Deposits for leased property. Compliance requires that the Holder adhere to multiple time limits for the preparation of Move-Out Statements and for the return of the full Security Deposit or deductions of funds from the Security Deposit.
The Move-In Inspection Per the GAR Lease Agreement, a Security Deposit is not given until there is a Move-In Inspection, which includes a list of any existing damages to the premises. Both the Landlord and Tenant must agree to the list of pre-existing damages and sign the Move-In Inspection. The Move-In Inspection creates a base line for any change to the property at Move-Out. Because there is often a time lag between the signing of a lease and the Move-In Inspection, it is common that the Tenant pay a Reservation Fee, which can be non-refundable, to the Landlord or Manager. The reservation fee then converts to a Security Deposit following the delivery of the Move-In Inspection. This has to be spelled out in the Lease. If the Holder is a real estate agency like RMAA, the funds must be deposited within 5 banking days an into an escrow account. The Security Deposit cannot be released to the Landlord or to the Tenant until there is a Move-Out Statement. When is the Move-Out Statement prepared? The Move-Out Statement must be prepared within three (3) banking days after the termination of occupancy. If all goes well and there is a satisfactory Move-Out Agreement at the termination of the lease, the Security Deposit must be returned to the Tenant by the Holder within 30 days of termination. If the tenant terminates occupancy without notifying the Holder, the Holder may make a final inspection within a reasonable time after discovering the termination of occupancy. The tenant has the right to inspect the premises within five (5) banking days after the termination of occupancy in order to ascertain the accuracy of the Move-Out Statement. If the tenant agrees with the Move-Out Statement, the tenant signs. If the tenant refuses to sign the Move-Out Statement, the tenant has to specify in writing, the items on the Move-Out Statement with which they disagree within three (3) banking days. For all purposes herein, a banking day shall not include Saturday, Sunday or federal holidays. What if the Move-Out is not satisfactory and there are damages to the property? Deductions from Security Deposit: The Holder has the right to deduct the following from the Security Deposit: (1) the cost of repairing any damage to Premises or Property caused by Tenant, Tenant’s household or their invitees, licensees and guests, other than normal wear and tear; (2) unpaid rent, utility charges or pet fees; (3) cleaning costs if Premises is left unclean; (4) the cost to remove and dispose of any personal property; (5) late fees and any other unpaid fees, costs and charges referenced herein. What if the Tenant abandons the property or does not co-operate with the Move-Out procedure? If the tenant terminates occupancy without notifying the Holder, the Holder may make a final inspection within a reasonable time after discovering the termination of occupancy. The tenant has the right to inspect the premises within five (5) banking days after the termination of occupancy in order to ascertain the accuracy of the Move-Out Statement. If the tenant agrees with the Move-Out Statement, the tenant signs. If the tenant refuses to sign the Move-Out Statement, the tenant has to specify in writing, the items on the Move-Out Statement with which they disagree within three (3) banking days. For all purposes herein, a banking day shall not include Saturday, Sunday or federal holidays. What If a Security Deposit is Dishonored? If a SD is not honored, the Holder must notify all parties to this Agreement in writing. The Tenant then has three (3) banking days after notice to deliver good funds. In the event Tenant does not timely deliver good funds, Landlord has the right to terminate this Lease. |
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