A referral is made by recommending the services of another party, person, company, or service.
If a Broker or any Licensee refers a client or customer to another Broker or Licensee and expects to be paid a referral fee, or something of value, then the client or customer must be given written disclosure of the referral fee. However, the amount of the referral is not required to be disclosed. That information should be documented between the two Brokers involved in the transaction. The required disclosure applies even if the referral is made to a Broker in another state, or country. Referrals for products or services other than brokerage services, such as mortgage brokers, warranty services, etc. must also be disclosed. The following are Unfair Trade Practices (UTP) that can result in disciplinary action from the Georgia Real Estate Commission as detailed in 43-40-25. Violations by Licensees, Schools, and Instructors; sanctions; unfair trade practices. (b) Licensees shall not engage in any of the following unfair trade practices: (6) Failing to disclose in writing to a principal in a real estate transaction any of the following: (A) The receipt of a fee, rebate, or other thing of value on expenditures made on behalf of the principal for which the principal is reimbursing the licensee; (B) The payment to another broker of a commission, fee, or other thing of value for the referral of the principal for brokerage or relocation services; or (C) The receipt of anything of value for the referral of any service or product in a real estate transaction to a principal; (36) Failing to obtain a person’s written agreement to refer that person to another licensed Broker for brokerage or relocation services and to inform such person being referred whether or not the Licensee will receive a valuable consideration for such referral. Article from GREC Newsletter January 2024
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While title insurance is an essential safety net, it’s important to know its limitations. Inexperienced buyers may confuse it with homeowner’s property insurance or a home warranty, but they are vitally different.
While not all title policies cover the same things, there are a number of items that are unlikely to be covered in a general title insurance policy. It’s important to educate your buyers on the proper title insurance coverage. Some of the items that may or may not be covered are:
FRAUDSTERS are impersonating property owners to illegally sell commercial or residential property. Sophisticated fraudsters are using the real property owner’s Social Security and driver’s license numbers in the transaction, as well as legitimate notary credentials, which may be applied without the notary’s knowledge.
Fraudsters prefer to use email and text messages to communicate, allowing them to mask themselves and commit crime from anywhere. Due to the types of property being targeted, it can take months or years for the actual property owner to discover the fraud. Property monitoring services offered by county recorder’s offices are helpful, especially if the fraud is discovered prior to the transfer of money. Where approved by state regulators, consumers can purchase the American Land Title Association (ALTA) Homeowner’s Policy of Title Insurance for additional fraud protection. WATCH FOR RED FLAGS CONSIDER HEIGHTENED SCRUTINY OR HALT A TRANSACTION WHEN A PROPERTY ■ Is vacant or non-owner occupied, such as investment property, vacation property, or rental property ■ Has a different address than the owner’s address or tax mailing address ■ Has no outstanding mortgage or liens ■ Is for sale or sold below market value CONSIDER HEIGHTENED SCRUTINY OR HALT A TRANSACTION WHEN A SELLER ■ Wants a quick sale, generally in less than three weeks, and may not negotiate fees ■ Wants a cash buyer ■ Is refusing to attend the signing and claims to be out of state or country ■ Is difficult to reach via phone and only wants to communicate by text or email, or refuses to meet via video call ■ Demands proceeds be wired ■ Refuses or is unable to complete multifactor authentication or identity verification ■ Wants to use their own notary CLOSING ATTORNEYS TAKE PRECAUTIONS DUE TO SELLER FRAUD ISSUES INCLUDING SOME OR ALL OF THE FOLLOWING: CONTACT SELLER USING INDEPENDENT SOURCES ■ Contact the seller directly at an independently discovered and validated phone number ■ Mail the seller at the address on tax records, property address, and grantee address (if different) ■ Ask the real estate agent if they have personal or verified knowledge of the seller’s identity MANAGE THE NOTARIZATION ■ Require the notarization be performed by a vetted and approved remote online notary, if authorized in your state ■ If remote online notarization is not available, the title company should select the notary. Examples include arranging for the seller to go to an attorney’s office, title agency, or bank that utilizes a credential scanner or multifactor authentication to execute documents VERIFY THE SELLER’S IDENTITY ■ Send the seller a link to go through identity verification using a third-party service provider (credential analysis, KBA, etc.) ■ Run the seller’s email and phone number through a verification program ■ Ask conversational questions to ascertain seller’s knowledge of property information not readily available in public records ■ Conduct additional due diligence as needed USE THE PUBLIC RECORD ■ Compare the seller’s signature to previously recorded documents ■ Compare the sales price to the appraisal, historical sales price, or tax appraisal value CONTROL THE DISBURSEMENT ■ Use a wire verification service or confirm wire instructions match account details on seller’s disbursement authorization form ■ Require a copy of a voided check with a disbursement authorization form ■ Require that a check be sent for seller proceeds rather than a wire Info from www.alta.org Now more than ever, consumers need to be aware of potential scams and how to best protect themselves. Real estate agents and attorneys must also play a key role in educating both homebuyers and homeowners about the need to remain vigilant. If the closing attorney is asking for extra precautions to verify a home seller, it is the duty of the agents involved to educate their clients about why this is necessary. The Foreign Investment in Real Property Tax Act (FIRPTA) was established in 1980 to ensure that foreign owners of U.S. property pay their share of taxes on the profit when they sell. It requires the buyer of real property from a foreign seller to withhold a portion of the sales price and remit the tax to the Internal Revenue Service (IRS). FIRPTA also applies to the sale of U.S. real property held by foreign-owned corporations, partnerships, trusts, and estates. If you are representing a foreign seller or your buyer is purchasing property from a foreign seller, it’s important to understand the obligations of the buyer and seller with regards to FIRPTA. This is a discussion you should have with your sellers before listing the property.
It is the buyer’s responsibility to withhold the tax, but the tax charged comes from the sales price. If the buyer fails to comply with the FIRPTA withholding requirements, they may be responsible for the tax owed in addition to any interest and/or penalties. It is an estimated withholding (about 10-15% of the selling price) depending on the sales price and if an investment property. GAR has included new verbiage in the seller brokerage engagement agreement requiring sellers to complete a FIRPTA Affidavit (F101 & F104).
FIRPTA Solutions can also help your client navigate through any FIRPTA issues. https://www.firptasolutions.com If your buyer discovers unpermitted structures or renovations during their due diligence, they need to do some investigation before moving forward with their purchase. It’s possible that the appraiser will not be able to give value to the unpermitted structures in the home.
Unpermitted work refers to construction or renovations done without obtaining the necessary permits from local authorities. Cost is among the top reasons people skip obtaining permits for renovations. Not only the price of the permits but also not having to pay for the increased property tax assessment. Besides a surface-level inspection, how does the buyer really know that the area in question was built properly and is structurally and operationally safe? What about obtaining insurance? Calls to the local building department must be navigated delicately and could set off an investigation with possible fines levied against the seller. A building inspector isn’t going to simply go out and put his seal of approval on unpermitted work without further investigation. They will likely want walls opened up and structures torn apart to inspect. Legalizing non-permitted work typically involves retroactive measures to bring the construction or renovation into compliance with building codes and regulations. Legalizing home improvement projects usually starts by filing an application with the relevant building department or permitting authority. Depending on the jurisdiction, individuals may be required to pay fines or penalties for nonpermitted work before it can be legalized. Hiring a licensed contractor or a qualified professional is often recommended to ensure the work meets safety standards and the proper building code. Detailed documentation of the existing structure, including plans, drawings, photographs, and descriptions, may be required during the legalization process. Inspections and evaluations by building inspectors and other relevant professionals are commonly conducted to assess the quality and safety of the construction projects. Additional steps, like securing approval from homeowner associations or community boards, may be necessary for certain types of remodeling, such as illegal additions or alterations. Timeframes for legalizing work can vary depending on the project’s complexity and the permitting authorities’ workload. Once the necessary approvals are obtained and any fines or penalties are paid, local authorities consider the formerly nonpermitted work legal and officially recognized. If the buyer decides to move forward with the purchase without addressing the unpermitted work, they will likely need to address these issues when it’s time to sell the property. Kick-Out Clause Explained A kick-out clause is when there is a sale (or lease) of the buyer’s property contingency, but it allows the seller to market the property. If another buyer makes an offer to purchase the property that the seller wants to accept, the seller gives notice of the offer to the first buyer who must then timely submit an amendment to remove certain contingencies and possibly the Due Diligence Period from the agreement and in some cases pay additional earnest money to the seller. If the first buyer does not do these things within the pre-agreed time frame, the seller can then “kick-out” the first buyer, terminate that contract, and sell the property to the second buyer. If the buyer meets the pre-agreed requirements of the kick-out clause, then the original contract remains in force subject to the terms of amendment signed by both parties. If the Kick-Out Clause is Exercised If the kick-out clause is exercised, the seller must give the buyer written notice that they have received an acceptable offer, and the buyer has the pre-determined amount of time to submit an amendment removing the specified contingencies. Whether all contingencies and the due diligence period get removed or just some of the contingencies and the due diligence period is a matter of negotiation between the parties. In the event the buyer does not deliver the amendment and the additional earnest money (if referenced in the kick-out clause), the agreement shall terminate, and the buyer shall be entitled to a full refund of the buyer’s earnest money. A couple of things to remember:
A general Notice form (F816) can be used. Example verbiage for notice: Per Exhibit (C), paragraph 7, Seller is hereby providing notice that he has received an acceptable offer and is executing the 72-hour kickout clause. Buyer has 72 hours to remove the contingencies set forth in Exhibit (C). Verbiage for Amendment Removing Contingencies: Amendment to Agreement (F701) should be used. Example verbiage for amendment: Buyer agrees to remove the contingencies set forth in Exhibit (C) to include the sale or lease of buyer’s property contingency and the due diligence period. Every real estate negotiation or transaction is unique by nature of the individuals involved and the property itself. Therefore, Special Stipulations are often needed to customize the transaction to the situation.
The Georgia Real Estate License Law does not require that any specific contract forms be used, only that they are written by legal counsel. About forty percent (40%) of Georgia Real Estate Licensees are members of the Georgia Association of Realtors® and as members they have access to the GAR® Contract forms. They do provide many Special Stipulations that address common contract issues. However, not everyone uses these forms and not every situation is common. In those cases, the real estate Licensee must create a Special Stipulation for the specific situation. Although a Licensee is not authorized to practice law and draft legal documents, the Licensee in Georgia is allowed to write Special Stipulations for a contract that is written by an attorney. Consider the following tips for writing a Special Stipulation:
Article From Dec 2023 GREC Newsletter The federal Fair Housing Act (FHA) protects the rights of people with disabilities which includes the rights to reasonable accommodation. These rights are protected under both state and federal laws to ensure that landlords do not discriminate against tenants with service animals & emotional support animals. Under the law, you can’t be discriminated against in the rental, lease, or purchase of housing.
The FHA requires housing facilities to allow both service animals and emotional support animals, if necessary, for a person with a disability to have an equal opportunity to use and enjoy the home. A service animal must perform tasks or services to aid the owner to qualify for FHA protection. And to be covered under the law, the emotional support animal must alleviate the emotional effects of the owner’s disability. To have a legal right to be an ESA, owners need to first obtain a signed prescription letter from a licensed psychologist, therapist, or psychiatrist. This letter must state that an ESA is needed to alleviate at least one symptom or effect of the owner’s mental health condition. Keep in mind that no one is allowed to request medical documentation about the tenant’s condition or ask them to state the details of their disability; a letter verifying need for an ESA is the most information about their condition they are required to supply. For service animals, the ADA limits the requirements of the owner. When it is not obvious what service an animal provides, only limited inquiries are allowed. There are two questions that may be asked: (1) is the dog a service animal required because of a disability, and (2) what work or task has the dog been trained to perform. You may not ask about the nature or extent of an individual’s disability. You may not require proof that the animal has been certified, trained, or licensed as a service animal. You may not require the animal wear an identifying vest or tag nor can you ask that the dog demonstrate it’s ability to perform the task or work. Can a landlord require a pet deposit for a service animal or emotional support animal? The landlord can't require the tenant to pay extra in the form of a pet deposit to have a service dog or emotional support animal. And any "no-pet" policies don't apply to an ESA or guide or service dog. But the tenant is liable for any damages the service animal or emotional support animal causes to the property or another person. Is there a difference between an emotional support animal and a service animal? Only animals who have received specialized training to perform a specific task or tasks for an individual with a disability are considered service animals. This is the key difference between a service animal and all other types of working animals, including therapy, comfort animals, and emotional support animals. Service animals are usually dogs, but all kinds of animals can be classified as an emotional support animal including but not limited to dogs, cats, miniature horses, rabbits, and hamsters. The only requirement for an ESA is that they are well-behaved and non-aggressive to other animals. Penalties for Misrepresentation of an ESAIn Georgia, there is no legal punishment for misrepresenting your pet as an emotional support animal like there is in other states. However, animal owners may face evictions from housing or university, or expulsion from public areas as a consequence. The GAR Purchase and Sale Agreement provides users with rules on how the Agreement should be
interpreted. In the event of internal conflicts or inconsistencies in this Agreement, the following rules for how those conflicts or inconsistencies shall be resolved will apply:
When interpreting the contract and trying to determine what controls, special stipulations control over both exhibits and the main body of the agreement but handwritten changes control over pre-printed or typed provision. If an FHA or VA exhibit is included with the contract, any amendatory clause shall control over inconsistent or conflicting provisions contained in a special stipulation, another exhibit, or the main body of the agreement. The amendatory clause gives the buyer the right to terminate the contract without forfeiting the earnest money if the appraised value does not meet or exceed the sales price. It cannot be removed or changed in a special stipulation. This should help resolve questions that have arisen when attempts have been made in special stipulations to amend or override the amendatory clause. The amendatory clause includes language making it superior to all other provisions of the contract. This language helps make it clear that a special stipulation cannot change the amendatory clause regardless of the verbiage that is used. In summary, special stipulations control over both exhibits and the main body of the agreement but any amendatory clause in an FHA or VA exhibit shall control over inconsistent or conflicting provisions contained in a special stipulation, another exhibit, or the main body of the agreement. The GAR real estate contract is valid in most cases whether there is an earnest money deposit or not. While a contract, to be valid, must have consideration, earnest money is not the only consideration included. Earnest money is a good faith deposit and may not be necessary to have a valid contract. The consideration can be the mutual promises of the parties to perform their respective obligations under the contract (i.e., a promise for a promise).
Generally, the purpose of the earnest money is to provide the seller with compensation in the event the buyer terminates the contract or fails to close through no fault of the seller and in violation of the agreements in the purchase and sale agreement. According to the GAR purchase and sale agreement C.2.(a), the seller’s sole remedy shall be to retain the earnest money as full liquidated damages. Furthermore, the seller expressly waives any right to assert a claim for specific performance. If earnest money is not included with the terms of the contract, the seller really doesn’t have much of a remedy. GAR purchase and sale agreement F201: 2. Default. a. Remedies of Seller: In the event this Agreement fails to close due to the default of Buyer, Seller’s sole remedy shall be to retain the earnest money as full liquidated damages. Seller expressly waives any right to assert a claim for specific performance. The parties expressly agree that the earnest money is a reasonable pre-estimate of Seller’s actual damages, which damages the parties agree are difficult to ascertain. The parties expressly intend for the earnest money to serve as liquidated damages and not as a penalty. |
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