Describing a space in a way that appeals to all buyers is the law (and it’s just good business).
There are certain phrases that should never appear in a property description. Some phrases are very clear violations of Fair Housing, others may be in a grey area. When deciding if something might violate fair housing, assume that it does. Our unconscious biases are just that. Unconscious. Being sensitive to how others might react will avoid discriminatory language that violates fair housing. Here are some examples of language to avoid.
The GAR 2022 Purchase and Sale Agreement (PSA) includes changes that clarify the Binding Agreement Date and have added a process to object to the date entered.
Sending Notice of Acceptance
The PSA defines the Binding Agreement Date as the date when a party to the transaction, who has accepted an offer or counteroffer, delivers notice of that acceptance to the party who made the offer or counteroffer. Notice may be delivered by either party or the Brokers working with or representing the parties to the other party. Sending a fully signed purchase and sale agreement with a specific Binding Agreement Date included, that one of the parties has agreed to, constitutes notice of the Binding Agreement Date to the other party.
When and how to use Dual Brokerage can be confusing. Let’s break it down.
It sometimes happens that a property is rezoned for a use other than that for which it is presently being used.
For example, a property previously zoned for single-family residential use with 100-foot frontage may be rezoned to require a 200-foot frontage. Another example: a property may have 2 rental units, but a rezoning allows only 1 rental unit.
If a property is being used for something other than what the property is presently zoned for, it is referred to as a “nonconforming use.” A legal nonconforming use is one that lawfully existed prior to the enactment or amendment of a zoning ordinance. An illegal nonconforming use is a property use by an owner that was never lawful to begin with and does not conform to the current zoning ordinance. Illegal nonconforming uses, if discovered, are subject to an enforcement action by local government for their removal.
Most legal nonconforming uses can be “grandfathered.” In other words, the nonconforming use will generally be permitted to continue so long as the owner can show that the land was lawfully used prior to the ordinance’s adoption and the use continues. However, if a nonconforming use is discontinued for whatever time period specified in the local zoning ordinance, the use will be abandoned and cannot be reestablished.
For example, current zoning does not allow for a rental unit in a primary owner-occupied property. A retiree had a legal residential non-conforming use that allowed a rental apartment. The retiree moved to an assisted living residence, the tenant moved out and the property was vacant. If the owner decides to sell the property as a residence with a rental unit after the period of time specified in the ordinance, they can’t. The nonconforming use was discontinued for the period of time specified in the zoning ordinance, so the non-conforming use is abandoned and cannot be reestablished.
Examples of other non-conforming uses are new zoning features such side, rear, or front setbacks in areas that include older properties. A new city zoning ordinance requires a 10-foot side setback for all improvements. An old tool shed sat right on the line. If the tool shed burns down and the owner wants to build a new toolshed, the new tool shed has to conform to the new zoning and be set back 10 feet from the sideline. (Of course, the owner could apply for a variance to the new zoning. Without extraordinary circumstances, however, a variance would not likely be granted.)
Weissman, Seth. The Red Book on Real Estate Contracts in Georgia (pp. 209-213).
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!
Timelines & Deadlines
Real estate licensees are familiar with deadlines and time frames involved in real estate transactions as well as those required to manage a real estate license. The Georgia Real Estate License Law, Rules and Regulations require compliance with critical time periods and deadlines. Many of these deadlines are necessary only in unusual situations, and some of them may not be required at all if the circumstances never occur. The following is a list of important time periods required by the Georgia License Law, Rules and Regulations:
Two questions have recently come up concerning the Conventional Loan Contingency Denial Letter and Appraisal.
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?"
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.”
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?
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
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.
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