REAL ESTATE

Transcription

REAL ESTATE

ILLINOIS
REAL ESTATE
MANAGING BROKERS
CONTINUING EDUCATION
12 Hrs for
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COLLINSVILLE
Dates:
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Dates:
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Dates:
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Class Time: 9:00 am thru 4:30 pm
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Meet Your Live Class Instructor
Dale Shea
Dale Shea earned a bachelor’s degree from Southern Illinois University-Carbondale in Construction
Management with a minor in real estate, and has been a licensed real estate broker since 1983. His first
brokerage office was opened at his age of 24. Within 2 years, his brokerage business included two office
locations, and up to 30 independent Realtor associates. Later selling his brokerage business, Dale chose to
“only sell” for several companies including the RE/MAX franchise, and several other leading luxury home brokerage companies located
in Lake County, IL.
Mr. Shea also holds the General Certified (Commercial/Industrial) appraisal license in the states of Illinois and Wisconsin. He is a specially
designated appraiser approved to complete both new construction and foreclosure appraisals for the Veterans Administration, and
HUD. Dale has instructed real estate and construction classes at his local community college and for other private entities.
McKissock is delighted to welcome Dale to our instructor family offering a quality classroom experience in both the Real Estate and
Appraisal industries.
Please reference the Table of Contents and page 73 in this book for complete instructions
on how to complete your proctored exams and receive completion certificates.
Live classroom locations and dates are subject to change. Visit our website or contact our office for the most current information.
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New CE Requirements for Illinois Managing Brokers
The Illinois Department of Financial & Professional Regulation, Real Estate Division requires the following 24 hours of
continuing education to be completed by 4/30/15 for real estate professionals holding a MANAGING BROKER license.
• 12-Hrs
NEW!
•
3-Hrs
•
3-Hrs
•
6-Hrs
Managing Broker Course (Must be taken with real-time instructor interaction.)
Mandatory Core A
Free when you take a live seminar!
Mandatory Core B
Elective Topics
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Table of Contents
Continuing Education for
Illinois Real Estate Professionals
Illinois Core A: (3 hrs)
Fair Housing, Agency License Law and Escrow
$25.95 value
24
Illinois Core B: Legal Issues
(3 hrs)
$25.95 value
39
Real Estate Safety: Protect Yourself During a Showing
(3 hrs)
$25.95 value
52
Niche Marketing: Narrow Your Focus
(3 hrs)
$25.95 value
70
Index
71
Notes Page
73
Proctored Exam Instructions
74
Book & Individual Course Evaluation Form
75
Illinois Real Estate CE Registration Form
76
Illinois Real Estate CE Assessment Answer Sheet
3
All 12 Hrs
95
$
75
FREE
with live seminar
Total à la carte price is $103.80.
We know you have a busy schedule.
That's why we're offering you a
convenient way to complete all 24
required CE hours in just two days.
Register for one of our 12-hour, twoday live seminars and you'll receive
the 12 hours in this correspondence
book for FREE.
Complete Your Courses in Two Easy Steps...
Step 1: Submit the Practice Quizzes
At the end of each course there is a 10 question practice quiz.
Submit your practice quiz:
• Register and complete the Online Correspondence exams at:
McKissock.com/ILRE
• Fax your Registration and Completed Exam Answer Sheet to:
1-814-723-0281
Step 2: Proctored Exams
Once McKissock has received your practice quiz you may schedule your Proctored
Exam. Illinois licensing regulations outline that successful completion of the
course requires the licensee (that's you!) pass a proctored exam for each course
with a minimum score of 70%. Please reference page 73 of this book for complete
exam details.
McKissock Proctor at Live Class Locations
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or go to page 75 to register today
Have questions?
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Take all your proctored exams for FREE!
Registration starts at 4:30 pm. Be prepared with scrap paper and a
writing utensil - the exams will be provided by the proctor. Results will be
communicated to you within 48 business hours.
Illinois Core A:
Fair Housing, Agency, License Law and Escrow
3 CE Credit Hours - Mandatory (Approval #:564.002398)
This course is designed to fulfill the core A requirement for Illinois real estate professionals. This course will take you
through all the subjects mandated by your state’s Real Estate Commission, and included instruction in Fair Housing,
Agency, License law and Escrow.
Chapters:
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•
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Chapter One: Agency
Chapter Two: Fair Housing
Chapter Three: License Law and Escrow
Learning Objectives:
•
•
•
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•
•
•
•
•
•
Define agency relationships, including designated agency and dual agency.
Identify duties to clients and customers, including duties after termination of agency agreements.
Define minimum services required for exclusive brokerage agreements.
Describe agency disclosure requirements.
List the federal fair housing laws, including the Americans with Disabilities Act.
Discuss Illinois Fair Housing laws and the behaviors that are considered discriminatory.
Explain discrimination in advertising, dealing with client or customer questions, and the importance of record keeping.
Explain recent additions to the License Act.
Identify general disciplinary actions and causes.
Discuss requirements for escrow accounts, including handling, maintaining, disbursing, and the disciplinary
actions related to escrow. Customer Testimonial
“This class was informative, invigorating to read and easy to follow. This was much better than spending a day in a stuffy classroom and
having to drive 30 minutes to boot!” ~ Charles
Illinois Core A: Fair Housing, Agency, License Law and Escrow
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Chapter One:
Agency
Overview
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Section 15-5. Legislative intent
Section 15-10. Relationship between licensees and consumers
Section 15-15. Duties of licensees representing clients
Section 15-25. Licensees relationship with customers
Section 15-30. Duties after termination
Section 15-35. Agency relationship disclosure
Section 15-40. Compensation does not determine Agency
Section 15-45. Dual agency
Section 15-50. Designated agency
Section 15-75. Minimum Services
Section 15-5. Legislative Intent
Common Law is derived from tradition, customs, and sometimes
judicial decisions. The Illinois General Assembly recognized that the
application of common law of agency relationships sometimes resulted in
misunderstandings and consequences contrary to the best interest of the
public. Because the real estate brokerage industry has a significant impact
on the State’s economy, and because of the State’s need to provide specific
legal guidelines, addressing the relationships between real estate licensees
and consumers, Article 15 of the License Act replaced common law duties
with specific, statutory duties of licensees.
Article 15 does not prescribe or affect contractual relationships between
broker and the affiliated licensees.
Article 15 does serve as a basis for private rights of action by consumers
and licensees. This private right of action does not extend to other Articles
of the Act.
Section 15-10. Relationships Between
Licensees and Consumers
An agency relationship is created when a person (buyer or seller, landlord,
or tenant) delegates to another person, the agent, the right to act on his/ her
behalf in business transactions with third parties (customers).
Principles governing agency relationships:
• Both parties must agree to form the relationship.
• The relationship is fiduciary – meaning the agent owes certain duties to the principal, as we have previously discussed.
An agency relationship can be created by either an oral or a written
agreement between the principal and the agent. It can also be implied from
either words or actions. Implied (accidental) agency exposes the licensee to
legal and financial risk. Although agency can be created orally, it would be
in the best interests of all concerned to have the relationship clearly defined
with a written agreement. In fact, The Illinois License Act specifically
requires a licensee to advise a consumer in writing, no later than beginning
to work as a designated agent, that a designated agency relationship exists
(unless another written agreement exists between the sponsoring broker
and consumer providing for a different relationship), and the name(s) of
his/her designated agent(s).
4
In Illinois, licensees are presumed to be the designated agent of the
consumer with whom they are working, unless the sponsoring broker and
consumer have entered into a written agreement for another type of agency
agreement, or unless the licensee is performing only ministerial acts on
behalf of the consumer. Ministerial acts are those acts performed by a
licensee for a consumer that are informational or clerical and do not rise to
the level of representation.
As indicated above, the Illinois License Act makes a presumption of
designated agency. That is, it is presumed, unless a written agreement
providing another type of representation is entered into between the broker
and consumer, that the designated agent(s) represents the client to the
exclusion of other affiliated licensees within the brokerage firm.
Designated agency and ministerial acts will be discussed in detail later in
this course.
Confidentiality
An important aspect of any agency relationship is confidentiality. Licensees
have a statutory duty to their clients to maintain confidentiality. Protecting
confidential information is a primary purpose of the law of agency.
A designated agent may disclose to his/her sponsoring broker (or persons
specified by the sponsoring broker) confidential information of a client for
the purpose of seeking advice or assistance for the benefit of the client in
regard to a possible transaction.
The sponsoring broker or his/her specified representative may not
disclose such confidential information, unless otherwise required by this
Act or requested or permitted by the client who originally disclosed the
confidential information.
What Constitutes Confidential Information
Confidential information means information obtained by a licensee from
a client during the term of a brokerage agreement that meets any one of
these criteria:
• Was made confidential by the written request or written instruction
of the client.
• Deals with the negotiating position of the client.
• Is information which if disclosed could materially harm the negotiating position of the client.
Confidential information includes, but is not limited to:
• The minimum price the seller-client will accept.
• Maximum price the buyer-client will offer.
• Information relating to the seller-client’s motivation to sell.
(i.e., pending divorce, health issues, job transfer).
• Information relating to the motivation of the buyer-client.
(i.e., current home has sold and must buy quickly).
• Urgency of seller-client or buyer-client.
Example:
Broker Betty called to set up an appointment to show her buyer client
a property. Betty told the listing agent, Sam, that her buyer was being
transferred to the area and needed to purchase a property in the next couple
of days.
Sam told Betty to show his home and encourage an offer, because the
sellers were going to lose a home they had an offer on if they didn’t sell
their existing home soon.
In this situation, both Betty and Sam disclosed confidential information
about their clients.
The rule of confidentiality could conceivably be waived if one of the
following is true:
• The client permits the disclosure of the information by word or
conduct.
• The law requires the disclosure.
• The information becomes public through a source other than the
licensee.
Other points to keep in mind regarding confidentiality include:
• Confidential information does not include material information
about the physical condition of the property, regardless of the
agency relationships involved in the transaction.
• Every brokerage firm should have a company policy in place that
addresses how confidential information must be handled. The
sponsoring broker is responsible for company policy requirements.
♦ Brokerage firms must secure their files in such a manner that
confidential information cannot be accessed by any person who
is not representing that particular client. It is particularly important to have procedures to protect confidential information with
regard to teams. Teams should either:
◊ Have separate phone lines, file cabinets and have no
access to each other’s files, or
◊ Have all team members be dual agents any time members
of the team represent both sides of the transaction.
• Managing brokers who list and sell or who manage and rent properties must put procedures in place to protect confidential information.
♦ The managing broker could declare himself/herself to be a
dual agent when both sides of the transaction are in-house but
this is not required by the Act.
♦ If the managing broker is involved in the transaction as the
listing or selling broker, he/she should not give advice to the
other licensee involved in the transaction,
♦ The managing broker must always remain neutral when giving advice to licensees.
♦ If the managing broker assisted an affiliate licensee, obtained
confidential information, and later becomes involved in the
transaction, he/she must become a dual agent.
• Example: Managing Broker Bill assisted affiliated licensees Jane
and John with a difficult offer on John’s listing. The transaction
fell apart, and later Managing Broker Bill wrote an offer on John’s
listing. Bill must be a dual agent because he has confidential information about John’s seller which he obtained while assisting with
the previous offer.
All confidential information must remain confidential, even after the
agency relationship ends.
CHECK YOUR UNDERSTANDING...
Q1: How may agency relationship be created? Q2: What information does the Illinois License Act require a licensee
to provide to a consumer prior to beginning to work as a designated
agent?
A1: Agency relationships may be created by either an oral or
written agreement. They can also be implied by words or actions.
A2: Although agency can be created orally, the Illinois License
Act requires advising a consumer in writing, no later than
beginning to work as a designated agent, that a designated agency
exists (unless another type of agency agreement exists).
Section 15-15. Duties of Licensees
Representing Clients
Franchises may dictate your legal structure but as an independent you
will The License Act stipulates that a licensee representing a client owes
that client certain duties. These duties include performing the terms of
the brokerage agreement. The licensee is obligated to perform specific
duties outlined in the brokerage agreement, whether a listing agreement
or buyer agency agreement, property management agreement, or tenant
representation agreement.
Duties to the client also include promoting the best interests of the client.
The Act specifies that the agent is obligated to promote the client’s best
interest as opposed to a licensee’s or any other person’s self-interest.
Duties to the client encompass seeking a transaction at the price and terms
stated in the brokerage agreement or those acceptable to the client. It also
requires that licensees present all offers and counter-offers to or from the
client until closing, unless that right is waived by the client.
Licensees have a duty to their client to disclose material facts concerning
the transaction known to the agent unless the information is confidential
client information. The License Act specifically omits from the definition
of material facts physical conditions that do not have a substantial adverse
effect on the value of the real estate, fact situations, or occurrences. If the
facts are physical in nature and would have an effect on the health or safety
of the resident, or would affect the price the buyer would offer or the seller
would accept, those facts would be considered material.
Disclosure of latent defects poses another issue for a licensee. A latent defect
is a hidden flaw, weakness or imperfection on a property which a seller
knows about but the buyer cannot discover by reasonable inspection.
Although Illinois licensees have no duty to discover latent (hidden) defects,
they are required to disclose known latent defects. The Illinois Appellate
court case, Munjal v. Baird and Warner, Inc. et al., 2nd Dist. (1985),
determined that licensees have no duty to discover latent material defects if
the seller has not disclosed these defects prior to the sale.
The issue of stigmatized property in recent years has been a popular topic
for discussion. Stigmatized properties are those properties that have an
undesirable reputation due to an associated unpleasant occurrence, such as
a murder, suicide, perceived ghosts, drug traffic, or gang violence. Due to
the potential liability, a licensee should seek legal advice when dealing with
such properties.
The disclosure of sexual offenders living in a neighborhood is an issue
more frequently faced by licensees now than in the past. At the federal
level, Megan’s Law is known as the Sexual Offender Act of 1994. This Act
requires offenders to notify law enforcement when they change address and/
or employment locations.
Listing agents have no legal duty to disclose the location of known sex
offenders in a neighborhood to a potential buyer. However, if the topic
does come up in conversation, a competent agent should refer a buyer client
to the public record. If doubt arises, the agent should consult with his/her
broker and the broker may consult with an attorney. It is also critical that the
licensee is aware of the sponsoring broker’s policy with regard to disclosure
of sex offenders or other facts that stigmatize property. Some companies
have a form that is given to all potential buyers explaining that the licensee
does not always have knowledge of sex offenders in any area, and the form
provides contact information for law enforcement offices who can provide
the information.
While the listing agent is not required to disclose items that stigmatize a
property, he/she can disclose items with the seller’s permission. The listing
5
agent could be harming the sale of the seller’s property, or potentially
reducing the value of the property, by disclosing the fact that stigmatizes
the property. It is important for the licensee to know the firm’s policy, and
if representing the seller, to obtain the seller’s permission before disclosure.
As a buyer’s agent, a licensee may choose to inform the buyer if the licensee
knows that the property is stigmatized. Disclosure to a buyer will depend
on the sponsoring broker’s policy. The buyer may consider the information
material in making a decision.
No cause of action shall arise against a licensee for failure to disclose that
an occupant was afflicted with HIV, AIDS, or any other medical condition,
that the property was the site of an act or occurrence that had no effect on the
physical condition of the property.
Another duty of licensees is to “timely account” for all money and property
received by the licensee in which the client has or may have an interest.
Promoting the best interest of the client also involves exercising reasonable
skill and care in the performance of brokerage services. This requires that
the agent use care in obtaining accurate information, in writing the contract
and other documents, and verifying that all details of the transaction are
covered.
Example:
Broker John listed a house on the edge of town. He indicated on the
property’s profile sheet that the property was on city water, when in fact, it
had a private well. John did not exercise “care.”
The client’s agent has a duty to obey all specific, legal directions of the
client, exercise reasonable skill and care in providing brokerage services to
the client, and comply with all applicable statutes and regulations, including
fair housing and civil rights.
To recap: A licensee’s duties to his/her client include:
• Performing the terms of the agreement.
• Promoting the best interests of the client.
• Exercising skill and care.
• Keeping confidential information confidential and complying with
all applicable statutes and laws.
In addition to specific duties of the licensee, Section 15-15 also clarifies
some situations that are permissible by the licensee or do not provide
liability to the licensee.
• A licensee does not breach a duty by showing alternative properties
to prospective buyers or tenants, by showing properties in which
the client is interested to other prospects, or by making or preparing contemporaneous offers or contracts on the same property.
Note that licensees must provide written disclosure to all clients
for whom the licensee is making contemporaneous offers, and the
clients must be given the option of being referred to another designated agent. This requirement applies to licensees working with
tenants as well as buyers.
• A licensee does not breach a duty to the client by working on the
basis that the licensee will receive a higher compensation based on
a higher selling price or lease cost.
♦ Example: Buyer Agent Sally enters into an exclusive buyer
agency with her buyer, and the buyer agreed to pay Sally a commission based on the sale price of the property. The higher the
sale price, the more commission Sally will receive.
• A licensee is not liable to a client for providing false information if
that information was provided to the licensee by a customer unless
the licensee knew or should have known the information was false.
changing a licensee’s duty under common law as to negligent or fraudulent
misrepresentation of material information.
Section 15-25. Licensee's Relationship with
Customers
Although a customer is not represented by the licensee, the licensee owes
the customer certain duties. The licensee must treat customers honestly
and not negligently or knowingly provide false information. Licensees
have a duty to disclose to prospective buyers, in a timely manner, all latent
material adverse facts regarding the physical condition of the property that
are known by the licensee and that could not be discovered by a reasonably
diligent inspection of the property by the customer.
The licensee is not liable for providing false information to the customer if
that information was provided by the licensee's client and the licensee had
no actual knowledge that the information was false.
A client's agent may provide assistance to a customer by performing
ministerial acts. Performing ministerial acts for the customer does not create
a brokerage agreement with the customer. Ministerial Acts are covered in
detail later in this course.
Section 15-30. Duties After Termination of
Brokerage Agreement
Certain duties are owed to the client after termination of the brokerage
agreement. Additional duties could be specified in a written agreement
between the parties (broker and client), but the following duties are always
present after termination, expiration, or completion of the brokerage
agreement:
• Accounting for all monies and property relating to the transaction.
• Keeping confidential all confidential information received during
the term of the brokerage agreement. (It is important for licensees
to remember that confidentiality does not end with the brokerage
agreement).
An example of confidentiality duty surviving the brokerage agreement:
If listing agent Jane's listing expired, and now Jane has an offer on the
property she previously had listed, Jane could not disclose to her buyer or
anyone else any confidential information that she obtained while she had
the property listed.
Q1: What are the duties of a licensee regarding disclosure of latent defects?
Q2: What are the duties of a licensee regarding disclosure of stigmatized
properties?
A1: Licensees have no duty to discover latent defects, but they are
required to disclose known latent defects.
A2: Licensees have no duty to disclose that a property is stigmatized
due to murder, suicide, ghosts or sex offenders. The listing broker may
disclose with permission of the seller. A buyer's agent would probably
disclose the information if known.
Although the statutes replace common law, one can see that the common
law fiduciary duties are included in the statutory duties. This section is not
6
Section 15-35. Agency Relationship Disclosure
Example:
Definitions pertinent to agency disclosure:
• Client: person represented by the licensee.
• Customer: person not represented be the licensee, but for whom the
licensee may be performing ministerial acts.
• Consumer: someone who is seeking or receiving licensing activity
(real estate services) .
Section 15-45. Dual Agency
Licensees are required to advise a consumer in writing, no later than
beginning to work as a designated agent of the consumer, that a designated
agency relationship exists (unless there is a written agreement between
the sponsoring broker and consumer providing for a different brokerage
relationship), and the name(s) of the client's designated agent(s).
This written disclosure may be part of the brokerage agreement, or may be
a separate document.
A licensee could represent a buyer client and be paid a commission by the
seller through the listing broker's MLS agreement.
Dual agency is an agency relationship in which both the seller and
purchaser, or lessor and lessee, are represented by the same licensee. In
Illinois, a licensee may act as a dual agent only with the informed, written
consent of all clients.
Undisclosed dual agency is a violation of the License Act. The disclosure
must be made prior to the licensee acting as a dual agent. Required dual
agency language is stipulated in Section 15-45 of the Act.
The client's agent must discuss with the client the sponsoring broker's
compensation and policy regarding cooperating with brokers who represent
the other party.
The required dual agency disclosure indicates to the consumer that
representing more than one party in a transaction presents a conflict of
interest, and that licensees may undertake dual representation only with
written consent of all parties. The disclosure also advises the client as to
what a licensee can and cannot do as a dual agent.
In review, Agency requires certain disclosures to client:
• material facts related to the property.
• agency relationships.
• compensation sources.
• agent's interest, if any, in property.
• agent's and/or company's interest (more than 1%) of any entity referred by agent.
Dual agency exists when a real estate firm or a real estate licensee represents
both the seller and the buyer or the landlord and the tenant in the same
transaction. Because the goals of the buyer and the seller (or the landlord
and tenant) are different, this type of representation can easily result in a
conflict of interest for the broker.
Remember that agency must be disclosed (or non-agency) prior to the
consumer sharing confidential information. Disclosure should be well in
advance of but never later than, the preparation of an offer.
Effectively serving as a dual agent is extremely difficult, if not impossible.
Since an agent owes fiduciary duties to the principal, a dual agency situation
puts the agent in the middle of a situation in which he or she is required to
balance the interests of two principals. The interests of each client could be
vastly different, and sometimes completely opposite.
Disclosure to Customers
The licensee must disclose to the customer in writing that the licensee is not
acting as the customer's agent. This disclosure must be made no later than
the preparation of an offer to purchase or lease but at a time intended to
prevent disclosure of confidential information by the customer.
In Illinois, a written document is not needed to create an agency relationship.
Illinois law makes it clear that an agency relationship and liability of the
licensee can be created by actions – creating an implied or accidental
agency.
However, under Section 1450.195 of the Illinois Administrative Code, all
exclusive brokerage agreements, including all exclusive listing agreements
and exclusive buyer brokerage agreements, must be in writing.
Section 15-40. Compensation Does Not
Determine Agency
The License Act makes it clear that compensation does not determine an
agency relationship. The payment or promise of payment of compensation
does not determine that an agency relationship exists. Compensation and
agency are not related.
Example:
A licensee could show a for-sale-by-owner property to a buyer client without
representing the seller. The licensee would be performing ministerial acts
for the seller. The licensee could be paid by the seller.
The confidential information of one client may be vital to the bargaining
position of the other. What if the seller tells the agent that he is willing
to take $5,000 less than the asking price? This is key information for the
buyer, but a dual agent is prohibited from sharing it.
Even the fairest and most careful of agents would have extreme difficulty
in giving undivided loyalty to both parties, or in other words, representing
the interests of both parties fully and equally.
Because of the issues outlined previously, dual agency must be disclosed to
both the buyer and the seller. Both parties must agree in writing to the dual
agency relationship. Informed consent is necessary from both the buyer and
seller in the event of dual agency, as this arrangement is ethical ONLY if
both parties agree to it.
Important Points About Dual Agency
A Dual Agency Consent Agreement is required in the event of dual agency
in Illinois. The Act dictates the language that must be used on this form and
the licensee cannot change that language. Click here to link to the License
Act and view the required language in Section 15-45.
• This written confirmation must be presented to each client at the
time he or she enters into a brokerage agreement but may be signed
by the client at that time or at any time before an agent acts as a
dual agent.
• Either client has a right to change his/ her mind and request another
agent.
• A licensee acting in a dual agency capacity must obtain a written
confirmation from the clients of their prior consent for the licensee
to act as a dual agent. The licensee should obtain this confirma7
tion at the time the clients are executing any offer or contract to
purchase or lease in a transaction in which the licensee is acting
as a dual agent.
A licensee may not serve as a dual agent in any transaction in which he or
she has an ownership interest in the property, or in which he/she has an
ownership interest in an entity which is a party to the transaction.
• If an agent refers a client to another agent in order to avoid a dual
agency situation, that agent must give written notice in order to
receive any compensation for the referral.
Even when dual agency has been avoided, an agent must provide written
notice to all clients, when he or she is writing offers for more than one
buyer on the same piece of property (contemporaneous offer).
Section 15-50. Designated Agency
According to the Act, "designated agency means a contractual relationship
between a sponsoring broker and a client under Section 15-50 of this Act in
which one or more licensees associated with or employed by the broker are
designated as agent of the client".
So, a designated agent is a person who is authorized by the managing broker
to act as the agent of a specific principal in a transaction (either the seller
or buyer). Once this authorization has been given, that designated agent
is the only licensee within that company who has agency, or fiduciary,
responsibilities toward that principal. The designated licensee becomes the
EXCLUSIVE agent of the client. However, if there are personal assistants
or a team of licensees working with a particular client, there could be more
than one designated agent for that client.
Designated agency is not only permitted in Illinois, but it is assumed in
this state.
Designated agency results when two separate licensees within the firm
are designated as legal representatives of the principals to the transaction.
This is not considered a dual agency situation, nor is the managing broker
considered to be acting in the capacity of a dual agent.
Designated Agency
In Illinois, the sponsoring broker has a contractual, statutory relationship
with his/her company's clients, not an agency relationship (unless he/she is
also listing agent or selling agent or otherwise involved in the transaction).
Section 15-75. Exclusive Brokerage
Agreements
The Act states that all exclusive brokerage agreements must specify that the
sponsoring broker, through one or more sponsored licensees, must provide,
at a minimum, all of the following services:
• Accept delivery of and present to the client offers and counteroffers to buy, sell, or lease the client's property or the property the
client seeks to purchase or lease. Keep in mind that all offers and
counter-offers should be presented as soon as possible.
• Assist the client in developing, communicating, negotiating, and
presenting offers, counteroffers, and notices that relate to the offers
and counteroffers until a lease or purchase agreement is signed and
all contingencies are satisfied or waived. • Answer the client's questions relating to the offers, counteroffers,
notices, and contingencies.
These services are not required if the contract is non-exclusive, such
as in the case with an open listing. Also, if these minimum services are
not included in an agreement, it will be presumed to be a non-exclusive
agreement.
Multiple listing services (MLS) typically accept only exclusive right to sell
and exclusive agency listings into their service.
Q1: What are the minimum duties required for all exclusive brokerage
agreements?
Q2: If these minimum duties are not included in the agreement, what is the
result?
The Act requires that at the beginning of the agency relationship:
• The client receives documentation in writing that a designated
agency relationship exists, unless there is written agreement between the sponsoring broker and the consumer providing for a different brokerage relationship.
• The written confirmation shows the name of the designated agent
(or agents).
A1: Minimum required duties of exclusive brokers agreements include:
• Accepting delivery of presenting offers and counteroffers.
• Assisting the client is development, communicating, negotiating
and presenting offers and counteroffers until an agreement is
signed and all contingencies are satisfied or waived.
• Answering client questions regarding offers, counteroffers,
notices and contingencies.
The written disclosure can be included in a brokerage agreement or be a
separate document.
A2: If these minimum requirements are not included in the agreement,
it will be presumed to be a non-exclusive agreement.
The managing broker is responsible for keeping records of these disclosures
given to clients. He/she is also responsible for protecting confidential
information disclosed by a client to his/her designated agent.
A designated agent may disclose to his/her sponsoring broker (or someone
specified by the sponsoring broker) confidential information of a client for
the purpose of seeking advice or obtaining assistance for the benefit of the
client, but that information cannot be disclosed by the sponsoring broker
or specified individual unless otherwise required by law or permitted by
the client.
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Summary/Review
In Illinois, licensees are presumed to be the designated agent of the
consumer with whom they are working.
Although Illinois has replaced common-law fiduciary duties with the
statutory duties of an agent, the statutory duties include the common-law
fiduciary duties.
Licensees owe customers the duties of honesty and disclosure of material
defects.
Duties remaining after termination of the brokerage agreement are
accounting for all money and property, and keeping confidential information
confidential.
Since the last half of the 20th century, there have been an increasing
number of remedies provided under this act. Title VIII of the Civil Rights
Act of 1968, also known as the Fair Housing Act of 1968, prohibited
discrimination in housing based on race, color, religion or national origin.
In 1968 in a landmark decision, the Supreme Court in Jones v. Mayer ruled
that discrimination on the basis of race is strictly prohibited. This means
there can be NO EXEMPTIONS OR EXCEPTIONS with regard to race.
Licensees must disclose to customers, in writing, that they are not the
customer's agent, and the disclosure must be made no later than the
preparation of an offer but at a time to prevent disclosure of confidential
information.
Title VI of the Civil Rights Act of 1964 was enacted to prohibit
discrimination on the basis of race, color, or national origin in programs
and activities receiving federal financial assistance.
Compensation does not determine agency.
In 1974, the Housing and Community Development Act added sex to the
list of protected classes.
Dual agency requires written, informed consent of all parties, and
confirmation when becoming a dual agent.
Exclusive brokerage agreements must contain certain minimum required
services.
Chapter Two:
Fair Housing
And in 1988, the Fair Housing Amendments Act added handicap and
familial status.
Based on these laws, the list of protected classes of the Federal Fair
Housing Act are:
• Race
• Religion
• Color
• National origin
• Sex
• Handicap
• Familial status
1988 Amendments
As we said, the 1988 amendments added handicap and familial status to the
list of protected classes. Let's look more closely at these protections.
Disability or Handicap
Overview
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Fair Housing Law – Important Legislation
Requirements for New Buildings
1988 Amendments for Familial Status
Fair Housing Enforcement
Americans with Disabilities Act
Illinois Human Rights Act
Exceptions to the Illinois Human Rights Act
Illinois Real Estate License Act of 2000
Local Fair Housing Laws
Types of Discriminatory Behavior
Advertising Awareness
Advertising and Discrimination
Writing Advertising Copy
Responsibilities
Providing the Right Information
Record Keeping
If a person has a physical or mental disability or handicap (including
hearing, mobility and visual impairments, chronic alcoholism, chronic
mental illness, AIDS, AIDS Related Complex and mental retardation) that
substantially limits one or more major life activities, has a record of such a
disability or is regarded as having such a disability, a property owner may
not:
• Refuse to let the person make reasonable modifications to the
dwelling or common use areas, at his or her expense, so he or she
can use the housing. (Where reasonable, the landlord may permit
changes only if the person agrees to restore the property to its original condition when he or she moves).
• Refuse to make reasonable accommodations in rules, policies,
practices or services if necessary for the disabled person to use the
housing.
For example: A building with a "no pets" policy must allow a visuallyimpaired tenant to keep a guide dog.
Fair Housing Law – Important Legislation
Fair Housing Law first began with the Civil Rights Act of 1866 which
prohibited discrimination in housing based on race. However, at that time the
federal government did not provide solutions, and the individuals involved
had to provide their own remedies. Because those being discriminated
against had limited access to legal help, many victims of discrimination
were left without recourse.
In buildings that are ready for first occupancy after March 13th, 1991, and
have an elevator and four or more units:
• Public and common areas must be accessible to persons with disabilities.
• Doors and hallways must be wide enough for wheelchairs.
• All units must have all of the following:
♦ An accessible route into and through the unit.
♦ Accessible light switches, electrical outlets, thermostats and other environmental controls.
♦ Reinforced bathroom walls to allow later installation of grab bars.
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♦ Kitchens and bathrooms that can be used by people in wheelchairs.
If a building with four or more units has no elevator and will be ready for
first occupancy after March 13th, 1991, these standards apply to ground
floor units.
These requirements for new buildings do not replace stricter standards that
apply in state or local law.
1988 Amendments for Familial Status
Unless a building or community qualifies as housing for older persons,
it may not discriminate based on familial status. That is, it may not
discriminate against families in which one or more children under 18 live
with one of the following persons:
• A parent.
• A person who has legal custody of the child or children.
• The designee of the parent or legal custodian, with the parent or
custodian's written permission.
Familial status protection also applies to pregnant women and anyone
securing legal custody of a child under 18.
Exemption: Housing for older persons is exempt from the prohibition
against familial status discrimination if one of the following conditions
exists.
• The HUD Secretary has determined that it is specifically designed
for and occupied by elderly persons under a Federal, State or local
government program.
• It is occupied solely by persons who are 62 or older.
• It houses at least one person who is 55 or older in at least 80 percent
of the occupied units, and adheres to a policy that demonstrates the
intent to house persons who are 55 or older.
Fair Housing Enforcement
The federal Fair Housing Act is administered by the Office of Fair Housing and Equal Opportunity (FHEO) under the direction of the secretary of
Housing and Urban Development (HUD).
Any person who believes he or she has been discriminated against may file
a complaint with HUD within one (1) year of the alleged act. HUD can also
initiate a complaint on its own.
When HUD receives a complaint, it will start an investigation. Within 100
days, HUD will determine if there is reasonable cause to charge discrimination or it will dismiss the complaint.
During the investigation period, HUD can attempt to resolve the complaint
by getting assurance from the person against whom the complaint was filed
that he or she will remedy the alleged violation. This is called conciliation.
A conciliation agreement must protect both the person filing the complaint
and the public interest. If an agreement is signed, HUD will take no further
action on the complaint. However, if HUD has reasonable cause to believe
that a conciliation agreement is breached, HUD will recommend that the
Attorney General file suit.
More on Enforcement
If the case goes to an administrative hearing, HUD attorneys will litigate
the case for the person filing the complaint. That person may intervene in
the case and choose to be represented by his or her own attorney.
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An Administrative Law Judge (ALJ) will consider evidence from both the
complainant and the respondent. If the ALJ decides that discrimination occurred, the respondent can be ordered:
• To compensate for actual damages, including humiliation, pain and
suffering.
• To provide injunctive or other equitable relief, for example, to
make the housing available to the complainant.
• To pay the Federal Government a civil penalty to vindicate the
public interest. The maximum penalties are $10,000 for a first violation and $50,000 for a third violation within seven years.
• To pay reasonable attorney's fees and costs.
• In addition to or instead of filing a complaint with HUD, a person
may file a suit in a state or federal court within two (2) years of
the alleged violation.
If the court finds that discrimination has occurred, the person filing the
complaint may be entitled to:
• Actual damages.
• Punitive damages.
• Attorney's fees and costs.
Another important piece of legislation that licensees should become
familiar with is the Americans with Disabilities Act (ADA) which became
effective in 1992.
ADA mandates that persons with disabilities have equal access to jobs,
public accommodations, government services, public transportation and
telecommunications. It prohibits discrimination in the "full and equal
enjoyment of goods and services" provided by public places, including
hotels, shopping centers and offices, and it applies to the lease and operation
of commercial facilities.
Since most real estate firms are public places, they fall into ADA's
definition of a public accommodation. Brokers should evaluate how this
applies to physical changes they might need to make to their office space
to accommodate both employees and clients. In addition, licensees should
alert their commercial and investor clients to the existence of the law and
the need to have their leases professionally evaluated and their offices
inspected for compliance.
The owner of a commercial property might have to make changes to a
building to bring it into ADA compliance. Such changes might include:
• Adding ramps to the front entrance or accessible parking spaces.
• Widening doorways or aisles.
• Installing elevators.
• Improving restroom facilities by adding wider stalls, higher toilets
or grab bars.
Violations
The Department of Justice may file lawsuits in federal court to enforce
the ADA, and courts may order compensatory damages and back pay to
remedy discrimination if the Department prevails. The Department of
Justice may also obtain civil penalties of up to $55,000 for the first violation
and $110,000 for any subsequent violation.
It's important for investors and commercial clients to understand the impact
of the ADA. Owners of small businesses that serve the public must remove
physical "barriers" that are "readily achievable," which means easy to
accomplish without much difficulty or expense. The "readily achievable"
requirement is based on the size and resources of the business, so larger
businesses with more resources are expected to take a more active role in
removing barriers than small businesses.
The ADA also recognizes that economic conditions vary. When a business
has resources to remove barriers, it is expected to do so; but when profits
are down, barrier removal may be reduced or delayed. Barrier removal is an
ongoing obligation – the owner is expected to remove barriers in the future
as resources become available.
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Marital status
Military status
Unfavorable (but not dishonorable) discharge from military service
Sexual orientation
Order of protection status
A model home in a real estate development is not normally required to
comply with the ADA. However, if the home is also the development's
sales office, the area where the sales are conducted must comply with ADA
since it is a public accommodation.
According to the Illinois Human Rights Act, it is considered a civil rights
violation for anyone to commit any of the following actions based any of
the established protected classes:
• Refusal to engage in a real estate transaction with a person.
• Change the terms or privileges of a real estate transaction.
• Refusal to negotiate.
• Refusal to receive or transmit an offer.
• Publicize an application form that shows intent to discriminate unlawfully.
• Offer solicitation, acceptance, usage, or retainer of a listing of
property, KNOWING there is intent to unlawfully discriminate.
• False representation that a property is not available for sale, rental,
inspection, or lease when it really is.
• Purposely not telling someone about a property.
NOTE: Many communities also have State or local accessibility codes
enforced by local building inspectors. When a local accessibility code
exists, the owner must follow both the code and the ADA requirements.
Exceptions to the Illinois Human Rights Act
New Construction and Renovation
If a client is planning to build a new facility or modify an existing one, he
or she needs to consult the ADA Standards for the specific requirements.
Renovations or modifications are considered to be alterations when they
affect the usability of the space, for example, installing a new display
counter, replacing fixtures or flooring, or replacing an entry door. However,
simple maintenance such as repainting a wall is not considered an alteration
by the ADA.
Q1: What is the significance of the Jones v. Mayer ruling?
Q2: What is significant about the Fair Housing Amendments Act of 1988?
Q3: Describe the exemption that exists for familial status discrimination.
Q4: If a person feels like he or she has been discriminated against, how long
does that person have to file a complaint?
A1: Jones v. Mayer ruled that discrimination on the basis of race is
strictly prohibited, which means there can be NO EXEMPTIONS OR
EXCEPTIONS with regard to race.
A2: It added handicap and familial status to the list of protected classes.
A3: •
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Housing for older persons is exempt if one of the following conditions is exists.
The HUD Secretary has determined that it is specifically designed
for and occupied by elderly persons under a Federal, State or local government program.
It is occupied solely by persons who are 62 or older.
It houses at least one person who is 55 or older in at least 80
percent of the occupied units, and adheres to a policy that demonstrates the intent to house persons who are 55 or older.
A4: With HUD – within one year of the alleged act In state or federal
court – within two years of the alleged act
As with many rules, there ARE exceptions to the Illinois Human Rights
Act. They are as follows:
• Private owners of single family homes are exempt IF they own
less than three single-family homes; IF they or a member of their
family was the last current resident of the home; IF the home was
sold WITHOUT a real estate licensee; AND IF the home was sold
WITHOUT using discriminatory advertising.
• Reasonable federal, state, and local restrictions regarding the number of occupants for a property are allowed.
• Religious organizations MAY limit those renting or buying to those
persons of the same religion, but ONLY if the religious membership is not restricted on the basis of race, color or national
origin.
• Private rooms in private homes that are occupied by the owner or
his family are exempt.
• Rental properties MAY allow discrimination based on sex in the
event of roommates who share a common bathroom or bedroom.
• Anyone who has been convicted of illegal manufacturing and/
or distribution of controlled substances IS NOT protected by
this Act .
• "Housing for older persons," which is housing that's intended for/
occupied ONLY by those over 62 years old, OR intended and occupied by those 55 or older, and have at least 80% of the units occupied by at least one person in that age group are exempt.
Illinois Real Estate License Act of 2000
According to Section 15-15 of the Illinois License Act of 2000, licensees
have the responsibility when working with clients to comply without
limitation to all fair housing and civil rights statutes.
Section 25-40 of the License Act deals with exclusive state powers and
functions and municipal functions.
Illinois Human Rights Act
In addition to federal Fair Housing Law, Illinois has enacted the Illinois
Human Rights Act for state-level protection against discrimination. In
addition to the classes protected under the federal laws, Illinois has added
these classes:
• Age (can't discriminate against anyone over the age of 40)
• Ancestry
As stated, nothing in the section affects or impairs the validity of the
powers granted to any municipality by the Illinois Municipal Code to enact
ordinances to:
• Prescribe fair housing practices.
• Define unfair housing practices. • Establish Fair Housing or Human Relations Commissions and
standards for the operation of these commissions in the administration and enforcement of such ordinances.
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Prohibit discrimination based on race, color, creed, ancestry, national origin or physical or mental handicap in the listing, sale,
assignment, exchange, transfer, lease, rental, or financing of residential property.
Prescribe penalties for violations of such ordinances.
Local Fair Housing Laws
Local jurisdictions can add additional classes to protect against discrimination. Under the Chicago Fair Housing Ordinance, source of income was
added to the already existing federal and state protected classes we have
discussed on previous screens.
Violating the Chicago Ordinance
Under this Ordinance, any owner, lessee, sublessee, assignee, managing
agent or other person, firm, corporation, or real estate broker, who violates
or fails to comply with any of the provisions of this ordinance, will be punished by a fine in any sum not exceeding $500.00.
The ordinance also says that the aggrieved party is permitted to pursue
such other and further legal and equitable relief to which he or she may be
entitled at his or her own discretion.
More on Local Laws
It would not be practical for us to try to outline every Illinois city and its
local Fair Housing laws in this course. It's up to you to take the time, as a
broker, to investigate your own city and what is being done locally by the
government to encourage Fair Housing practices across the board.
From Evanston to Springfield, you'll find that more and more Illinois city
governments are taking a stand on this issue in today's real estate industry.
Types of Discriminatory Behavior
Discriminatory activities in real estate include:
• Refusing to sell, rent or negotiate with any person who is a member
of a protected class.
• Changing terms, conditions or services for different individuals as
a means of discrimination.
• Stating or advertising that the property is restricted.
• Telling persons that a property is not for sale or rent when it is.
• Denying membership in any multiple listing service (MLS) or any
broker's organization.
• Using discriminatory advertising.
Discrimination in Mortgage Lending
These practices are also considered discriminatory.
• Refusing to give a loan.
• Refusing to provide loan information.
• Giving different terms for loans, such as interest rates or fees.
• Discriminating when doing a property appraisal.
• Refusing to purchase a loan.
• Setting different conditions for a loan purchase.
In mortgage lending, keep in mind that it is also illegal to:
• Threaten, coerce, intimidate or interfere with anyone exercising a
fair housing right or assisting others who exercise that right.
• Advertise or make any statement that indicates a limitation or preference based on race, color, national origin, religion, sex, familial
status, or handicap. This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is
otherwise exempt from the Fair Housing Act.
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Fair Housing laws also prohibit these activities:
• Blockbusting – Making a profit by inducing owners to sell by
telling them that persons of a protected class are moving into the
neighborhood which will have detrimental results, such as the lowering of the property values, an increase in criminal behavior or a
decline in the quality of the schools in the area. Blockbusting – also
called panic peddling or panic selling – includes subtle as well as
obvious actions or inducements.
• Steering – Channeling homebuyers toward or away from homes in
certain neighborhoods in order to preserve or alter the makeup of
that neighborhood. Some examples of steering would be showing
a white couple properties in areas that are occupied only by other
whites or showing African-American buyers homes that are in integrated areas or areas occupied only by African Americans.
• Redlining – Restricting the number of loans in certain areas of a
community because of its racial or ethnic makeup. The usual justification for redlining is that the lender wants to limit the risks in a
deteriorating area. The lender then discriminates against the whole
class of risks rather than distinguishing among the individual risks.
In an effort to help lenders meet the needs of the persons in their respective
communities, including low-income persons, the Community Reinvestment Act requires the periodic evaluation of a lender's lending record. In
a process known as filtering down, dwellings that were formerly occupied
by middle- and upper-income families decline in quality and value and become available to lower-income families. Lenders are encouraged to make
loans on these properties to lower-income families to prevent the deterioration of the community.
Q1: What did the Illinois Human Rights Act do?
Q2: List three activities that are considered discriminatory in real estate.
Q3: What is blockbusting?
Q4: What is redlining?
A1: It added state-level protection against discrimination and named additional protected classes.
A2: •
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Refusing to sell, rent or negotiate with any person who is a member of a protected class
Telling persons that a property is not for sale or rent when it is
Denying membership in any multiple listing service (MLS) or
any broker's organization
A3: Blockbusting is making a profit by inducing owners to sell by telling
them that persons of a protected class are moving into the neighborhood
which will have detrimental results.
A4: Restricting the number of loans in certain areas of a community because of its racial or ethnic makeup.
Advertising Awareness
Compliance with anti-discrimination laws is critical when doing advertising.
Discriminatory advertising is defined as advertising that indicates a preference, limitation or discrimination based on race, color, religion, handicap,
sex, familial status or national origin. But it is sometimes difficult to know
what actually constitutes discriminatory advertising.
It is probably safe to say that any advertising that describes the property
would be considered acceptable, while advertising that describes buyers
could be considered discriminatory, especially if the buyers are from a protected class.
Dealing with Race, Color or National Origin
If a licensee uses words that describe the housing, the current or potential
residents or the neighbors or neighborhood in racial or ethnic terms, he or
she will create liability for discriminatory advertising.
For example, phrases such as apartment complex with chapel or kosher
meals available are not discriminatory.
NOTE: A licensee can use common terms that relate to religious holidays,
such as Santa Claus, the Easter Bunny or St. Valentine's Day, or phrases
such as Merry Christmas and Happy Easter without violating discrimination laws.
Dealing with Handicap
For example, phrases such as white family home or no Irish are discriminatory.
A licensee should never write a real estate advertisement which contains
explicit exclusions, limitations or other indications of discrimination based
on handicap.
However, if the licensee creates ads which are racially neutral, he or she
will have no liability.
For example, phrases such as no wheelchairs, able-bodied persons only, no
deaf or no handicapped parking are considered to be discriminatory.
For example, phrases such as master bedroom, rare find or desirable neighborhood are not considered discriminatory.
On the other hand, advertisements that include descriptions of the property,
services or facilities, or neighborhoods are not considered discriminatory
advertising.
NOTE: Ads with human models showing all one race, all able-bodied, all
one gender are illegal. There has been at least one major lawsuit in Illinois
over billboards with all white models.
Advertising and Discrimination
Dealing with Sex or Gender
If a licensee writes an ad for a single family home or a separate unit in a
multi-family dwelling, the ad must not have an overt preference for or limitation of any person that is based on gender.
For example, an add should never read males only, men only, women only,
females only or other like phrases, unless the ad is describing shared living
areas or homes used exclusively as dormitories by educational institutions.
There are some terms that may appear on their face to be a reference to sex,
but since they are commonly used as physical descriptions of housing units,
they are not considered by HUD to be discriminatory advertising.
For example, the term mother-in-law apartment falls into the category of
nondiscriminatory terms.
Also, the term master bedroom is not a violation of either the gender or race
discrimination provisions, so it too can be used freely.
For example, a licensee could use phrases such as great view, fourth-floor
walk-up, walk-in closets, jogging trails and walk to bus-stop without violating anti-discrimination laws.
A licensee could also describe in an ad the conduct that is required of residents without it being viewed as discriminatory.
For example, a licensee could use the phrases non-smoking or sober.
It is also within the law to write an ad that gives descriptions of accessible
features, such as wheelchair ramp.
Dealing with Familial Status
As we've seen with all of the other protected classes, when writing an ad,
a licensee should never state a precise preference, limitation or discrimination that is based on familial status. Advertisements may not contain limitations on the number or ages of children, or state a preference for adults,
couples or singles.
For examples, a licensee should never use phrases such as couples only,
empty nesters, single person, no families, mature individuals or senior discount.
As we discussed on the previous screen, advertisements that include descriptions of the property, services or facilities or neighborhoods are not
considered discriminatory advertising.
Dealing with Religion
For example, a licensee could use phrases such as two bedroom, cozy,
family room, no bicycles allowed or quiet streets without violating antidiscrimination laws.
For example, licensees should never use phrases such as no Jews or Christian home.
In light of what we have just discussed, it's important for licensees to view
any advertising from the perspective of all the protected classes. When
composing advertising, licensees should ask themselves how they would
feel if they were a member of a minority and were reading the ad. This is
a good guideline to help in determining whether or not the licensee should
publish the ad.
If a licensee creates an ad which is explicit in its preference for or limitation
of any particular religion, the ad is discriminatory.
Advertisements which use the legal name of an entity which contains a
religious reference or ads which contain a religious symbol, standing alone,
may designate a religious preference.
For example, the name Roselawn Catholic Home or a picture of a cross
could imply a preference for someone of that religion.
However, if the licensee uses a disclaimer in the ad - such as the statement
"This Home does not discriminate on the basis of race, color, religion, national origin, sex, handicap or familial status" - it will not be considered
discriminatory advertising.
If a licensee creates an ad which contains descriptions of properties or services which do not indicate a preference for the kind of person who would
use those facilities, the ad would not be considered discriminatory.
Writing Advertising Copy
As you have just seen, it can be a challenge to create advertising that does
not use some discriminatory words or phrases. Words that are not generally recognized as being discriminatory can be, so it's important to become
familiar with those phrases that you should avoid.
In 1995, the Department of Housing and Urban Development (HUD) which
enforces fair housing laws sent some guidelines to its staff to help the when
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investigating allegations of discrimination. The memo addressed some
words and phrases which are not acceptable to use and others which, if
used, would not constitute a violation or be considered discriminatory.
The HUD memo addressed only a small set of possibilities, but it seems to
indicate that the staff should not move complaints forward if the ads appeared reasonable and did not favor or disfavor a protected group.
Organizations have published lists of words to help write ads that will not
be discriminatory. One particularly good list was compiled by the Miami
Valley Fair Housing Center, Inc. in Dayton, Ohio. Here is the link for the
"Fair Housing Advertising Word and Phrase List", http://www.mvfairhousing.com/ad_word_list.php, copy and paste this into your search bar. You
can print a PDF copy or the list from a link on the list.
Responsibilities
Managing brokers have a responsibility to comply with fair housing policies. They must maintain a fair housing office. A managing broker should
take these steps to ensure compliance with fair housing laws.
• Follow the suggestion of the National Association of REALTORS® and post a sign which states it is against company policy
as well as state and federal laws to offer any information on the
racial, ethnic or religious make-up of a neighborhood or to restrict
the listing, showing or giving of information on the availability of
homes for any of those reasons.
• Prominently display in all offices the Equal Opportunity Poster
that the Department of Housing and Urban Development (HUD)
distributes. Note: While not legally required to be posted in brokerage offices, if the poster is not displayed and the broker is accused
of discrimination, failure to have it displayed is considered prima
facie evidence of discrimination. Here is the link, http://www.hud.
gov/offices/fheo/promotingfh/928-1.pdf, for a copy of the "Equal Housing Opportunity Poster" for you to view or print out if desired. • Maintain the concept of fair housing in all forms of advertising.
(We'll discuss advertising guidelines in more detail later in this
unit).
• Provide ongoing training and education to all affiliated licensees
by holding seminars and workshops, watching videos and bringing
in guest speakers. Appropriate training is also available through
NAR, state and local boards and real estate schools.
More Responsibilities
Managing brokers should also do the following:
• Report blatant misconduct by other licensees. This can prove to be
a very uncomfortable situation for a managing broker, but when violations are obvious, the behavior should be reported to the proper
authority.
• Put a system in place to monitor the activities of all affiliated licensees with regard to fair housing compliance. Ask licensees to
keep records of all prospects, their qualifying information and the
prospects reactions to the property they were shown. Review the
records periodically to help identify any situations where the licensee may be in violation of fair housing issues.
• Include a Fair Housing Policy for their office in the Policy and
Procedures Manual.
Broker's Responsibility
Licensees share in the responsibility of complying with fair housing laws.
Licensees should:
• Know the fair housing laws and their responsibilities for compliance.
• Act in accordance with the law at all times.
• Learn to keep clear and accurate records.
• Attend fair housing training seminars periodically.
• Know the resources to use if misconduct needs to be reported.
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Important Note
Violations of fair housing laws carry penalties and fines, so brokers must
be careful about avoiding these violations. Fines, hearings and court
appearances will cost a firm both time and money and will negatively
impact the firm's operation. There is also the issue of the firm's reputation,
which would suffer greatly if violations are filed and proven. Many errors
and omissions liability policies do not cover fair housing issues.
Providing the Right Information
In the world of fair housing and real estate, there certainly are myriad
challenges. Every day you will face fair housing issues, sometimes, without
realizing it. Seemingly innocuous questions or comments from your buyers
and sellers can open the proverbial can of worms before you know what's
happened.
You have to stay on your toes and be aware of what's happening. There
are some typical questions that are most likely asked of you frequently -possibly even every day. So let's discuss some of those issues and give you
some help in formulating good answers.
We know you've probably been faced with questions that are outside your
realm of expertise or knowledge. Although you likely already know this,
it's best to refer such questions to people who are experts in those fields.
Try to limit yourself to discussing aspects of the home, selling, buying and
listing properties.
For example, questions about local schools, the ethnicity in a certain area, or
any similar questions should not be answered by a real estate professional.
If you consistently refer buyers to experts who can answer these questions
in a factual way, you can minimize your housing liability.
More on Answering Questions
What if a buyer asks you a question about the minorities living in a specific
area? It would be inappropriate and dangerous for you to answer this
question. You could be in a lot of trouble for doing so.
However, you could refer the buyer to experts in this field -- someone
who would actually be in possession of the demographics in a particular
area. This way, the buyer gets a factual answer to his or her question, and
not your opinion, which may or may not be a representation of the true
statistics. Even if your opinion is fairly accurate, you are safest to avoid
answering questions of this nature.
Your Opinion
If a client asks you a specific opinion question, such as, "Would you live in
this home or this neighborhood?" it is illegal to voice an opinion based on
race, religion, color, national origin, sex, handicap, familial status or any of
the protected classes. It is okay to make factual statements based on various
features within the home.
The same applies to questions you may receive about your opinion of the
neighborhood. If you make comments about the neighborhood's features
in relation to their location within the city, closeness to shopping or other
benefits, that's okay. Make sure your voiced opinions do not relate in any
way to race or any of the other protected classes.
Questions About Ethnic Makeup
You may run across a buyer who is genuinely interested in living in an area
where he will be surrounded by members of his own race. If someone asks
for the "black" or "Jewish" areas, what do you do?
Well, for one, you need to explain to the buyer that you, ethically and legally,
cannot recommend housing based upon the race, religion, color, national
origin, sex, handicap, or familial status makeup of the neighborhood.
Remember, selecting properties based on the ethnic makeup of the
neighborhood could easily bring about a "steering" charge against you.
Listing Agreements
A real estate professional should make it clear from the beginning that
his or her brokerage does take fair housing laws seriously. Before even
entering into a listing agreement, a real estate professional should explain
the importance of fair housing compliance and secure a commitment to
this before agreeing to list the house. This way, if the seller chooses not
to follow the fair housing laws, the agent or broker can refuse the listing.
This discussion and the listing agreement should make it clear that the agent
will observe five rules in dealing with the listing and resulting prospective
buyers.
• The prospective buyer will only be described in terms that do not
include race, religion, color, national origin, sex, handicap, familial
status or other protected-class status.
• The prospective buyers will be identified not by name but by occupation, present residence, or other characteristics of the buyer
which could not identify them as members of a protected class.
• The facts of the offer should be carefully documented so that the
broker cannot be charged with failure to present the offer in a fair
and nondiscriminatory manner.
• The listing will be terminated if the seller refuses to consider an offer because the prospective buyer is a member of a protected class.
• The supervisor and broker will be informed of any suspected attempts by the seller to illegally discriminate.
Questions About Buyers
If, as a real estate professional, you are posed questions about the buyer that
have nothing to do with the sale, you have to handle the situation carefully.
If you are asked about the color, religion, ethnicity, familial status or other
"protected class" characteristics of the buyers, you must tell the seller it
is inappropriate for you to give out such information. The seller cannot
withhold property from a "protected class" individual, and the real estate
professional must definitely not be involved, should this happen. If so, both
the seller and the agent or broker could be found in violation of the law.
In the same way, the seller cannot, legally, decline to show a property to
minorities or members of other protected classes. Both the seller and the
real estate professional could be sued for violating fair housing laws.
Record Keeping
As we mentioned on an earlier screen, managing brokers should put a
system in place to monitor the activities of all affiliated licensees with
regard to fair housing compliance. Here is a short list of things to consider:
• It would be a good practice for an employing broker to have a company form for interviewing/qualifying buyers as a way of proving
that all buyers are treated equally and that buyer, rather than the
licensee, is setting the parameters as to where to live. The broker
should keep that questionnaire with answers in the client's file. • If a seller attempts to discriminate, the broker should document
that information, including his or her refusal to be a party. If a broker releases a listing because a seller insists on discriminating, the
broker would document that and what steps were taken as a result.
• The managing broker should also keep agendas of meeting in
which he or she reviewed fair housing laws. Even though not required by law, it would be prudent for the broker to have these
agendas along with a "sign-in" sheet that shows which licensees
were in attendance at the meeting.
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The fair housing policy should be in the firm's policy and procedures manual. Ideally, the broker will require affiliated licensees to
sign that they have read and understand the policy.
Record Retention
According to Section 1450.755 of Illinois Administrative Code, a broker
must retain all of the following records for five (5) years:
• Escrow records.
• Transaction records for all residential, property management, and
commercial transactions.
• Employment agreements.
• Records reflecting the payment of compensation for the performance of licensed activities.
The broker must also retain licensee records for five years after licensee's
association with broker is terminated.
Q1: How is discriminatory advertising defined?
Q2: Why is it not prudent to describe buyers in ad copy?
Q3: Give two examples of words or phrases that would be considered
discriminatory and two that would not, with regard to sex/gender when
writing an ad.
Q4: What would you say to a Hispanic buyer who tells you he wants to
see homes that are located only in predominantly Hispanic neighborhoods?
A1: Discriminatory advertising is defined as advertising that indicates a
preference, limitation or discrimination based on race, color, religion,
handicap, sex, familial status or national origin.
A2: Advertising that describes buyers could be considered discriminatory,
especially if the buyers are from a protected class.
A3: •
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Discriminatory - males only, women only
Non-discriminatory - mother-in-law apartment, master bedroom
A4: You need to explain to the buyer that you, ethically and legally,
cannot recommend housing based upon the race, religion, color, national
origin, sex, handicap, or familial status makeup of the neighborhood.
Summary/Review
Fair Housing law first began with the Civil Rights Act of 1866 which
prohibited discrimination in housing based on race. The list of protected
classes of the Federal Fair Housing Act is:
• Race
• Religion
• Color
• National origin
• Sex
• Handicap
• Familial status
Any person who believes he or she has been discriminated against may file
a complaint with HUD within one (1) year of the alleged act.
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In addition to or instead of filing a complaint with HUD, a person may file
a suit in a state or federal court within two (2) years of the alleged violation.
The Americans with Disabilities Act mandates that persons with disabilities
have equal access to jobs, public accommodations, government services,
public transportation and telecommunications.
Recent Changes to the Real Estate License Act
of 2000
Since 2012, several changes in the License Law have become effective.
These changes are mainly in the areas of licensing and license renewal.
Licensing
In addition to federal Fair Housing Law, Illinois has enacted the Illinois
Human Rights Act for state-level protection against discrimination. In
addition to the classes protected under the federal laws, Illinois has added
these classes:
• Age
• Ancestry
• Marital status
• Military status
• Unfavorable discharge from military service
• Sexual orientation
• Order of protection status
Local jurisdictions can add additional classes to protect against
discrimination.
Fair Housing laws also prohibit these activities.
• Blockbusting
• Steering
• Redlining
It would be inappropriate and dangerous for a licensee to answer questions
about the minorities living in a specific area. The licensee should refer
the buyer to experts in this field -- someone who would actually be in
possession of the demographics in a particular area.
Managing brokers should put a system in place to monitor the activities of
all affiliated licensees with regard to fair housing compliance.
Chapter Three:
License Law and Escrow
Overview
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Broker Licensing
Managing Broker Licensing
Auctioneer Licensing
Broker License Renewal for 2014
Continuing Education
Expiration of Brokerage Agreement
Payment of Compensation
Reliance on Advisory Letters
Disciplinary Actions Not Related to Escrow
Requirement for a Physical or Mental Examination
Employment Agreements
Ministerial Acts
Unlicensed Assistants
Section 1450.750. Special Accounts - Overview
Special Accounts - Escrow
Disputes Regarding Escrow Monies
Maintaining Escrow Accounts
Disciplinary Causes Related to Escrow
As stated in Section 5-27 of the License Act, applicants who wish to obtain
a broker's license must meet the following requirements:
• Be of good moral character.
• Successfully complete a four-year course of study in a high school
or secondary school approved by the Illinois State Board of Education or an equivalent course of study as determined by an examination conducted by the Illinois State Board of Education which will
be verified under oath by the applicant. • Be 21 years of age; however, a broker may be 18 years old if he or
she has a minimum of 4 semesters of post-secondary school study
as a full-time student or the equivalent, with major emphasis on
real estate courses, in a school approved by the Department.
• Complete 90 hours of instruction (15 hours of case studies/situational type in classroom or other interactive delivery method).
• Take and pass the written exam.
• Submit an application with sponsoring card and fee.
NOTE: An individual holding an active license as a managing broker may
return the license to the Department along with a form provided by the
Department and that person will be issued a broker's license in exchange.
Managing Broker Licensing
Section 5-28 of the License Act of 2000 states that applicants for a
managing broker license must meet the following requirements:
• Be 21 years of age.
• Be of good moral character.
• Have a high school diploma or equivalent. • Have been licensed at least 2 of the 3 prior years as salesperson
or broker.
• Complete 165 hours of pre-license education: 120 broker pre-license and 45 additional hours completed in the year before applying for managing broker license. The additional hours must focus
on brokerage administration and management and include at least
15 hours in the classroom or by other interactive delivery method
between the instructor and the students.
• Take and pass exam.
• Submit application with sponsor card and pay fees.
According to Section 5-28(c), no applicant can act as a managing broker
for more than 90 days after an appointment as a managing broker has
been filed with the Department without obtaining a managing broker's
license.
Auctioneer Licensing
According to Section 5-32 of the License Act, an auctioneer licensed under
the Auction License Act who does not possess a valid and active broker's or
managing broker's license, or who is not otherwise exempt from licensure,
may not engage in the practice of auctioning real estate, except as provided
here.
The Department will issue a real estate auction certification to applicants
who:
• Possess a valid auctioneer's license under the Auction License Act.
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Successfully complete a real estate auction course of at least 30
hours approved by the Department, which covers the scope of activities that may be engaged in by a person holding a real estate
auction certification and the activities for which a person must hold
a real estate license, as well as other material as provided by the
Department.
Provide documentation of the completion of the real estate auction
course.
Successfully complete any other reasonable requirements as provided by rule.
The auctioneer's role is limited to establishing the time, place, and method
of the real estate auction, placing advertisements regarding the auction, and
crying or calling the auction. Any other real estate brokerage activities must
be performed by a person holding a valid and active real estate broker's or
managing broker's license under the provisions of the License Act or by
a person who is exempt from holding a license and who has a real estate
auction certification.
An auctioneer who conducts any real estate auction activities in violation of
this Section of the Act is guilty of unlicensed practice. The Department may
revoke, suspend, or otherwise discipline the real estate auction certification
of an auctioneer who is adjudicated to be in violation of the provisions of
the Auction License Act.
Advertising for the real estate auction must contain the name and address
of the licensed real estate broker, managing broker, or a licensed auctioneer
who is providing brokerage services for the transaction.
A person licensed as a real estate broker or managing broker is not required
to obtain a real estate auction certification in order to auction real estate.
More License Act Changes and Revisions
Continuing Education
Section 5-70(l) of the License Act states that, except as specifically
provided in this Act, continuing education credit hours may not be earned
for completion of pre- or post-license courses.
The approved 30-hour post-license course for broker licensees will satisfy
the continuing education requirement for the pre-renewal period in which
the course is taken.
The approved 45-hour brokerage administration and management
course will satisfy the 12-hour broker management continuing education
requirement for the pre-renewal period in which the course is taken.
Expiration of Brokerage Agreement
The language of Section 10-25 has been revised as shown below in bold.
"No licensee shall obtain any written brokerage agreement that does
not either provide for automatic expiration within a definite period
of time or provide the client with a right to terminate the agreement
annually by giving no more than 30 days' prior written notice. Any
written brokerage agreement not containing such a provision shall
be void. When the license of any sponsoring broker is suspended or
revoked, any brokerage agreement with the sponsoring broker shall
be deemed to expire upon the effective date of the suspension or
revocation."
Payment of Compensation
The following was added to Section 10-5 regarding compensation:
Broker License Renewal for 2014
By April 30th, 2014 all broker licensees must have completed the continuing
education (CE) requirements and applied to renew their license through the
Illinois Department of Financial and Professional Regulation (IDFPR). The
specific requirements depend on how and when the licensee received his or
her Illinois broker license.
Brokers who were licensed under the new 90-hour pre-licensing
requirements whose first license expires April 30th, 2014 must:
• Complete and pass the 30-Hour Broker Post- License Course before April 30th, 2014.
• Submit the renewal application with the appropriate licensing fee
to IDFPR by April 30th, 2014.
NOTE: These licensees have no other CE requirements for this renewal
period.
Brokers who transitioned from a salesperson license or were licensed as a
broker before February 1st, 2012 must:
• Have taken 12 hours of CE between May 1st, 2012 and April 30th,
2014. The 12 hours must include a minimum 6 hours Core CE (3
hours of which must be Core A and 3 must be Core B) and a maximum 6 hours of elective CE.
• Submit the renewal application with the appropriate licensing fee
Brokers who were licensed under the new 90-hour pre-licensing
requirement on or after February 1st, 2014 do not need to renew in 2014.
The license renewal deadline for those brokers is April 30th, 2016 and
the only hours required for the 2016 renewal will be the 30-Hour Broker
Post-License Course.
"(e) Notwithstanding any other provision of this Act, a sponsoring
broker may pay compensation to a person currently licensed under
the Auction License Act who is in compliance with and providing
services under Section 5-32 of this Act."
Reliance on Advisory Letters
Section 25-14 states the following:
"Licensees or their representatives may seek an advisory letter from
the Department as to matters arising under this Act or the rules
promulgated pursuant to this Act. The Department shall promulgate
rules as to the process of seeking and obtaining an advisory letter
and topics and areas on which advisory rules will be issued by the
Department. A licensee is entitled to rely upon an advisory letter
from the Department and will not be disciplined by the Department
for actions taken in reliance on the advisory letter."
Q1: What is the role of a licensed auctioneer?
Q2: What is the renewal requirement for brokers who were licensed under
the new 90-hour pre-licensing requirements whose first license expires
April 30th, 2014?
Q3:What is the renewal requirement for brokers who transitioned from a
salesperson license or were licensed as a broker before February 1st, 2012?
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A1: The auctioneer's role is limited to establishing the time, place, and
method of the real estate auction, placing advertisements regarding the
auction, and crying or calling the auction.
A2: •
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Complete and pass the 30-Hour Broker Post- License Course before April 30th, 2014
Submit the renewal application with the appropriate licensing fee
A3: Have taken 12 hours of CE between May 1st, 2012 and April 30th,
2014. The 12 hours must include a minimum 6 hours Core CE (3 hours
of which must be Core A and 3 must be Core B) and a maximum 6 hours
of elective CE. Submit the renewal application with the appropriate
licensing fee to IDFPR by April 30th, 2014.
Disciplinary Actions Not Related to Escrow
As stated in Section 20-20, the Department may refuse to issue or renew
a license, place a licensee on probation, suspend or revoke any license,
reprimand, or take any other disciplinary or non-disciplinary action the
Department deems necessary, or impose a fine not to exceed $25,000 for
any one or a combination of the following causes:
• Fraud or misrepresentation in applying for or obtaining a license or
license renewal. Note: The license renewal form includes questions
regarding school loans, child support and Illinois taxes being paid
current. Answering those questions or any other question on the
renewal form untruthfully can result in disciplinary action.
• Conviction of, plea of guilty or nolo contendre, to a felony or
misdemeanor involving dishonesty, fraud, larceny, embezzlement,
or obtaining money, property or credit by false pretenses, in Illinois
or any other state or jurisdiction.
• Inability to practice with reasonable judgment, skill or safety as a
result of physical illness, including but not limited to, deterioration
through the aging process or loss of motor skill, or mental illness
or disability.
• Conducting real estate business in a retail establishment, if not
separated from the main retail business in a separate and distinct
area.
• Disciplinary action of another state or jurisdiction if at least one of
the grounds for discipline is the same as or equivalent to one of the
grounds for discipline in Illinois.
• Engaging in real estate activity without a license or after the license
is expired or while the license was inoperative. Note: Practicing
without a license (including an expired or inoperative license) can
result in a fine of up to $25,000 in addition to other disciplines. • Cheating or attempting to subvert a licensing exam or continuing
education exam, or aiding or abetting an applicant to do so.
• Advertising in a way that is inaccurate, misleading, or contrary to
the Act.
• Making substantial misrepresentation or untruthful advertising.
• Making any false promises that are likely to influence, persuade
or induce.
• Pursuing a continued and flagrant course of misrepresentation or
making of false promises through licensees, employees, agent,
advertising, or otherwise.
• Using misleading or untruthful advertising, or using trade name
or insignia of membership in a real estate organization when the
licensee is not a member.
• Acting for more than one party in a transaction (acting as a dual
agent) without written notice to all parties. Undisclosed dual agent
is not only a license law violation, it exposes the licensee to legal
problems.
• Representing or attempting to represent a broker other than the
sponsoring broker.
• Failure to account for or remit moneys or documents coming into
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his/her possession that belong to others.
Failing to furnish copies upon request of documents relating to a
real estate transaction to a party who has executed that document.
Failure of a sponsoring broker to timely provide information,
sponsor cards, or termination of licenses to the Department.
Engaging in dishonorable, unethical, or unprofessional conduct of
a character likely to deceive, defraud, or harm the public.
Employing any person on a purely temporary or single deal basis
as a means of evading the law regarding payment of commission
to non-licensees.
Commingling the money or property of others with his/her own
money or property.
Permitting the use of his/her license as a broker to enable a
salesperson or unlicensed person to operate a real estate business
without actual participation and control.
Any other conduct that constitutes dishonest dealing
Displaying a "for rent" or "for sale" sign on any property, or
advertising a property or sale or rent, without the written consent
of an owner or owner's duly authorized agent.
Failing to provide information requested by the Department within
30 days of the request.
Using a blind ad. The brokerage name and franchise affiliation (if
any) must be included in all advertising.
Influencing or attempting to influence a seller, purchaser, occupant,
landlord, or tenant in a way that tends to promote racially or
religiously segregated housing or in a way that retards, obstructs,
or discourages racially integrated housing. As "keepers of the
land", licensees have an obligation to provide equal opportunity
in housing.
Engaging in any act that is in violation of Article 3 of the Illinois
Human Rights Act, whether or not a complaint has been filed. Inducing any party to a contract of sale, lease, or brokerage
agreement to substitute a new contract.
Negotiating a sale, exchange or lease directly with any person
if the licensee knows that the person has an exclusive brokerage
agreement with another broker unless specifically authorized by
that broker.
When a licensee is also an attorney, acting as the attorney for one
of the parties in the same transaction in which the attorney is acting
as a broker or salesperson.
Advertising or offering free merchandise or services if any
conditions necessary to receive the merchandise or services are not
disclosed in the same ad.
Disregarding or violating any provision of the Land Sales
Registration Act of 1989, the Illinois Time Share Act, or the rules
that enforce those Acts.
Violating the terms of a disciplinary order issued by the Department. Paying or failing to disclose compensation in violation of the Act.
Requiring a party who is not a client of the licensee to allow the
licensee to retain a portion of the escrow moneys for payment of the
licensee's commission or expenses as a condition of release of the
earnest money. Licensees may not hold earnest money "hostage"
for the payment of commission.
Disregarding or violating any provision of the Act or Rules, or
aiding someone else in doing so.
Failing to provide the minimum services required by the Act for
exclusive brokerage agreements.
Habitual or excessive use or addiction to alcohol, narcotics,
stimulants, or any other chemical agent that results in a licensee's
inability to practice with reasonable skill or safety.
Enabling, aiding, or abetting an auctioneer, as defined in the
Auction License Act, to conduct a real estate auction in a manner
that is in violation of this Act.
Requirement for a Physical or Mental
Examination
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When enforcing the disciplinary section of the License Act, the Department
may require a licensee under investigation for an alleged violation to submit
to a physical or mental examination. Section 20-20(e) reads as follows:
"In enforcing this Section, the Department or Board upon a showing of
a possible violation may compel an individual licensed to practice under
this Act, or who has applied for licensure under this Act, to submit to
a mental or physical examination, or both, as required by and at the
expense of the Department. The Department or Board may order the
examining physician to present testimony concerning the mental or
physical examination of the licensee or applicant. No information shall
be excluded by reason of any common law or statutory privilege relating
to communications between the licensee or applicant and the examining
physician. The examining physicians shall be specifically designated by
the Board or Department. The individual to be examined may have, at
his or her own expense, another physician of his or her choice present
during all aspects of this examination. Failure of an individual to submit
to a mental or physical examination, when directed, shall be grounds
for suspension of his or her license until the individual submits to the
examination if the Department finds, after notice and hearing, that the
refusal to submit to the examination was without reasonable cause.
If the Department or Board finds an individual unable to practice
because of the reasons set forth in this Section, the Department or Board
may require that individual to submit to care, counseling, or treatment
by physicians approved or designated by the Department or Board, as
a condition, term, or restriction for continued, reinstated, or renewed
licensure to practice; or, in lieu of care, counseling, or treatment, the
Department may file, or the Board may recommend to the Department to
file, a complaint to immediately suspend, revoke, or otherwise discipline
the license of the individual. An individual whose license was granted,
continued, reinstated, renewed, disciplined or supervised subject to such
terms, conditions, or restrictions, and who fails to comply with such
terms, conditions, or restrictions, shall be referred to the Secretary for a
determination as to whether the individual shall have his or her license
suspended immediately, pending a hearing by the Department.
In instances in which the Secretary immediately suspends a person's
license under this Section, a hearing on that person's license must be
convened by the Department within 30 days after the suspension and
completed without appreciable delay. The Department and Board
shall have the authority to review the subject individual's record of
treatment and counseling regarding the impairment to the extent
permitted by applicable federal statutes and regulations safeguarding
the confidentiality of medical records. An individual licensed under this Act and affected under this Section
shall be afforded an opportunity to demonstrate to the Department or
Board that he or she can resume practice in compliance with acceptable
and prevailing standards under the provisions of his or her license."
Employment Agreements
Section 10-20 of the License Act makes the following points regarding
sponsoring brokers and employment agreements with their affiliated
licensees:
• A licensee may perform activities as a licensee only for his or
her sponsoring broker. A licensee must have only one sponsoring
broker at any one time.
• Every broker who employs licensees or has an independent
contractor relationship with a licensee shall have a written
employment agreement with each such licensee. The broker having
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this written employment agreement with the licensee must be that
licensee's sponsoring broker.
Every sponsoring broker must have a written employment
agreement with each licensee the broker sponsors. The agreement
shall address the employment or independent contractor
relationship terms, including without limitation supervision,
duties, compensation, and termination.
Every sponsoring broker must have a written employment
agreement with each licensed personal assistant who assists a
licensee sponsored by the sponsoring broker. This requirement
applies to all licensed personal assistants whether or not they
perform licensed activities in their capacity as a personal assistant.
The agreement shall address the employment or independent
contractor relationship terms, including without limitation
supervision, duties, compensation, and termination.
Notwithstanding the fact that a sponsoring broker has an
employment agreement with a licensee, a sponsoring broker
may pay compensation directly to a corporation solely owned by
that licensee that has been formed for the purpose of receiving
compensation earned by the licensee. A corporation formed for the
purpose herein stated in this subsection shall not be required to
be licensed under this Act so long as the person who is the sole
shareholder of the corporation is licensed.
Ministerial Acts
Ministerial acts are those acts that a licensee may perform for a consumer
that are informative or clerical in nature and do not rise to the level of active
representation on behalf of a consumer. They are not agency acts and do not
form an agency agreement.
Examples of ministerial acts include without limitation:
• Responding to phone inquiries by consumers or inquiries from
consumers walking into a licensee's office concerning the availability and pricing of brokerage services or price or location of
a property. Providing this information is not an agency act. Also,
describing a property or the property's condition in response to a
consumer's inquiry is a ministerial act.
• Attending an open house and responding to questions about the
property from a consumer. Use caution to ensure the attendees
know they are not currently being represented, at a time to prevent
them from sharing confidential information. • Setting an appointment to view the property.
• Accompanying an appraiser, inspector, contractor, or similar third
party on a visit to a property.
• Completing business or factual information for a consumer on an
offer or contract to purchase on behalf of a client.
• Showing a client through a property being sold by an owner on his
or her own behalf.
• Referral to another broker or service provider. Keep in mind that
referring an existing client to another licensee to avoid dual agency
requires that the licensee provide the client being referred written
notice.
Unlicensed Assistants
According to Section 1450.740 of the Act, licensees may employ, or
otherwise utilize the services of, unlicensed assistants to assist them with
administrative, clerical or personal activities that do not require a license.
Compensation for unlicensed personal assistants cannot be transaction
based.
An unlicensed assistant, on behalf of and under the direction of a licensee,
may engage in the following administrative, clerical or personal activities.
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Note: This is not an all-inclusive list; it is meant to be illustrative:
• Answer the telephone, take messages and forward calls to a licensee.
• Submit listings and changes to a multiple listing service.
• Follow up on a transaction after a contract has been signed.
• Assemble documents for a closing.
• Secure public information from a courthouse, sewer district, water
district or other repository of public information.
• Have keys made for a company listing. • Draft advertising copy and promotional materials for approval by
a licensee.
• Place advertising.
• Record and deposit earnest money, security deposits and rents.
• Complete contract forms with business and factual information at
the direction of and with approval by a licensee.
• Monitor licenses and personnel files. • Compute commission checks and perform bookkeeping activities.
• Place signs on property.
• Order items of routine repair as directed by a licensee.
• Prepare and distribute flyers and promotional information under
the direction of and with approval by a licensee.
• Act as a courier to deliver documents, pick up keys, etc.
• Place routine telephone calls on late rent payments.
• Schedule appointments for the licensee (this does not include making phone calls, telemarketing or performing other activities to solicit business on behalf of the licensee.)
• Respond to questions by quoting directly from published information.
• Sit at a property for a broker tour that is not open to the public.
• Gather feedback on showings.
• Perform maintenance, engineering, operations or other building
trades work and answer questions about that work.
• Provide security.
• Provide concierge services and other similar amenities to existing
tenants.
• Manage or supervise maintenance, engineering, operations, building trades and security.
• Perform other administrative, clerical and personal activities for
which a license under the act is not required.
An unlicensed assistant of a licensee may not perform the following
activities:
• Host open houses, kiosks, or home show booths or fairs • Show property.
• Interpret information on listings, titles, financing, contracts, closings or other information relating to a transaction.
• Explain or interpret a contract, listing, lease agreement or other
real estate document with anyone outside the licensee's company.
• Negotiate or agree to any commission, commission split, management fee or referral fee on behalf of a licensee.
• Perform any other activity for which a license under the act is required.
Any licensee who employs an unlicensed assistant is responsible for the
assistant's actions taken under that licensee's supervision direction.
Any licensee who permits, aids, assists, or allows his or her unlicensed
assistant to perform any activity which requires a license will be in violation
of the Act.
Stenographic, clerical, maintenance, engineering, building trades, security
or office personnel not directly engaged in the practice of real estate
brokerage are not required to be licensed.
A licensee is prohibited from acting as an unlicensed assistant for any
licensee other than his or her sponsoring broker or a licensee sponsored by
the sponsoring broker.
20
Q1: What are some of the disciplines the Department may impose for
violations of the License Act?
Q2: When enforcing the disciplinary section of the License Act, what can
the Department do if there is reason to believe that a licensee is unable to
practice with reasonable judgment or skill?
Q3: With whom must a sponsoring broker have employment agreements?
Q4: Who is responsible for the actions of an unlicensed assistant?
A1: The Department may refuse to renew a license, place it on probation,
suspend or revoke a license, reprimand, or take any other disciplinary
action the Department deems necessary, or impose a fine of up to $25,000.
A2: The Department may require a licensee under investigation for an
alleged violation to submit to a physical or mental examination.
A3: The sponsoring broker must have written employment agreements
with all affiliated licenses, including independent contractors and
licensed personal assistants.
A4: The licensee who employs the assistant is responsible for those
activities the assistant performs under the licensee's supervision or
direction.
Section 1450.750. Special Accounts - Overview
Escrow monies include all monies, promissory notes or any other typeof
financial consideration, and specifically include earnest money and security
deposits; except security deposits in which the person holding the deposit is
the sole owner of the property being leased or sold.
Rent money paid to a licensee to be transmitted to the owner is not
considered to be escrow money. Money held in a custodial account for
transmittal to a licensee's client pursuant to a written agreement (i.e., a
contract for deed), is not subject to escrow rules.
There is no requirement for sponsoring brokers to maintain an escrow
account. They may, instead, arrange for earnest money and other escrow
monies to be held by a title company or other third party.
Sponsoring brokers who accept escrow monies must maintain and deposit in
a special escrow account separate from personal or other business accounts,
all escrow moneys entrusted to them while acting as the real estate brokers,
escrow agents or as the temporary custodians of the funds of others.
Security deposits must be maintained in an escrow account for the duration
of the lease, unless the tenant waives the requirement in writing. Any such
waiver included in the lease must appear in bold print.
Section 1450.750. Special Accounts - Escrow
Escrow accounts must be non-interest bearing, unless otherwise required
by law or unless the principals to the transaction specifically require, in
writing, that the deposit be placed in an interest bearing account. In that
case, the principals must stipulate to whom the interest is paid.
A sponsoring broker may maintain more than one escrow account. All
accounts must be in a federally insured depository.
Commingling is, of course, prohibited. Each sponsoring broker may deposit
only escrow monies received in connection with any real estate transaction
into an escrow account. The sponsoring broker may not deposit personal
funds in an escrow account, except he or she may deposit from his/ her
own personal funds, and keep in any escrow account, an amount sufficient
to avoid incurring service charges relating to the escrow account. The sum
must be specifically documented as being for service charges, and the
sponsoring broker must have proof available that the amount of his/her own
funds in the escrow account does not exceed the minimum amount required
by the depository to maintain the account without incurring service charges.
The sponsoring broker must provide a receipt to the payor of any escrow
funds and retain a copy.
All escrow monies must be placed in the sponsoring broker's escrow
account not later than the next business day following the transaction.
A transaction exists once an accepted real estate contract is signed or
lease agreed to by the parties. If a branch office transmits escrow monies
to the main office rather than maintain an account, those funds must be
transmitted by the branch office to the main office not later than the next
business day following the transaction. The main office must deposit the
monies received from the branch office not later than the next business day
following receipt of the funds from the branch office.
The sponsoring broker must keep all escrow monies on deposit in an
escrow account until a transaction is consummated or terminated, and
disbursement must be according to the terms of the contract and must be
made not later than the next business day following the sponsoring broker's
receipt of notice of the consummation or termination, or otherwise in
accordance with the written direction of all principals to the transaction or
their duly authorized agents.
Commissions or fees earned by a sponsoring broker must be disbursed by
that broker from the funds deposited in an escrow account no earlier than
the day the transaction is consummated or terminated and not later than the
next business day after the transaction is consummated or terminated, or
otherwise in accordance with the written direction of all principals to the
transaction or their duly authorized agents.
The sponsoring broker who serves as an escrow agent must notify all
principals in writing if a principal fails to tender escrow moneys, when a
principal's payment is dishonored by the financial institution, or when there
appears to be a deficiency in the amount of the deposit.
The sponsoring broker cannot keep escrow money for commission. He/she
may not withhold, for any period of time, any authorized disbursement of
escrow moneys due to any claim for a commission or compensation to any
licensee. The broker may sue for unpaid commission, but cannot withhold
escrow money.
Transfer of escrow monies to the closing agent for the transaction may
be made up to 2 business days prior to the scheduled closing. If prior to
the consummation or termination of the transaction, the sponsoring broker
receives written direction from all of the principals to the transaction or their
duly authorized agents agreeing to a disbursement of the escrow monies,
that broker must disburse the escrow moneys according to the written
directions no later than the next business day following the sponsoring
broker's receipt of the last required written direction.
Disputes Regarding Escrow Monies
In the event of a dispute in writing over the return or forfeiture of any
escrow monies held by the sponsoring broker or if a sponsoring broker has
actual knowledge that any party to a transaction contests or disagrees with
an anticipated disbursement of escrow monies held by that broker, he or
she must continue to hold the deposit in his/ her escrow account until one
of the following occurs:
• He/she has a written release from all parties or their duly authorized agents consenting to the disposition, in which case the escrow
monies must be disbursed according to the terms of the written
direction no later than the next business day after the sponsoring
broker's receipt of the last required written release.
• A civil action is filed, by either the sponsoring broker or one of the
parties, to determine its disposition, at which time payment may be
made into court.
• The funds are turned over to the State Treasurer or such other appropriate State agency or officer designated pursuant to the Act or
the Uniform Disposition of Unclaimed Property Act because of inactivity of the account or inability to locate the parties, or inability
of the parties to reach a resolution.
If an interpleader action is filed by the sponsoring broker, and the broker
is authorized by real estate contract to withdraw from the escrow account
those amounts as may be necessary to reimburse the sponsoring broker for
costs and reasonable attorney's fees associated with that action, excluding
costs and attorney's fees associated with that broker's attempt to collect a
commission or fee.
Abandoned Funds
Brokers may disburse unclaimed escrow monies that are deemed abandoned
to the Office of the State Treasurer provided the following conditions are
met: (1) funds were not disbursed from the normal consummation of the
transaction, nor from any other written directions of the principals, nor as
the result of a court order, and, (2) there has been no notice of any claim
filing in court, and (3) six months have elapsed after the receipt of a written
demand for the escrow monies from one of the principals or principals'
agents to the transaction.
More Escrow Rules
Affiliated licensees should IMMEDIATELY give earnest money checks to
their sponsoring broker.
Brokers must always be able to account for any client or escrow funds,
as well as important documents. If the IDFPR asks to see escrow records
or other records that are stored onsite, they must be supplied within 24
HOURS of the request. Other records must be available within 30 days.
Escrow records must be retained for five years, with the records for
immediate prior two years being maintained in the office location.
Section 20-20. Disciplinary Causes Related to
Escrow
IDFPR may take disciplinary action if the sponsoring broker:
• Fails to account for or remit any monies or documents coming into
his/her possession that belong to others.
• Fails to maintain and deposit into a special account, separate from
personal and business accounts, all escrow monies belonging to
others that are entrust to a licensee, unless:
♦ Disbursed prior to consummation or termination under one of the following conditions:
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1.
in accordance with written direction of the principals
to the transaction or their duly authorized agents,
impose a fine not to exceed $25,000 for any one or a combination of alleged
violations.
2.
in accordance with directions providing for the
release, payment or distribution contained in any
written contract signed by the principals or their
duly authorized agents,
When enforcing the disciplinary section of the License Act, the Department
may require a licensee under investigation for an alleged violation to submit
to a physical or mental examination.
3.
pursuant to a court order; or
♦ Deemed abandoned and transferred to the Office of the State Treasurer as unclaimed property. Escrow money may be
deemed abandoned if not disbursed as indicated above, in the
absence of notice of filing of a claim in court, and if 6 months
have elapsed after the receipt of a written demand for the escrow money from one of the principals or their duly authorized
agent.
•
Fails to make available to the Department escrow records and related documents within 24 hours of request by the Department.
Consider this situation:
A branch office of Classic Realty took an earnest money check on Thursday. The offer was accepted on Friday. The following Monday was a legal
holiday. The branch office does not have an escrow account but instead
delivers any escrow funds to the main office.
Q1: When must the branch office have the earnest money to the main office?
Q2: When must the sponsoring broker deposit the earnest money into his/
her escrow account?
A1: The branch office must insure that the main office receives the
earnest money no later than Tuesday (Monday was a holiday).
The sponsoring broker must have written employment agreements with all
affiliated licenses, including independent contractors and licensed personal
assistants.
Any licensee who employs an unlicensed assistant is responsible for
those activities the assistant performs under the licensee's supervision or
direction.
Sponsoring brokers must have an escrow account, or may arrange for a
third party such as a title company to hold escrow funds.
Escrow accounts must be non-interest bearing and held in federally insured
depository.
Broker commissions must be disbursed from the escrow account no earlier
than the closing of the transaction and no later than the next business day
after closing.
The sponsoring broker may not withhold escrow funds for payment of
commission.
The sponsoring broker must hold escrow deposits until:
• He receives written release from all parties or
• It is turned over to the courts (an interpleader action is filed) or
• It becomes unclaimed property (5 years, or 6 months after receipt
of a written demand from one of the principals or their authorized
agent).
Sponsoring brokers must retain records for five years, including ledgers,
journals, monthly reconciliation statements, and master escrow account
logs.
A2: The sponsoring broker must deposit it by the end of the following
business day (Wednesday).
Summary/Review
The Department will issue a real estate auction certification to applicants
who possess a valid auctioneer's license under the Auction License Act,
successfully complete a real estate auction course of at least 30 hours
approved by the Department, and provide documentation of the completion
of the real estate auction course.
The auctioneer's role is limited to establishing the time, place, and method
of the real estate auction, placing advertisements regarding the auction, and
crying or calling the auction.
By April 30th, 2014 all broker licensees must have completed the continuing
education (CE) requirements and applied to renew their license through
IDFPR.
Continuing education credit hours may not be earned for completion of pre
or post-license courses.
The Department may refuse to issue or renew a license, place a licensee
on probation, suspend or revoke any license, reprimand, or take any other
disciplinary or non-disciplinary action the Department deems necessary, or
22
Illinois Core A: Agency, License Law and Escrow
~ Final Assessment Questions ~
Select the best answer for each question and mark your answers on the Student Assessment Sheet (last page of
book) or complete your assessment online at www.McKissock.com/ILRE
1.
What is the overall legislative intent behind the enactment
of Article 15 of the Real Estate License Act of 2000?
a. To govern agency contracts
b. To promote stability in the market
c. To apply common law to agency relationships
d. To increase bureaucracy in real estate
2.
A licensee should always obey the instructions of their
client, unless:
a. The instructions are illegal
b. The action doesn't make sense
c. The instructions make the sale difficult
d. The licensee doesn't agree with the client
3.
4.
5.
6.
The __________ is represented by the licensee, whereas
a _________ is either represented by another agent or
represents themselves.
a. Customer; client
b. Customer; agent
c. Client; agent
d. Client; customer
7.
What is NOT needed in order to form an agency
agreement?
a. Client
b. Compensation
c. Broker
d. Written documentation
What action would NOT be considered a breach of duty
or obligation on the part of the licensee?
a. Showing alternative properties to prospective buyers
b. Showing properties in which the client is interested to
other prospective buyers
c. Working on the basis that the licensee will receive higher
fee based on a higher selling price
d. All of the answers shown
8.
Broker Tom has a written agreement with buyer Jon.
Jon is purchasing a property from seller Eric. As part
of the purchase agreement, Eric will be paying Tom's
commission. With whom does Tom have an agency
relationship?
a. Eric
b. Jon
c. Both Eric and Jon
d. Tom's sponsoring broker
Licensees working with customers may:
a. Reveal the maximum their client is willing to pay for a
property
b. Not have any contact with the customer outside of the
office
c. Only perform ministerial acts
d. Have a fiduciary relationship with the customer
9.
Which of these fiduciary obligations does not necessarily
end with the termination of an agency agreement?
a. Loyalty
b. Obedience
c. Confidentiality
d. Disclosure
In which type of agency relationship would a licensee
represent both the buyer and seller in the same
transaction?
a. Dual agency
b. Designated agency
c. Listing agency
d. Subagency
10. What must be included with the agency relationship
disclosure?
a. That a designated agency relationship exists, unless
otherwise specified
b. The sponsoring broker's compensation
c. The name of the designated agent
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3 CE Credit Hours - Mandatory (Approval #:564.002261)
This course is designed to fulfill the Core B requirement for Illinois real estate professionals. The course will cover three
distinct, yet important, topics for real estate professionals: antitrust, fair housing, and short sales. Participants will begin
the course with an in-depth look at antitrust. Students will discuss both the Sherman and Clayton Acts, as well as the
Illinois Antitrust Act. The course will outline the most common antitrust violations in real estate and discuss the potential
penalties for violation. Students will then move into a discussion on fair housing. The course will give a brief history on fair
housing legislation before moving on to some of the more recent amendments that have been made. Specifically, the course
will focus on the 2008 amendments to the Americans with Disabilities Act and their effect on the real estate industry. The
course will conclude with a discussion about short sales and how real estate professionals can educate their clients about the pros and cons of
a short sale. Students will conclude the course with an examination of the recent mortgage relief programs and how they benefit homeowners.
Chapters:
•
Chapter One: Antitrust
•
Chapter Two: Fair Housing
•
Chapter Three: Short Sales
•
Compare and contrast the Sherman and Clayton Acts.
•
Identify the most common antitrust violations in real estate.
•
•
•
•
•
•
•
Discuss potential penalties for antitrust violations on both a state and federal level.
Recognize how fair housing has been modified as new classes of protection are added.
Contrast the difference between the original and amended definition of "disability".
Identify those actions that are prohibited by fair housing laws.
Identify the impact of a home's appraisal value on the bank's consideration for a short sale.
Discuss the bank's options for minimizing loss.
Explain the tax implications of the short sale deficiency.
Customer Testimonial
"Continuing education finally made enjoyable. You'll never sit through classes again. McKissock is the only way to go."
24
~ Will
Chapter One:
Antitrust
Overview
centuries old form of a contract whereby one party entrusts its property to a
second party. The property is then used to benefit the first party.
The law attempts to prevent the artificial raising of prices by restriction of
trade or supply. In other words, innocent monopoly, or monopoly achieved
solely by merit, is perfectly legal, but acts by a monopolist to artificially
preserve his status, or nefarious dealings to create a monopoly, are not. Put
another way, it has sometimes been said that the purpose of the Sherman
Act is not to protect competitors, but rather to protect competition and the
competitive landscape.
Antitrust is a term that many people associate with large corporations.
Brokers need to be aware, however, that it is relatively easy for those in the
real estate industry to commit an antitrust violation without even realizing
what they're doing. In this chapter, we hope to help clarify the antitrust laws
and give licensees the knowledge and skills to avoid finding themselves on
the wrong end of an antitrust suit.
•
•
•
•
•
•
•
Antitrust
The Sherman Antitrust Act (Section 1 and Section 2)
The Clayton Act
Violations which are Most Common in the Real Estate Industry
Illinois Antitrust Law
Penalties for Antitrust Violations
Compliance Policies
Antitrust
Antitrust Laws and Unfair Business Practices are designed to promote the
policy and practice of COMPETITION. Some of the symptoms of a lack
of competition are higher pricing and diminishing quality of a service or
product.
"The purpose of the [Sherman] Act is not to protect businesses from
the working of the market; it is to protect the public from the failure
of the market. The law directs itself not against conduct which is
competitive, even severely so, but against conduct which unfairly tends
to destroy competition itself. This focus of U.S. competition law, on
protection of competition rather than competitors, is not necessarily
the only possible focus or purpose of competition law. For example, it
has also been said that competition law in the European Union tends
to protect the competitors in the marketplace, even at the expense of
market efficiencies and consumers."
Section 1: Trusts, etc., in restraint of illegal trade: Penalty
Every contract, combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States, or with foreign
nations, is declared to be illegal. Every person who shall make any contract
or engage in any combination or conspiracy hereby declared to be illegal
shall be deemed guilty of a felony, and on conviction thereof, shall be
punished by fine not exceeding $10,000,000 if a corporation, or if another
person, $350,000, or by imprisonment not exceeding three years, or by both
said punishments, in the discretion of the court.
Section 2: Monopolizing trade a felony: Penalty
Real estate brokers compete with one another to obtain listings of homes
for sale. At the same time, they often cooperate with one another to secure
buyers for those listings. This dual situation of competition and cooperation,
which is unique to the real estate industry, can present many opportunities
for antitrust violations.
In light of this risk, the National Association of Realtors (NAR) has
produced a 16-minute video entitled "Antitrust and Real Estate" which can
be obtained through NAR. This informative video explains the basis for
antitrust laws and how they pertain to you, as a real estate professional.
The foundation for federal antitrust laws is the Sherman Act of 1890.
•
Every person who shall monopolize, or attempt to monopolize, or
combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or
with foreign nations, shall be deemed guilty of a felony, and
•
On conviction thereof, shall be punished by fine not exceeding
$10,000,000 if a corporation, or, if any other person, $350,000, or
by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.1
NOTE: The emphasis of this Act is to prohibit the restraint of trade to allow
for greater competition.
The Sherman Antitrust Act The Sherman Antitrust Act requires the United States Federal government
to investigate and pursue trusts, companies, and organizations suspected
of violating the Act. It was the first Federal statute to limit cartels and
monopolies, and today still forms the basis for most antitrust litigation by
the United States federal government.
Despite its name, the Act has fairly little to do with "trusts." Around the
world, what U.S. lawmakers and attorneys call "antitrust" is more commonly
known as "competition law." The purpose of the Act was to oppose the
combination of entities that could potentially harm competition, such as
monopolies or cartels. At the time of its passage, the trust was synonymous
with monopolistic practice, because the trust was a popular way for
monopolists to hold their businesses, and a way for cartel participants to
create enforceable agreements.
In 1879, C. T. Dodd, an attorney for the Standard Oil Company of Ohio, had
devised a new type of trust agreement to overcome Ohio state prohibitions
against corporations owning stock in other corporations. A trust is a
An update to the Act has increased the maximum amount of the fine paid by both a
corporation and an individual.
1
25
The Clayton Act
The Clayton Antitrust Act of 1914 was passed by the U.S. Congress as an
amendment to clarify and supplement the Sherman Antitrust Act of 1890.It
was drafted by Henry De Lamar Clayton. Clayton was a Congressman from
Alabama who served in the House from 1897 to 1915 and later became a
federal judge.
This law specifically prohibits leases, sales, contracts for sale, or other conditions, agreements, or understandings that have the effect of substantially
lessening competition or creating a monopoly in a line of commerce. Price
fixing, price discrimination, tying, and exclusive dealing are covered by
this law.
An amendment to the Clayton Act was enacted by Congress in 1936 to
strengthen standards prohibiting price discrimination, which were seen as
ineffective. This amendment, known as the Robinson-Patman Act, makes
discrimination in price, services, or facilities unlawful for both sellers and
buyers when it has a tendency to create a monopoly, to restrain competition,
or to violate trade regulations.
The Clayton Act is a civil statute (carrying no criminal penalties) that was
passed in 1914 and significantly amended in 1950.The Clayton Act prohibits mergers or acquisitions that are likely to lessen competition. Under
the Act, the government challenges those mergers that a careful economic
analysis shows are likely to increase prices to consumers.
The Act seeks to assure that suppliers of products treat buyers even-handedly. It requires that buyers be given an equal opportunity to participate in
certain types of seller programs relating to the resale, such as advertising
and promotional programs, and that such benefits be disbursed to buyers on
equal terms in proportion to their participation. The Clayton Act also is enforced by the Department of Justice. The Federal Trade Commission (FTC)
has co-jurisdiction with the DOJ to enforce this Act, although the DOJ has
exclusive jurisdiction to enforce its criminal aspects. Also, each individual
state is considered a "person" under the Act. A state may file an antitrust action as an injured party, seeking injunctive relief or damages.
Violations which are Most Common in the Real
Estate Industry
Conspiracy to Fix Prices
It is a violation of both State and Federal Antitrust Laws for there to be ANY
agreement between competing real estate brokers to fix the prices that each
will charge to a third party. Let’s look at some examples, which are prohibited, regarding Conspiracy to Fix Pricing:
• Brokerage A and Brokerage B agreed to charge all their clients x%
commission on all listings.
• Brokerage A, Brokerage B, and Brokerage C agreed to pay a set
amount to outside brokers for any referral.
• A licensee tells her clients that her brokerage charges 6% commission on all their listings and that all other brokers charge the same
amount as it is a “standard” in the industry.
If two or more companies or brokerages agree to set their pricing or commission rates, they have violated the law and the penalties can be severe.
Agents and brokers in any setting, business or social, should take great care
to never even discuss commission rates in any context. It’s much better to
be safe than sorry in this case.
Imbalanced Commission Splits
Licensees need to be especially careful of imbalanced exploitative splits
when cooperating with other licensees on listings. An exploitative split is
one that:
• Minimizes the licensee’s cost of cooperation with other licensees.
• Maximizes the licensee’s commission because he or she sells his
or her own listings.
• Maximizes the licensee’s commission when he or she sells other
licensees’ listings.
26
The traditional compensation model in real estate is for the seller to agree to
a commission amount with the listing broker. This broker would place the
property into the MLS and offer a certain split of the commission to cooperating brokers or agents that successfully bring a buyer.
Any agreements between companies that would attempt to set or control the
amount or percentage of the splits offered in a market would very likely be
a per se violation of antitrust statutes.
Any agreements between companies that would attempt to fix the minimum or maximum time frame for listings or just about any other contractual
items in a listing agreement would likely be per se violations also.
If a competitor is discounting commissions and several companies or brokers agree that they’ll allow that competitor to show their listings, but set
a different coop rate for this competitor because they don’t like the limited service model they’re working with, this would also , very likely, be
deemed a per se offense.
It’s considered a per se offense when the government has deemed it definite
and egregious damaged to the free trade of another. A per se violator cannot
even present a defense as a whether it was damaging, whether it restrained
trade or not. They’re left with only whether they committed the offense or
not.
Here is an example of an imbalanced commission split:
A listing broker offers 1% to the buyer’s broker who sells his or her listings. Yet the broker seeks 3% of the commission when he or she sells the
listings of other brokers who have 6% total commission.
This splitting structure discourages cooperation from other brokers and increases the likelihood that the broker can sell his or her own listing.
Conspiracy to Boycott
The conspiracy to boycott happens when a group of competitors agrees not
to deal with another firm or when brokers collectively decide not to deal
with a third party in order to eliminate competition. Here is an important
distinction:
Individuals each have the right to choose whom they will and will not do
business with. It is the collective action of a group which is prohibited
by antitrust Laws.
The purpose of the boycott, either explicitly or implicitly, is to eliminate the
firm as a market competitor or to cause the firm to abandon the discount or
alternative marketing strategies.
With new real estate business and commission pricing models being tried
all the time, most agents or brokers have experienced a competitor in their
market doing some type of commission discounting, fee for service, or other types of alternative pricing models for real estate services.
The conspiracy to boycott may also apply if real estate professionals were
to boycott a vendor. In many areas, the newspaper business had contracted
to one major daily or weekly publication in each market area. There are real
estate agents and brokers that lament the lack of competition and the high
advertising costs.
If a group of the local real estate offices grouped together, even very informally, and pulled their advertising in an effort to force a change of policies
and/ or advertising rages on the newspaper, they would most likely be guilty
of a per se offense of the antitrust statutes.
Let’s look at a couple of examples:
Over a lunch meeting, Broker A from XYZ Realty and Broker B from
ABC Realty agree not to show the listings of ADC Realty. They further
state that if no other brokers will show the ADC Reality listings, then
ADC Realty should be out of business in no time. This is a conspiracy to
boycott in order to eliminate competition.
A couple of brokers are having lunch and discuss the new commission
discounting company in town. They both agree that it’s a bad thing for
business and that they’re not going to show that broker’s discounted listings. They’re probably guilty of a per se offense and couldn’t even argue
otherwise in court.
If you’re in a meeting or even a social gathering, and the conversation turns
toward any of these topics, you should leave the area immediately. It would
probably also be wise to make it known that the possibility of violation is
why you’re leaving.
Illinois Antitrust Law
Illinois' Antitrust Act is based mainly on the federal Sherman Act which we
discussed earlier. The Illinois Act prohibits monopolization, price fixing,
tying agreements, exclusive dealing, and any other conduct that unreasonably restrains trade or competition. The Act also prohibits any conspiracy
between competitors to fix prices, control the supply or sale of products or
services or to allocate customers or markets, and any violations of these
prohibitions are considered per se violations of the Act. Additional violations of the Act include:
• Contracting, combining, or conspiring in a way that unreasonably
restrains trade.
• Attempting to acquire a monopoly.
• Excluding competition or fixing prices.
• Entering into an exclusive dealing agreement which substantially.
lessens competition or would tend to create a monopoly.
A note about tying agreements: tying agreements occur when a party agrees
to sell one product, but only on the condition that the buyer also purchase
a different product (in real estate, this could occur if a broker enters into an
agency agreement with a buyer, but only on the condition that the buyer
purchase title insurance from a company that the broker owns). The customer may not want the product or can buy it elsewhere at a lower price.
Not all tying or product bundling arrangements are unlawful, but requirements like these are illegal if they harm competition. Tying agreements are
illegal per se when the party has enough economic power, as it pertains to
the tying product, to restrain a substantial amount of commerce in the tied
product.
In the real estate industry, courts have applied tying law to "list backs"
where a sale of property is conditioned upon the agent obtaining the listing
for a future sale. Courts have also found it unlawful for developers to refuse
to sell a lot unless the builder/buyer agrees to use the developer's broker
when the property is conveyed to the occupant.
The courts have applied tying law to a developer who allegedly required
that homes be purchased through the developer's wholly-owned escrow
company. It should be noted, however, that in some instances, an individual
or entity may offer financial incentives to use additional services instead
of mandating the purchase of a tied product. Such incentive offers are less
likely to be antitrust violations.
Tying agreements are not specifically addressed by the Illinois Antitrust
Act. However, the Illinois Supreme Court has concluded that the legislature
intended for the Act to deal with tying agreements "harshly."
Under Illinois law, a person or business has the right to deal, or refuse to
deal, with whomever they choose, as long as that choice is made independently. It is when a person or business collaborates with another in order to
reduce competition that antitrust issues arise. In order for there to be an "exclusive dealing" agreement which violates the Act, there must be an express
or implied agreement between two parties to shut out a competitor, and the
agreement must have a substantial anticompetitive effect on the market.
While price fixing arrangements are prohibited by the Act, price discrimination is not necessarily a violation. Price discrimination is only a violation
of the Act when it is predatory in nature and is the result of a concerted
refusal to deal or a conspiracy. There is no violation if a person simply did
not obtain the services at a lesser price as negotiated for by another person.
Illinois has adopted both a Consumer Fraud and Deceptive Business Practices Act and the Uniform Deceptive Trade Practices Act. The Consumer
Fraud Act prohibits intentional unfair acts, practices, and methods of competition, and deceptive acts or practices such as fraud or misrepresentation
in the conduct of trade or commerce. Even if no person actually has been
misled or deceived, such deceptive practices are unlawful. In construing
the Act, Illinois courts consider interpretations of the Federal Trade Commission Act. The Illinois law also identifies particular acts that are violations, including wrongfully advertising a service as "factory authorized."
The Uniform Deceptive Trade Practices Act enumerates various acts that
constitute deceptive trade practices, including any conduct that "creates a
likelihood of confusion or misunderstanding."
To state a cause of action under the Consumer Fraud Act, there must be: (1)
a statement by the seller, (2) of an existing or future material fact, (3) that
was untrue, regardless of the defendant's knowledge or lack of knowledge
of its falsity, (4) made for the purpose of inducing reliance, (5) on which
the victim relies, and (6) that resulted in damages to the victim. An advertisement, for example, is deceptive on its face if it creates a likelihood of
deception or has the capacity to deceive.1
Penalties for Antitrust Violations
Penalties under the Sherman Act
The Sherman Act outlaws all contracts, combinations, and conspiracies that
unreasonably restrain interstate and foreign trade. This includes agreements
among competitors to fix prices, rig bids, and allocate customers. The
Sherman Act also makes it a crime to monopolize any part of interstate
commerce.
An unlawful monopoly exists when only one firm controls the market for
a product or service, and it has obtained that market power, not because its
product or service is superior to others, but by suppressing competition with
anti-competitive conduct. The Act is not violated simply when one firm's
vigorous competition and lower prices take sales from its less efficient competitors -- that is competition working properly.
Sherman Act violations involving agreements between competitors are
usually punished as criminal felonies. The Department of Justice alone is
empowered to bring criminal prosecutions under the Sherman Act. For offenses committed before June 22, 2004, individual violators could be fined
up to $350,000 and sentenced to up to 3 years in federal prison for each
offense, and corporations could be fined up to $10 million for each offense.
For offenses committed on or after June 22nd, 2004, individual violators
can be fined up to $1 million and sentenced to up to 10 years in federal
prison for each offense, and corporations can be fined up to $100 million for
each offense and be placed under court-ordered supervision for a period of
up to 10 years. Under some circumstances, the maximum fines can go even
higher than the Sherman Act maximums to twice the gain or loss involved.
The Department of Justice - The U.S. Attorney General may enforce criminal or civil antitrust violations. Civil action may be investigated by the FBI
and criminal actions may be investigated through a grand jury.
1
You may view the full text of the The Illinois Antitrust Law at this site:
http://www.weblocator.com/attorney/il/law/antitrust.html#180
27
Private Causes of Actions - Persons or firms that have been injured by Antitrust Violations may recover treble (three times) their actual damages and
reasonable attorneys' fees. An injunction may be placed to prohibit further
activities.
The Federal Trade Commission (FTC) - A complaint filed with the FTC
could result in an extensive investigation and a cease and desist order could
be placed upon the person or firm in violation.
Court Supervision - The courts may have the right to supervise, for up to 10
years, the business that has been convicted of a violation.
Loss of Brokerage or Real Estate License - It is possible for a brokerage or
a licensee to lose its or his or her license to practice real estate.
If you have an antitrust problem or complaint, you can contact the Federal
Trade Commission at:
E-mail: [email protected]
Mail:
Federal Trade Commission
Bureau of Competition-H374
Washington, DC 20580
Phone: 1-877-FTC-HELP (1-877-382-4357)
The Illinois Attorney General's Office has been granted exclusive enforcement authority when it comes to antitrust violations. The Illinois Attorney
General's Office may pursue enforcement through both criminal and/or civil
proceedings. The Illinois Antitrust Act confers upon the Attorney General
with all the powers and duties vested by law in the State's Attorneys with respect to criminal prosecutions. The Act also provides the Attorney General
with civil subpoena powers in order to require parties to appear or to produce documentation to the Attorney General prior to the filing of a civil suit.
The Act empowers the Attorney General to petition the Illinois circuit
courts to convene a grand jury to investigate possible criminal violations of
the Act. The only violations subject to criminal penalties are:
• Price fixing
• Limitations on production
• Allocation of markets, customers, and products
• Exclusive dealing agreements
These violations are considered Class Four felonies and are punishable by
a fine of up to $100,000 for individuals and $1,000,000 for corporations.
The Act also empowers the Attorney General to seek civil penalties for antitrust violations. The Attorney General may impose a maximum fine of
$50,000 to every individual and $100,000 to every corporation who violates
the Act. These fines are in lieu of any other penalty for a violation of the Act
and are in addition to civil damage actions. In addition, the Attorney General may seek other civil relief including injunctions, divestiture of property
and dissolution of business.
Compliance Policies
The nature of the real estate business, with its constant interaction between
industry competitors, makes it alarmingly easy to violate antitrust laws. As
such, every broker is affected by the law, whether he or she is aware of it
or not. Awareness is vital, and brokers who do not implement strict office
policies to assure compliance with antitrust laws place themselves at risk.
It is impossible to cover every potential antitrust problem. There are, however, steps you can take to protect yourself and your office from antitrust
violations:
• Have every office member read and acknowledge receipt of a copy
of your office policy dealing with antitrust compliance.
• Include antitrust training as part of every new salesperson's and
broker's training.
• Establish a relationship with competent legal counsel, and seek legal advice before you take action whenever you are unsure of what
the law requires.
• NEVER engage in any conversation that puts you in the vulnerable
position of being implicated in activities that restrain trade in any
way.
• Never make derogatory comments about a competitor.
• Never have discussions regarding commission splits or payment
of referral fees unless discussing a particular transaction with the
other broker involved in the transaction.
• Never imply or suggest that commissions are set by a group of
brokers or any other group.
And a final word... The following, and similar phrases, should be avoided
because they often spark antitrust activities:
1.
"This is the rate that every firm charges."
2.
"I'd like to drop my commission, but no one else in the MLS will
show your house unless the commission is X%."
3.
"The best way to handle Broker X is to not do business with her."
4.
"Why is Broker X advertising here? This is our territory."
5.
"You shouldn't sign with Broker X, because nobody does business
with him."
6.
"Let's not deal with Broker X; she's not a professional because she
hires part-timers."
7.
"Let's agree to always split commissions like this..."
8.
"I bet they would drop their discount program if we refused to do
business with them."
9.
"Before you decide to list with ZYX Realty, you should know that
because they are "discount brokers", other agents will not show
their listings."
The Attorney General may also bring a civil action on behalf of counties,
municipalities, townships, or other subdivisions to recover damages. If the
civil action is successful, the State and all other private plaintiffs may recover damages for any violation of the Act.1
http://www.ag.state.il.us/publications/html/antitrust.htm
1
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Chapter Two:
Fair Housing
Overview
Our focus for this chapter will be on Fair Housing legislation. Specifically
we will look at some of the amendments and changes that have been made
since the Fair Housing Act was first introduced in the 1960s. We will have
a lengthy discussion on the 2008 amendments to the Americans with Disabilities Act, which focused primarily on clarifying and strengthening the
definition of "disability." We will conclude the chapter with a look at some
of the other significant changes that have been made to the Fair Housing
Act.
•
•
•
•
•
•
•
•
•
Fair Housing Legislation
The Fair Housing Act and Amendments to the Fair Housing Act
Federal Fair Housing Amendment Act
Additional protection if you have a disability
Requirements for new buildings
Housing Opportunities for Families
Prohibited Actions
Significant Recent Changes
Fair Housing Legislation
In 1962, President Kennedy signed Executive Order 11063, entitled "Equal
Opportunity in Housing." It prohibited discrimination in the sale, rental or
use of all residential housing that was owned operated or financed by the
federal government. It had good intentions but little real impact on the housing market in general, as it lacked judicial enforcement.
In 1964, Congress passed Title VI to the Civil Rights Act of 1964, which
prohibited discrimination in public accommodations, in all federally assisted programs, and in employment on the basis of:
• Race
• Color
• Religion
• Sex
• National origin
Likewise, this didn't have much effect because it did not prohibit discrimination in the private housing market.
President Lyndon Johnson introduced fair housing legislation in 1966. It
languished in Congress and was debated for about three years.
An important case was heard in California in 1967. Reitman v Mulkey concerned a husband and wife who were refused the right to rent a property
because of race.
The legal issue was "whether Article I, Sec. 26 of California Constitution,
prohibiting state from denying right of any person to decline to sell, lease or
rent his real property to such person as he in his absolute discretion chooses,
would involve the state in private racial discriminations to an unconstitutional degree and deny to any person the equal protection of the laws within
the meaning of the 14th."
The Fair Housing Act
The real change in fair housing came in 1968, a year that is considered the
birth of modern fair housing. In March, the Kerner Commission Report said
that America was heading for two societies that were separate, but unequal.1
In addition to the assassination of Rev. Martin Luther King Jr., two historic
events occurred that year that forever changed the housing market.
First, in April, Congress enacted the Fair Housing Act (Title VIII of the
Civil Rights Act of 1968). This Act bans discrimination on the basis of race,
color, religion and national origin in most types of housing transactions.
The Act also contains a variety of remedies to attack housing discrimination
including private discrimination.
Then, on April 4, Dr. Martin Luther King, Jr. was assassinated. The ensuing
debate led to a swift passage of the Fair Housing Act (Title VIII of the Civil
Rights Act of 1968), just 7 days later.
Second, in June, the U.S. Supreme Court rendered its decision in Jones v.
Alfred H. Mayer Co., and held that the Civil Rights Act of 1866 banned private, as well as government, racial discrimination in housing. Thus the 1866
Act was given new life, and could be used to fight racial discrimination.
The Fair Housing Act outlaws a variety of private discriminatory acts, including refusal to rent or sell, discrimination in the terms of sale or rental,
blockbusting, and discrimination in advertising and in the use of real estate
services.2
The Fair Housing Act prohibited Discrimination in most types of housing
on the basis of:
• Race
• Color
• Religion
• National origin
In 1974, Congress passed the Housing and Community Development Act,
which added "sex" as another prohibited basis for discrimination. This prohibited sexual harassment, but not discrimination for sexual orientation.
Also, in 1974, the Fair Housing Act was expanded to include prohibition
of gender discrimination. Later that year the Equal Credit Opportunity Act
was passed by Congress, which prohibited credit discrimination in housing
based on the basis of:
• Race
• Color
• Religion
• National origin
• Gender or marital status
• Age
Throughout the years there have been several additions to the FHA that
have made it more effective and inclusive. For this exercise, we will take a
look at some of these changes and give some perspective as to when they
were implemented.
1
Video - Kerner Commission Report: http://www.pbs.org/moyers/journal/03282008/
watch.html Courtesy of: Bill Moyers of The Journal (PBS) - March 28, 2008--
Video - http://www.history.com/videos/fair-housing-act#fair-housing-act Courtesy
of: Fair Housing Act. (2011). The History Channel website. Retrieved 4:28, April
13, 2011, from http://www.history.com/videos/fair-housing-act
2
29
Federal Fair Housing Amendment Act
HUD has played a lead role in administering the
Fair Housing Act since its adoption in 1968. The
1988 amendments, however, have greatly increased the Department's enforcement role. First,
the newly protected classes have proven significant sources of new complaints. Second, HUD's
expanded enforcement role took the Department
beyond investigation and conciliation into the area
of mandatory enforcement.
Complaints filed with HUD are investigated by the Office of Fair Housing
and Equal Opportunity. If the complaint is not successfully conciliated, the
office determines whether reasonable cause exists to believe that a discriminatory housing practice has occurred. Where reasonable cause is found, the
parties to the complaint are notified by HUD's issuance of a Determination,
as well as a Charge of Discrimination, and a hearing is scheduled before a
HUD administrative law judge. Either party - complainant or respondent may cause the HUD-scheduled administrative proceeding to be terminated
by electing instead to have the matter litigated in Federal court. Whenever
a party has so elected, the Department of Justice takes over HUD's role as
counsel seeking resolution of the charge on behalf of aggrieved persons,
and the matter proceeds as a civil action. Either form of action - the ALJ
proceeding or the civil action in Federal court - is subject to review in the
U.S. Court of Appeals.
The Fair Housing Act covers most housing. In some circumstances, the Act
exempts owner-occupied buildings with no more than four units, singlefamily housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit occupancy to members.
Americans with Disabilities Act -1990 - ADA as amended in 2008
The ADA Amendments Act of 2008 is an Act of Congress, effective January 1st, 2009, that amended the Americans with Disabilities Act of 1990
(ADA) and other disability nondiscrimination laws at the federal level of
the United States.
The Amendments Act was a response to a number of decisions by the Supreme Court that had interpreted the original text of the ADA. Because
members of the U.S. Congress viewed those decisions as limiting the rights
of persons with disabilities, the Amendments Act explicitly reversed those
decisions. It also rejected portions of the regulations published by the Equal
Employment Opportunity Commission that interpret Title I (the employment-related title) of the ADA. The Amendments Act makes changes to the
definition of the term "disability," clarifying and broadening that definition
and therefore the number and types of persons who are protected under the
ADA and other federal disability nondiscrimination laws. It was designed to
strike a balance between employer and employee interests.
The Amendments Act requires that courts interpreting the ADA and other
Federal disability nondiscrimination laws focus on whether the covered entity has discriminated, rather than whether the individual seeking the law's
protection has an impairment that fits within the technical definition of the
term "disability." The Act retains the ADA's basic definition of "disability"
as an impairment that substantially limits one or more major life activities;
a record of such an impairment; or being regarded as having such an impairment. However, it changes the way that the statutory terms should be
interpreted.
When Congress passed the ADA in 1990, it adopted the functional definition of disability from Section 504 of the Rehabilitation Act of 1973. This
was done, in part, because after 17 years of development through case law,
30
Congress believed the requirements of the definition were well understood.
Within the framework established under the Rehabilitation Act, courts treated the determination of disability as a threshold issue, but focused primarily
on whether unlawful discrimination had occurred. However, after the passage of the ADA, the focus of court decisions shifted to whether the individual claiming that s/he had suffered discrimination was protected by the law.
The ADA Amendments Act of 2008 was intended to overturn two controversial decisions interpreting the ADA. The Supreme Court's decisions imposed a stricter standard for determining disability in:
• Sutton v. United Airlines (130 F.3d 893)[4] - which stated that impairments must be considered in their mitigated state, and
• Toyota v. Williams (224 F.3d 840)[5] - which stated that the standard for determining whether an individual was eligible for protection under the law must be demanding.
After the Court's decisions in Sutton and Williams, lower courts often found
that an individual's impairment did not constitute a disability. As a result,
in many cases, courts never reached the question whether discrimination
had occurred.
Through these rulings, the Supreme Court and lower courts created a situation in which individuals with physical or mental impairments that affected
them significantly enough to have been considered "substantially limiting a
major life activity" under the case law interpreting the Rehabilitation Act,
were not considered as qualifying for protection under the ADA.
These included individuals with impairments such as:
• amputation
• intellectual disabilities
• epilepsy
• multiple sclerosis
• HIV/AIDS
• diabetes
• muscular dystrophy
• cancer
In 2004, the National Council on Disability, an independent federal agency
charged with making recommendations to the President and Congress, issued a report called "Righting the ADA." This report detailed the various
ways in which the courts had misinterpreted Congressional intent and limited the reach of the ADA and proposed legislative language to restore this
intent. Chief among the misinterpretations identified in the report was the
scope-of-coverage problem - i.e., the narrowing of the ADA's definition of
"disability" to exclude many individuals that Congress intended to protect
from discrimination.
The Amendments Act explicitly overturns the controversial Supreme Court
decisions in Sutton and Toyota, rejecting the high burdens imposed by the
Court in those cases, and reiterates that Congress intends the scope of the
ADA to be broad and inclusive. The Amendments Act retains the ADA's
definition of disability as a physical or mental impairment that:
• substantially limits one or more life activities
•
•
a record of such impairment
being regarded as having such impairment
However, it clarifies and expands the definition's meaning and application
in the following ways:
• The Amendments Act deletes two findings in the ADA that led the
Supreme Court to restrict the meaning and application of the definition of disability.
These findings were that "some 43,000,000 Americans have one or more
physical or mental disabilities" and that "individuals with disabilities are a
discrete and insular minority." The Court had treated these findings as limiting how other provisions of the ADA should be construed.
• The law provides that the definition of disability "shall be construed in favor of broad coverage of individuals under this Act, to
the maximum extent permitted by the terms of this Act."
It retains the terms "substantially limits" and "major life activities" from
the original ADA definition of "disability," but makes clear that Congress
intended the terms to impose less- demanding standards than those enunciated by the Supreme Court in the Toyota case. It also states that the EEOC's
regulatory definition of "substantially limits" was overly strict.
• The law prohibits consideration of mitigating measures such as
medication, assistive technology, accommodations, or modifications when determining whether impairment substantially limits a
major life activity.
The related text of the Amendments Act explicitly rejects the Supreme
Court's holdings in Sutton and its companion cases that mitigating measures
must be considered in determining whether impairment constitutes a disability under the law. The Amendments Act also provides that impairments
that are episodic or in remission are to be assessed in their active state.
• The law provides additional direction on the "major life activities"
that must be substantially limited in order for an impairment to be
a disability: the Act lists specific examples of major life activities,
rather than leaving that phrase open to interpretation, as did the
ADA of 1990.
The non-exhaustive list of major life activities in § 4(4)(a) of the amended
ADA includes (information can be found at the end of page 35 of this document):
• caring for oneself.
• performing manual tasks.
• seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking,
communicating and working.
The Amendments Act also lists major bodily functions, including, but not
limited to:
• functions of the immune system.
• normal cell growth.
• digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive functions.
policies and procedures, for such persons.
• The law clarifies that the authority granted to three specific Federal
agencies to issue regulations interpreting the ADA includes the authority to issue regulations implementing the definitions contained
in Sections 3 and 4 of that Act.
• The AMENDMENTS ACT makes conforming amendments Section 7 of the Rehabilitation Act of 1973, (information can be found
on page 6 of this document) and to Title I of the ADA itself.
To conform the employment-related provisions of the ADA with
parallel provisions of Title VII of the Civil Rights Act of 1964, the latter
amendments change the language of Title I to provide that no covered entity
shall discriminate against a qualified individual "on the basis of disability."
The United States Court of Appeals for the District of Columbia Circuit held
on July 21, 2009, that the Amendments Act does not apply retroactively.
Additional Protection if You Have a Disability
If you or someone associated with you:
• Has a physical or mental disability (including hearing, mobility
and visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS Related Complex and mental retardation) that
substantially limits one or more major life activities.
• Has a record of such a disability.
• Is regarded as having such a disability.
Your landlord may not:
• Refuse to let you make reasonable modifications to your dwelling
or common use areas, at your expense, if necessary for the disabled
person to use the housing. (Where reasonable, the landlord may
permit changes only if you agree to restore the property to its original condition when you move).
• Refuse to make reasonable accommodations in rules, policies,
practices, or services if necessary for the disabled person to use
the housing.
Example: A building with a "no pets" policy must allow a visually impaired
tenant to keep a guide dog.
Example: An apartment complex that offers tenants ample, unassigned
parking must honor a request from a mobility-impaired tenant for a reserved
space near their apartment if necessary to assure that they can have access
to her apartment.
However, housing need not be made available to a person who is a direct
threat to the health or safety of others or who currently uses illegal drugs.
The law removes from the "regarded as" prong of the disability definition
(the third prong of the definition) the requirement that an individual demonstrate that the impairment that he or she has, or is perceived to have, limits a
major life activity in a way that is perceived to be substantial.
In buildings that are ready for first occupancy after March 13th, 1991 and
have an elevator and four or more units:
• Public and common areas must be accessible to persons with disabilities.
• Doors and hallways must be wide enough for wheelchairs.
Under the Amendments Act therefore, an individual can establish coverage
under the law by showing that he or she has been subjected to an action prohibited under the Act because of an actual or perceived physical or mental
impairment that is not transitory and minor. The law also explicitly states
that although individuals who fall solely under the "regarded as" prong of
the definition of disability are protected from discrimination, entities covered by the ADA are not required to provide accommodations, or to modify
All units must have:
• An accessible route into and through the unit
• Accessible light switches, electrical outlets, thermostats and other
environmental controls.
• Reinforced bathroom walls to allow later installation of grab bars.
• Kitchens and bathrooms that can be used by people in wheelchairs.
31
If a building with four or more units has no elevator and was ready for first
occupancy after March 13th, 1991, these standards apply to ground floor
units. These requirements for new buildings do not replace any more stringent standards in state or local law.
Housing Opportunities for Families
Unless a building or community qualifies as housing for older persons,
it may not discriminate based on familial status. It may not discriminate
against families in which one or more children under the age of 18 live with:
• A parent.
• A person who has legal custody of the child or children.
• The designee of the parent or legal custodian, with the parent or
custodian's written permission.
Familial status protection also applies to pregnant women and anyone
securing legal custody of a child under 18.
Exemption: Housing for older persons is exempt from the prohibition
against familial status discrimination if:
• The HUD Secretary has determined that it is specifically designed
for and occupied by elderly persons under a Federal, State or local
government program.
• It is occupied solely by persons who are 62 or older.
• It houses at least one person who is 55 or older in at least 80% of
the occupied units, and adheres to a policy that demonstrates intent
to house persons who are 55 or olde.r
A transition period permits residents on or before September 13th, 1988, to
continue living in the housing, regardless of their age, without interfering
with the exemption.
Prohibited Actions
In the sale and rental of housing: No one may take any of the following
actions based on race, color, national origin, religion, sex, familial status
or handicap:
• Refuse to rent or sell housing.
• Refuse to negotiate for housing.
• Make housing unavailable.
• Deny a dwelling.
• Set different terms, conditions or privileges for sale or rental of a
dwelling.
• Provide different housing services or facilities.
• Falsely deny that housing is available for inspection, sale, or rental.
• For profit, persuade owners to sell or rent (blockbusting).
• Deny anyone access to or membership in a facility or service (such
as a multiple listing service) related to the sale or rental of housing.
In Addition: It is illegal for anyone to:
• Threaten, coerce, intimidate or interfere with anyone exercising a
fair housing right or assisting others who exercise that right
• Advertise or make any statement that indicates a limitation or preference based on race, color, national origin, religion, sex, familial
status, or handicap. This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is
otherwise exempt from the Fair Housing Act.
Significant Recent Changes
The Housing for Older Persons Act of 1995 (HOPA) makes several changes
to the 55 and older exemption. Since the 1988 Amendments, the Fair
Housing Act has exempted from its familial status provisions properties
that satisfy the Act's 55 and older housing condition.
First, it eliminates the requirement that 55 and older housing have
"significant facilities and services" designed for the elderly. Second, HOPA
establishes "good faith reliance" immunity from damages for persons who
in good faith believe that the 55 and older exemption applies to a particular
property:
• if they do not actually know that the property is not eligible for the
exemption.
• if the property has formally stated in writing that it qualifies for the
exemption.
HOPA retains the requirement that senior housing must have one person
who is 55 years of age or older living in at least 80 percent of its occupied
units. It also still requires that senior housing publish and follow policies
and procedures that demonstrate intent to be housing for persons 55 and
older. An exempt property will not violate the Fair Housing Act if it includes
families with children, but it does not have to do so.
A HUD rule published in the April 2nd, 1999, Federal Register implements
the Housing for Older Persons Act of 1995, and explains in detail those
provisions of the Fair Housing Act that pertain to senior housing.
Changes were made to:
• Enhance law enforcement, including making amendments to criminal penalties in section 901 of the Civil Rights Act of 1968 for
violating the Fair Housing Act.
• Provide incentives for self-testing by lenders for discrimination
under the Fair Housing Act and the Equal Credit Opportunity Act.
See Title II, subtitle D of the Omnibus Consolidated Appropriations Act, 1997, P.L. 104 - 208 (9/30/96).
However, housing need not be made available to a person who is a direct
threat to the health or safety of others or who currently uses illegal drugs.
In mortgage lending: No one may take any of the following actions based
on race, color, national origin, religion, sex, familial status, or handicap
(disability):
• Refuse to make a mortgage loan.
• Refuse to provide information regarding loans.
• Impose different terms or conditions on a loan, such as different
interest rates, points, or fees.
• Discriminate in appraising property.
• Refuse to purchase a loan.
• Set different terms or conditions for purchasing a loan.
32
Chapter Three:
Short Sales
Overview
The chapter will emphasize that a real estate professional must understand
the process and the pitfalls of using short sales to market a home and detailed
the benefits to the homeowner, the lender, and the real estate professional.
We will give an example of what the short sale process may look like.
Finally, the chapter will discuss some of the recent options homeowners
have to avoid foreclosure.
•
•
•
•
Short Sale Defined
Short Sale Deficiencies
The Bank, the Borrower and the Real Estate Professional
Short Sale Example
•
•
•
•
•
The Making Home Affordable Program
The Home Affordable Refinance Program
The Home Affordable Modification Program
Home Affordable Foreclosure Alternatives (HAFA) Program
Foreclosure Alternatives Program
The new agent with a new approach
Next steps
The Conclusion
Final analysis
Deficiency
Borrower benefits
Real estate agent benefits
Bank benefits
Short Sale Defined
A short sale in real estate occurs when the
outstanding obligations (loans/mortgages)
against a property are greater than for what
the property can be sold. Short sales are a way
for homeowners to avoid foreclosure on their
homes and still be able to pay off their loan
by settling with their lender. It is important to
remember that homeowners do not have to be
behind on their mortgage to request a short
sale for their home. The most important thing
to remember is that the homeowner/real estate agent must be able to clearly
demonstrate that the home cannot be sold for the amount of the current lien.
The situation seems simple: real estate can be accurately valued. But can it?
An appraisal is a "snapshot" of a home's value at one moment in time. In a
market with rising prices, the appraisal is less relevant than it would be in
a market where prices are falling. This is because any inaccuracy will be in
the bank's favor, minimizing its exposure to risk. That is why appraisals are
examined even more carefully when real estate, as a whole, struggles. Much
of the bank's decision is contingent on the accuracy of the value opinion
generated by a professional appraiser. It is for this reason that when a short
sale is considered, anyone involved in the process needs to recognize the
significance of the appraised value on the bank's decision to agree to a short
sale.
Short sales are a process that basically creates no real winners. The value of
the technique is that it attempts to moderate the losses for both lender and
homeowner. The lender's goal shifts from maximizing profits to minimizing
losses; doing so protects the lender from continued loss. Lenders will
always view short sales as a potential way of mitigating their own losses,
but will not consider the homeowner's plight or emotional situation.
In other words, a short sale is an arrangement where the homeowner offers,
and the bank agrees to accept, less than the total amount owed to pay off
the home. The "deficiency" is the difference between the amount owed and
what the bank collects at the short sale. Much of the confusion about short
sales arises from the deficiency that is created when a short sale is granted
and arranged by a lending institution.
Short Sale Deficiencies
Lenders that agree to negotiate a short sale have several options to consider
when finalizing their decision. The deficiency can be "forgiven" by the
lender, though that is not as much of a gift as it appears. Typically, the
deficiency is treated as a loss by the bank, but it becomes income for the
borrower. That is, the lender will send a 1099 tax form for this deficiency
amount (that amount they wrote off on their books) which is now considered
income for the seller/homeowner and has income tax implications that
are real and relevant. President Bush signed into law The Mortgage Debt
Relief Act of 2007, which alleviates the income tax requirements for
certain situations. The Mortgage Debt Relief Act of 2007 generally allows
taxpayers to exclude income from the discharge of debt on their principal
residence only. Debt reduced through mortgage restructuring, as well as
mortgage debt forgiven in connection with a foreclosure, qualifies for the
relief.
This provision applies to debt forgiven in calendar years 2007 through 2012.
Up to $2 million of forgiven debt is eligible for this exclusion ($1 million
if married filing separately). The exclusion does not apply if the discharge
is due to services performed for the lender or any other reason not directly
related to a decline in the home's value or the taxpayer's financial condition.
It would be prudent to refer specific questions to a qualified tax expert to
ensure a transaction qualifies for this tax relief or income tax exemption.
Lenders also can choose to file a judgment for the deficiency, which will
be reported on the borrower's credit report for 10 years. The judgment can
be reported as "satisfied" or "unsatisfied"; obviously, satisfied is preferable.
If it is unsatisfied, it means that a court has ruled in favor of the lender,
which may then try to collect the debt owed through techniques such as
wage garnishing. The lender also can demand that the borrower sign a note
with attractive terms. (The bank is in a position to believe that getting its
loss returned without interest over a period of years is better than receiving
nothing).
This process is being referred to as an arrangement because the definition
of the process depends on the bank that holds the loan. Though there are
common procedures, every bank does it differently and is not required to
follow any particular formula or rule when analyzing and approving a short
sale request. If you take part in a short sale, it's crucial you assume nothing
until you have the bank's policies in writing.
This bears repeating. NEVER ASSUME THAT A DEBT OWED TO A
LENDER IS GONE UNLESS THE DETAILS OF THE RELEASE OF
THAT DEBT ARE GIVEN IN WRITING.
Example
Someone who had done a short sale had a first mortgage and a second
position lien. The bank agreed to the short sale, which ended up being
enough to pay off the first loan, but not the second. The deficiency was the
balance of the second mortgage. Because the bank agreed to the short sale,
the seller assumed she wouldn't have to worry about the deficiency from the
second mortgage. So it is a shock to her that the bank is pursuing her for
the deficiency.
REMEMBER, the lender(s) will always want ALL their money accounted
for somehow. That is, they will send a 1099 tax form, attempt to file a
33
judgment, or attempt to set up a new unsecured lien for the homeowner to
pay after the home sale. NEVER assume something is written off unless
you have a formal, signed, written, unconditional release of lien and/or
judgment from the lender specifically stating that no further action to collect
this debt will be taken.
The Bank, the Borrower and the Real Estate
Professional
Within their lending units, banks have
divisions that handle workout or hardship
situations. In struggling markets, these
divisions are expanded to handle the volume,
but don't expect the lender to make the
process simple or easy. Workout divisions are
designed to minimize losses for the bank, and
many employees receive a commission on the
amount they save the bank by minimizing the
bank's deficiencies during short sale situations. In other words, they are
rewarded for pushing the limits in the bank's favor. While this fact should
not be surprising, it should never be a reason to decide against an attempt
to negotiate a short sale. All it means is that the borrower must be fully
prepared for a strategic financial battle. The more educated and prepared the
borrower is, the greater the chance of a favorable outcome.
With the tremendous volume of loan defaults as a result of the current real
estate market decline, lenders will not agree to "officially" consider a short
sale until there is a formal offer. This means that the bank will not consider
the situation completely until a certain amount of information is submitted;
at least enough for them to make a decision that can be justified, either way,
from their perspective. Before your short sale is approved, you'll have to
submit an application, hardship letter, financial statements, tax returns, pay
stubs, the purchase agreement from the buyer, and perhaps more, depending
on the lender.
This is the part where the real estate professional can be an integral part of
the solution to what appeared to be an unmanageable problem for a seller.
Armed with knowledge about the short sale process, a salesperson can
facilitate a short sale and earn a commission on a home that was previously
perceived as un-saleable. As in a typical sales transaction, educating the
client will aid the process and help resolve a situation that could have led
to something significantly more undesirable. It is worthy to note that short
sales have become a mainstay in the real estate market. In some markets,
short sales may represent upwards of 20% of the listing inventories. The
number of potential foreclosures within your market may differ, but their
impact on real estate is very real and most likely will remain for several
years to come.
How does the Real Estate Agent Profit?
When there is a formal request for a short sale commitment from the bank,
real estate agent commissions are usually included if a real estate agent is
involved in the deal. Be ready for the bank to counteroffer to lower your
commission. Again, being properly prepared for this counteroffer and
understanding the process is an agent's best strategy for avoiding the need
to modify his or her commission.
Real estate agents can also "hunt" for short sales by talking to clients who
have had their homes listed for a long time without success. This is usually
indicative of either a poorly marketed home or an inappropriately priced
one. Or it can be the product of the homeowner being in what is known as
an "upside-down" position; that is, the mortgage balance is larger than the
value of the home - a perfect opportunity to apply the short sale technique.
By proactively reaching out to homeowners who feel they have no, or
limited, options, the real estate professional can find many viable sales
situations. He or she can explain the short sale process and help the owner
negotiate with the lender to get the house sold and the debt relieved,and the
agent earns a commission.
34
A real estate agent's best offense for meeting sales objectives in a struggling
real estate market is to use his or her knowledge and retain a flexible
approach to business. Short sales can be complicated and may require a bit
of micro-management, but they are also profit situations that are appealing
when business is slow and consumer sentiment is negative. At some point,
the market will rebound and it is highly likely that those whom the real estate
agent helped through difficult times will remain loyal clients and develop
into a solid referral base - the real estate salesperson's most important tool.
When weighing the available options, it is important to make sure that
fees typically included in real estate transactions are an integral part of
the analysis. Real estate professionals can be invaluable to homeowners,
as closing costs are specific to localities and states and are typically well
known to those selling real estate. Closing costs will include title and
escrow fees (if the seller is responsible for any portion of them, which
will depend on your county), attorney fees, a portion of unpaid property
taxes, re-conveyance fees, notary fees, delivery fees, documentary fees,
and/or transfer fees. While this is not an exhaustive list, it provides enough
assistance to understand what is relevant.
Keep in mind that if the situation appears very poor from the bank's
perspective, bank representatives have the ability to negotiate each and
every closing fee should they find that it would be in the bank's best interest.
The most successful short sale negotiators are those who have enough
education and experience to determine when to push for those concessions
and when to hold back.
REO as a Specialty
In response to a very real need, there have been many associations that
have begun to educate and support those real estate professionals who want
to specialize in REOs. These organizations provide a valuable source of
tools and resources for those enmeshed in the complex world of short sale
transactions. These organizations can facilitate REO sales opportunities by
providing REO listings as well as the ability to interact with other REO
agents throughout the country using forums.
Some of these companies can help teach you how to redefine new marketing
strategies to increase sales and reduce marketing time. These associations
can help real estate agents improve their standard of REO marketing so you
will be a first choice in REO Management and sales in your local market.
They can help you achieve your goal to sell the property in the least amount
of time at the highest recovery price.
Short Sale Example
Introduction
Mr. and Mrs. O’Neill purchase their home in 2004 for $250,000. It was a
part of a fast-growing suburb that had seen tremendous growth during the
past decade. Their real estate agent had advised them that the home had
appreciated over 10% just during the time from Phase l to Phase lV of the
development, the phase in which they were purchasing.
The specific financial data for this purchase is as follows:
• Purchase Price: $250,000
• Down Payment $25,000
• Mortgage Amount: $225,000
• Real Estate Taxes: $ 2,400
Unexpectedly, Mr. O’Neill was laid off from his job as economic conditions
declined in his industry. The O’Neills understood they could no longer
afford to live in their home and were completely willing to move to a more
affordable one. They spent their entire savings to keep their debts current
while they waited for their home to sell. During the time they had their
home on the market, they began to realize that the market was changing,
and there was no activity on their home. There were very few potential
buyers even as the O’Neills lowered their home price to below what they
had bought if for, four years earlier.
The O’Neills’ options were slowly dwindling. Their savings were now gone
and, while Mr. O’Neill had found temporary work nearby, his new salary
was not nearly sufficient to support his family in this home. They had begun
to realize that the value of their home was below the current balance of their
mortgage: $223,893.
The New Agent with a New Approach
When their listing agreement expired with their current agent, they were
contacted by another agent asking them if they had been informed of the
process known as a short sale. Neither homeowner was aware of the process
but remained receptive and set up a meeting with a new agent. This real
estate professional spent most of their meeting gathering facts about the
O’Neills’ current financial position. She discovered that:
• The current mortgage balance was $223,893.
• The real estate taxes were current, but about to be delinquent unless
circumstances changed.
• Mr. O’Neill had been working, but was not in a position to afford
the home he could support with his previous job.
• The O’Neills had used all their savings while their home was on
the market.
• They were very open to reducing the price, and in fact had done so.
The current price was the balance of the mortgage, and they could
not understand how they could lower the price, as they had no assets to make up the difference.
• They had maxed out their credit cards but remained current by paying minimum balances.
• The real estate agent added one fact:
• The value of their home was realistically $180,000.
Borrower Benefits
The O’Neills benifited from this situation in a number of ways. They were
no longer in a home that they could not afford. The fact that they had
maintained their minimum payments allowed their credit profile and score
to remain unaffected by this difficult situation. They began to rebuild their
lives with a renewed sense of home and confidence.
Real Estate Agent Benefits
The real estate professional took the dire situation and, with a bit of
ingenuity and perseverance, created a viable real estate transaction. The
real estate agent was part of a sale that originally appeared un-workable,
but ultimately created and earned commission. In addition, she found a way
to help the homeowners by affecting the sale that gave them the chance to
start over.
Bank Benefits
The lender understood that the difference between the home’s value and
the mortgage balance was going to be the same whether or not the bank
agreed to a short sale. If the bank did not agree to a short sale, it would have
to begin a foreclosure proceeding and incur a great many legal expenses,
which would have increased their losses. By agreeing to the short sale, the
lender had the ability to minimize its losses by avoiding the only other
option to eventually recoup its investment: foreclosure.
Next Steps
Through this example is somewhat simplified, the fundamentals are
substantially universal. Usually there are emotions that impact the process
and the bank can be resistant, or even downright reluctant, to agree to a short
sale. But given the bank’s ultimate goal of minimizing losses, it is evident
that it really did not have any other choice but to agree to this arrangement
as it WAS IN THE BANK’S BEST INTEREST.
Near the end of the meeting, the agent provided and explanation of a short
sale and remarked that the O’Neills could be prime candidates for this
technique. She also informed them that they just needed to find a legitimate
buyer with a serious offer.
The Making Home Affordable Program
With a new perspective and fresh approach, they put the house back on
the market at $180,000, and within days several potential buyers showed
serious interest. With these offers in hand, the agent returned to the O’Neills
to finish educating them about the short sale process. She requested that
they put together a package containing a letter explaining their current
financial situation, documentation of their current assets and income, and
an authorization for her to work on their behalf.
The agent, armed with the serious offer and proper documentation,
approached the lender and submitted the required information. Within
a week, the lender acknowledged receipt and outlined the next steps,
following analysis of the situation to determine what the lender would find
acceptable.
The Conclusion
At some point, the bank understood that it, too, was in a financially negative
situation not so different from that of the O’Neills. Initially, the bank’s offer
to the homeowners indicated acceptance of the $180,000 offer, but the
O’Neills would have to pay the closing costs. The O’Neills contacted an
attorney to fight this part of the lender’s offer. The attorney was successful
and, even after paying his fee; the O’Neills were now in a position to sell
their home through a shortfall.
Final Analysis
• Mortgage Balance: $223,893
• Closing Costs: $3,098
• Agency Fees: $ 5,800
• Total: $ 229,791
• Selling Price: $ 180,000
• Deficiency: $ 49,791
The borrowers received a 1099 Tax Form from their lender in the amount
of $49,791. This was their notice that they may be subject to certain income
taxes.
The Making Home Affordable program (MHA) was introduced in March
of 2009 and aims at providing assistance to as many as 7 to 9 million
homeowners, making their mortgages more affordable and helping to
prevent foreclosures.
The Home Affordable Refinance Program
The MHA is split into two smaller programs, each aimed at providing help
to homeowners in different ways. The first off-shoot program is The Home
Affordable Refinance Program.
The Home Affordable Refinance Program will be available to an estimated
4 to 5 million homeowners who have a good payment history on an existing
mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers
would be unable to refinance because their homes have lost value, pushing
their current loan-to-value ratios above 80%. Under this program, many
of these homeowners will be able to refinance their original loans to take
advantage of today's lower mortgage rates, or to refinance an adjustable-rate
mortgage into a more stable mortgage, such as a 30-year fixed rate loan.
The goal of the refinance effort is "to provide access to low-cost refinancing
for responsible homeowners suffering from falling home prices." The goal
is to provide refinancing of Fannie Mae loans that will allow responsible
borrowers to find a more solvent position by reducing their monthly
payments or by refinancing from a more risky loan structure (such as
interest-only or short-term ARM) to a more stable product. The solutions
will provide mortgage refinances for current LTVs up to 125%, and
mortgage insurance flexibilities.
Eligibility Requirements
In order to be eligible for the Home Affordable Refinance Program, a
35
homeowner must meet all of the following requirements:
• Must be the homeowner of a one- to four-unit home.
• Must have a loan owned or guaranteed by Fannie Mae or Freddie
Mac.
• Must be current on mortgage payments.
"Making Home Affordable Program".
Have not completed successfully the trial period during the initial
phase of their modification.
4. Have missed at least two consecutive monthly payments during the
modification period of the "Making Home Affordable Program".
"Current" means that the homeowner hasn't been more than 30 days late on
their mortgage payment in the last 12 months.
Fundamentally, the issue of being able to keep the home is not an option,
and HAFA provides a way in which the homeowner can avoid a foreclosure
on his or her record through either (1) a short sale or (2) a deed-in-lieu of
foreclosure.
•
Must owe the same or less on the mortgage as the current value of
the house.
A person may be eligible if their first mortgage does not exceed 125% of
the current market value of the home. For example, if the property is worth
$200,000 but the person owes $250,000 or less on the first mortgage, they
may still be eligible.
The Home Affordable Modification Program
The second off-shoot program of the MHA is the Home Affordable
Modification Program. The Home Affordable Modification Program creates
a defined loan modification process through which borrowers who are in
default, at risk of imminent default, or in foreclosure can have their loans
modified to a more affordable monthly payment equal to a target 31 percent
of their monthly gross income.
Eligibility Requirements
In order to qualify for the Home Affordable Modification Program,
homeowners must meet the following requirements:
• The property must be the homeowner's primary residence.
• The amount owed on the first mortgage must be equal to or less
than $729,750.
• The homeowner must have trouble paying the mortgage.
For example, the homeowner may have had a significant increase in their
mortgage payment, reduction in their income since they got their current
loan, or have suffered a hardship that has increased their expenses.
•
•
The mortgage must have been obtained on or prior to January 1st,
2009.
The payment on the homeowner's first mortgage (including principal, interest, taxes, insurance and homeowners association dues, if
applicable) is more than 31% of their current gross income.
MODIFICATIONS WILL RUN UNTIL DECEMBER 31st, 2012; LOANS
CAN BE MODIFIED ONLY ONCE UNDER THE PROGRAM.
Home Affordable Foreclosure Alternatives
(HAFA) Program
HAFA is the acronym for a federal government
program named "the Home Affordable
Foreclosure Alternatives Program" which
was created to augment another government
program, the "Making Home Affordable
Program.” Both are under the supervision of
the U.S. Treasury Department as part of the TARP (Troubled Asset Relief
Program). HAFA has been created to help those when loan modification is
not an option by providing alternatives to foreclosure.
HAFA has been designed to help those:
1. Who request a short sale or deed-in-lieu of foreclosure.
2. Do not qualify for a trial mortgage modification as defined by the
36
3.
One of the most significant aspects of HAFA is that the bank agrees that any
deficiencies that are a part of the short sale or deed-in-lieu are forgiven; that
is, the borrower will begin again with a clean slate. Under HAFA, once the
lender accepts a short sale or deed-in-lieu, the loan balance is considered
cleared. In addition, banks do not have to verify a borrower's financial
information or analyze income ratios before considering him or her for
HAFA.
As of December 28th, 2010, HAFA guidelines have been updated. These
changes will increase the number of borrowers who may be eligible to
participate in the HAFA program which should also expedite the number of
potential approvals. These changes include the following:
(1) Relocation reasons no longer need to be connected to employment
opportunities or meet distance requirements. Borrowers are allowed
to have moved up to 12 months before certain dates in the HAFA
process but may not have purchased another home.
(2) Banks are no longer required to assess if the borrower's total
monthly mortgage payment exceeds 31% of gross income. However,
borrowers will still be required to provide evidence of a hardship.
(3) Banks/Servicers must communicate approval, disapproval, or
a counter offer within 30 calendar days after receiving either an (i)
executed sales contract, (ii) Alternative Request for Approval of
Short Sale, and (iii) a signed Hardship Affidavit.
(4) If an unsolicited borrower requests to participate in HAFA, the
servicer has 30 calendar days to acknowledge the borrower's eligibility
and, if eligible, send the borrower the Short Sale Agreement to begin
the process.
(5) HAFA will no longer impose a 6% cap on payments for each
subordinate mortgage/lien holder when establishing eligibility. The
$6,000 aggregate limit is still in effect.
(6) The update also clarifies that vendors of the servicer may not
be paid from the real estate commission fees (In other words, the
commission cannot be split with a vendor of the servicer). Servicers
must have implemented these changes by February 1st, 2011.
Foreclosure Alternatives Program (FAP)
This program was announced by the Obama Administration in May of 2009
and took effect in July of that year. This program outlines new incentives
and uniform procedures for short sales. For borrowers who are unable to
keep their home under the Making Home Affordable Loan Modification
Program, the servicer may consider a short sale or, if that is not successful,
a deed-in-lieu of foreclosure. Here is a general outline of the program.
•
Borrowers (Homeowners): Borrowers qualify under the FAP if they
meet the minimum requirements of the Home Affordable Modification Program, as previously listed, but did not qualify for a modification or were unable to sustain payments under a trial period plan
or modification. Before proceeding with a foreclosure, servicers
must determine if a short sale is appropriate. Considerations should
include property condition and value, average marketing time in
the community, the condition of the title including the presence of
junior liens and determinations that the net sales proceeds are exIllinois Core B: Legal Issues
pected to exceed the investor's recovery through foreclosure.
•
Standardized Documents: The program will include streamlined
and standardized documents, including a Short Sale Agreement and
an Offer Acceptance Letter. The goal is to minimize complexity
and increase use of the short sale option.
•
Incentive Payments:
♦ Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL.
♦ Borrowers may receive incentive compensation of up to
$1,500 to assist with relocation expenses.
♦ Treasury will also share the cost of paying junior lien holders
to release their claims, matching $1 for every $2 paid by the
investors, up to a total contribution of $1,000 by Treasury.
•
Property Valuation: The servicer will independently establish both
property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the
borrower regarding the list price and any permissible price reductions. The price may be determined based on either an appraisal
performed in accordance with USPAP; or one or more Broker Price
Opinions either of which must be dated within 120 days of the
Short Sale Agreement.
•
Minimum and Maximum Duration: Under the program, servicers
will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions.
The property must be listed with a licensed realtor experienced in
selling properties in the neighborhood. Marketing of the property
may run concurrently with the foreclosure process; however, no
foreclosure sale can take place as long as the borrower is acting
in good faith to sell the property. There is a maximum marketing
period of 1 year for the property.
•
Selling Commissions and Fees: The Short Sale Agreement has to
specify the reasonable and customary real estate commissions and
costs that may be deducted from the sales price. The servicer must
agree not to negotiate a lower commission after an offer has been
received.
•
No Borrower Fees: Servicers may not charge fees to borrowers for
participating in the FAP.
•
Deed-in-Lieu of Foreclosure Option: Servicers have the option to
require the borrower to agree to deed the property to the servicer
in exchange for a release from the debt if the property does not
sell within the time allowed in the Short Sale Agreement (plus any
extensions).
37
1.
In the Sale and Rental of Housing, no one maytake any of
the following actions based on race, color, national origin,
religion, sex, familial status or handicap EXCEPT:
a. make housing unavailable
b. deny a dwelling
c. deny housing to a person who is a direct threat to the
health or safety of others
d. set different terms, conditions or privileges for sale or
rental of a dwelling
2.
Fair Housing complaints filed with HUD are investigated
by the _____
a. Office of Fair Housing and Equa Opportunity
b. Attorney General of the state where the alleged incident
occurred
c. U.S. Court of Appeals
d. Office ofADA Amendments
3.
What is an exception to the Fair Housing Act?
a. Any statement that indicates a limitation or preference
based on national origin
b. A person who is HIV positive may be refused a rental
agreement if the disease is not in remission.
c. Housing need not be made available to a person who
currently uses illegal drugs.
d. Companion animals of any breed (by prescription) must
always be permitted.
4.
5.
38
In the Fair Housing Act of 1991 affecting four or more
units, all units must have ____.
a. Reinforced bathroom walls to allow later installation of
grab bars and Kitchens and bath rooms that can be used
by people in wheelchairs
b. Accessible light switches, electrical outlets, thermostats
and other environmental controls
c. An accessible route into and through the unit
d. All the answer shown are correct
HOPA retains the requirement that senior housing must
have one person who is 55 years of age or older living in
_____ of its occupied units.
a. 50 percent
b. at least 80 percent
c. half
d. 55 percent
6.
Collaborating with others and collectively refusing to
conduct business with another real estate professional
is a violation of antitrust law in that it constitutes a(n)
__________ of trade.
a. enhancement
b. robust environment
c. equitable
d. restraint
7.
A short sale is an arrangement where the ___________
offers, and the _________ agrees to accept less than the
total amount owed to pay off the home.
a. Bank; homeowner
b. Agent/licensee; bank
c. Homeowner; bank
d. Agent/licensee; homeowner
8.
A bank can try to recoup its losses from a short sale
deficiency by:
a. Demanding that the borrowers sign an unsecured note
b. Seeking a legal remedy known as a judgment
c. Taking a write-off loss on its bokos and issuing a 1099 to
the seller/homeowner
9.
A form known as a 1099, issued to the seller/homeowner
by a lender after a short sale, may subject the homeowner
to:
a. Tax consequences
b. Legal consequences
c. A decline in their credit score
d. An inability to purchase real estate in the future
10. A Realtor can represent clients in a short sale as long as:
a. The Realtor has a mortgage banker's license
b. The real estate market is in a decline
c. The buyers are ready to close quickly
d. The Realtor has written authorization
Real Estate Safety:
Protect Yourself During a Showing
3 CE Credit Hours (Approval # 564.002260)
As a real estate agent, you are placed in a position of special trust. Your clients expect you to deliver the best skill and care
as a part of your fiduciary duties. You counsel your clients on strategy, help them complete mounds of paperwork, and
sometimes even advise them on home staging. With all of this going on, it’s easy to forget about your clients’ personal safety
or the safety of their belongings. Your clients are counting on YOU to know the common risks associated with a real estate
transaction and the best practices for minimizing those risks.
Chapters:
•
Chapter One: Introduction
•
Chapter Two: Working with Seller Clients: Getting a Home Ready to Sell
•
Chapter Three: Working with Seller Clients: Conducting the Showings
•
Chapter Four: Working with Buyers with Safety in Mind
•
Identify common items that are vulnerable to theft during property showings
•
Explain to seller clients the safeguards to implement prior to taking photos and showings
•
List some pros and cons of using a lock box on a listing
•
Conduct a showing or open house, and property close up afterward
•
Explain safety tips for issues that commonly come up before and during a showing
•
Discuss the required disclosures and items that buyers should investigate
“When I was a multi-million salesperson and manager, you covered the multitude of problems that occurred in transactions. GOOD
CLASS.”
~ Waneta
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Chapter One:
Introduction
Fiduciary Duties
As a real estate professional, you are placed in a position of special trust.
Most of us already know that and take great care to provide fiduciary duties
to our clients in the transaction. We counsel our clients on strategy, help
them complete mounds of paperwork, and sometimes even advise them on
home staging. How many of us think about our client’s personal safety and
the safety of their belongings during this process?
Chapter Two:
Working with Seller
Clients: Getting a Home
Ready to Sell
Care: you show reasonable care for your clients in the transaction.
This could very well include their safety.
Many people think that a real estate agent’s most difficult task is preparing a listing for a Multiple Listing Service or handling paperwork. These
certainly are highly detailed and often challenging tasks, but there is so
much more that goes on before a home is listed, in order to make the home
more marketable and to help protect the seller and the seller’s possessions.
In this chapter, we will talk about safeguarding valuables and medications
during the showing of a home. Making sellers aware of the vulnerabilities
in showing a home without the assistance of a real estate licensee is also
crucial. The importance of screening buyers prior to showings will also
be covered.
Obedience: you obey your clients’ wishes. Most would wish to keep
themselves and their belongings safe.
Safety First: Before a Showing
Loyalty: being loyal to the client means placing their interests above
your own. You are their guardian in this transaction.
Have you ever taken a look at a property listing or the property itself and
found yourself focusing on the contents, rather than the building? Maybe
you like the artwork, the furniture, or the electronics. People generally don’t
look at listings and pick out the valuables, but there are individuals in our
society who do just that.
Think about it; you are providing fiduciary duties of:
Disclosure: you disclose facts that are relevant to the transaction–and
safety for buyers and sellers may be an extremely important disclosure!
(Think: lead paint, registered sex offenders registry)
Accounting: for funds and documents, which could include escrow
funds for radon systems and lead paint disclosures.
Confidentiality: a licensee keeps important information confidential,
thereby keeping their clients safe from its misuse.
There is no question that having a fiduciary relationship with a client means
that the client is counting on YOU to know the common risks and safety
precautions that should be applied in a real estate transaction. Let’s delve
into this subject and talk about some things that don’t frequently come up in
other education and training classes.
Note!
Please note: safety of the real estate licensee is also of great concern! This
course addresses the safety of the client, but a licensee is advised to learn
how to keep themselves safe during showings. Please read up on licensee
safety, contact your local Board of Realtors, and/or contact your local police
department for tips on staying safe. The North Carolina Real Estate Safety
Council (a joint effort from the NC Real Estate Commission, and the NC
Association of Realtors) has an excellent guide for real estate licensees.
Sellers should be counseled on protecting their valuables before photographs are taken and home showings are conducted. Some items should be
hidden from plain sight, while others may be better off shredded, moved
to another location or placed in a safe deposit box at a nearby bank. Sellers should be told that hiding valuables in the home does not protect them.
Buyers frequently open cupboard doors and look in freezers, in closets and
under beds. Some may go further and look in dressers, even though they
shouldn’t.
If a seller truly values something and moving it wouldn’t be a disruption
to their daily lives, valuables should be moved to the home of someone
trusted, or better yet, placed in a safe deposit box until the home is no longer
being shown. Some homeowners invest in a fire-proof lock box. While a
lock box is a good way to protect valuables and documents in a fire, these
boxes are often small enough to be removed from the property. A skilled
robber can get into one with enough time, especially if the box is in his
possession. Remember the expression: “an ounce of prevention is worth a
pound of cure.” A little forethought could prevent a major hardship!
As a person held in special trust, the real estate licensee should be careful
when photographing a home not to include valuables in the photos.
Things that should not be left out in plain sight include:
• Jewelry
• Antiques
• Medications
• Cash and checks
• Bills with account numbers
• Bank statements that include images of cleared checks
• Spare keys
• Photos that are too personal
• Personal documents such as Social Security Cards and Passports
40
• Briefcases, purses, computer bags
• Small electronics, such as iPods, iPads, and laptops.
Jewelry
Imagine this: you are a seller, trying to sell your home, and you list it with a
competent real estate licensee. The licensee does an excellent job marketing
the home and many potential buyers have viewed the home. One weekend,
your listing agent holds an open house, and it is a huge success! A large
number of buyers come to see the home, so many that the listing agent can’t
be in every room with every buyer during the open house. You come home
after everyone has gone, very happy with the exposure that your home has
gotten, only to find out that someone has been in your jewelry box! Almost
everything has been taken! How could this have happened?
According to an article in the Chicago Sun-Times, in 2012, a seller client
described the unthinkable: $162,000 worth of jewelry was stolen during
an open house in Highland Park, a neighborhood in Chicago. What did the
seller do? She sued the real estate firm that had the listing. The seller stated
that the listing brokerage had sole control over the home when the jewelry
was stolen, thus they were responsible for the loss.
Could this have been prevented? What is the best thing to do with jewelry? Jewelry is incredibly easy to sell or pawn. Advise the client to secure
jewelry in a locked safe or safe deposit box. In the event that jewelry is
stolen, contact police immediately and call around to local jewelers and
pawn shops.
Consider: Has one of your clients ever had a piece of jewelry stolen during
a showing or open house? If yes, consider what you could have done to help
prevent that from happening.
Antiques
Antiques may be more difficult to move off sight,
but they should not be ignored, especially small
items that can be tucked into a pocket or purse.
Medications
Medications can be more difficult to secure, if they are needed on a daily basis.
Every year, pharmacies report break-ins
and stolen medications. The National
Community Pharmacist Association
estimated that there were 686 prescription drug robberies in pharmacies in
2010. That is an 81% increase from 2006
(NCPA, 2012).
The prevalence of prescription drug theft from homes is not known because
many people do not report those thefts to the police. Think about how much
easier it is for a thief to steal medications from a home that is listed for sale!
Pain medication is of particular concern, but every medication should be secured prior to each showing. Sellers should NOT simply place medications
in a medicine cabinet or linen closet. Those are the first places many people
would look. Luckily, medications are generally small in size and can simply
be placed in a bag and taken with the seller before a showing.
Cash and Checks
Cash and Checks may seem like an obvious thing to avoid leaving out,
but what about bills or bank statements? Many people leave cash laying
around and don’t think it is a big deal. As a real estate licensee, you serve
your clients well by suggesting that cash, checks, bills and bank statements
be locked in a safe, taken off sight, or shredded. Bank statements may not
have account numbers printed on them, but copies of cancelled checks may
be included in a statement. A thief can obtain routing numbers and account
numbers from those images. Credit card bills frequently include account
numbers, and someone adept at identity theft or account theft could easily
charge up a fortune, even without the expiration date or security code.
Spare Keys
Spare Keys need to be secured as well. They should not be hanging from
a hook by a door or placed in a “junk drawer.” Spare keys should never be
hidden in common places, like under a doormat, under planters, just inside
a garage, or in obvious, magnetic hide-a-key places. Hidden spare keys are
often a good idea, but think like a burglar and put keys in a place that is not
obvious. Perhaps a trusted neighbor can hold on to a spare key, if necessary.
Photos
Photos that are too personal should be
packed away. This is a common suggestion when staging a home. Homes
generally sell better when buyers can
envision themselves living in the home,
which is difficult if pictures of another
family are scattered around the house.
There is another, perhaps more important reason to take down those family
snapshots. Children and young women are statistically more vulnerable to
predators. In order to reduce this sinister risk, people looking at a listing
online or in person should not know what the residents of the home look
like.
Social Security Cards and Passports
Personal documents, such as Social
Security Cards and Passports, are
prime targets of identity theft. Are
those documents in a file cabinet? Are
they in a fire-proof lock box or in a
file box marked “Family Documents”? These documents are often
overlooked and so easy to move to a
secure location, like a safe deposit
box. These documents are also the
easiest way for a thief to successfully steal an identity and ruin a person’s
credit or worse!
Briefcases, Purses, and Computer Bags
Don’t forget about briefcases, purses and computer bags, especially designer brands. Many high-end bags can fetch a good price on auction websites,
even if they are used.
Small Electronics
Small electronics, such as iPods, iPads, tablets, and laptops, should be
locked up. Although many of these items can be password protected and
have tracking software built in, that will not stop them from being stolen.
41
Passwords can be reset and tracking software can be disabled by a skilled
thief. These electronic devices are actually designed that way. If a consumer
owns one of these devices and forgets the password, usually a skilled information technology specialist can reset the password in a matter of minutes. As far as tracking software, that can be disabled and registration can
be reset. These small electronics are highly marketable and often contain
very personal information, such as passwords, social security numbers, and
credit card information.
Breakables
Finally, breakables should be safeguarded. They may be worthless to a
thief, but valuable to a family. Think about the vase that your daughter made
in 3rd grade art class. What if a clumsy buyer knocked it over? Many buyers
have children who come on showings and children are more prone to accidents. When securing a home, keep an eye out for those precious artifacts,
even if they are worthless on the market.
Suggestion
Provide sellers with a pre-listing checklist. Advise them to move valuables they
do not need on a daily basis to a secured
location, like a trusted family member’s
house, or better yet, a safe deposit box at
a bank. Things that should be moved include:
• Jewelry
• Antiques
• Medications
• Cash and checks
• Bills with account numbers
• Bank statements that include images of cleared checks
• Spare keys
• Photos that are too personal
• Personal documents, such as Social Security cards and passports
• Briefcases, purses, computer bags
• Small electronics, like iPods, iPads, tablets, and laptops
• Breakables
Consider: Are there any items that we missed? What else should be a part
of this checklist that we did not go over?
Example
You have been asked to list a beautiful home in a prestigious neighborhood
in your market area. The home is decorated impeccably, and you know it
will generate a great deal of interest.
When you first view the home, you notice the lovely office, with a wellmarked filing cabinet (one drawer says, “Family Documents”). On the desk
are a variety of electronics--a tablet, a laptop--and a few small collectables.
Further down the hall, you come to the master suite with an amazing walkin closet. The closet has an organization system with a jewelry rack that is
laden with gold and diamond jewelry. There are hooks that hold an array of
high-end handbags as well. It shows nicely.
Moving on to the master bath, you find wonderful storage. There are many
42
cabinets and drawers, some containing medications, while others have fine
linens and makeup.
As you walk through the home, you admire the beautiful photography. The
lovely family who currently own the home has 2 beautiful young children.
If the home looks well-staged, do you make any suggestions? How would
you broach the subject of home safety?
Comments: Handing the sellers a checklist is a good start. If it is preprinted, then it gives the feeling that securing valuables and taking down
personal photos is a normal matter of course. Discussing the checklist will
drive home the point. In some areas, having a professional home-stager can
add to the credibility of how important it is to secure valuables and take
down personal photos. A home-staging consultation may be surprisingly
affordable and may be a nice service that the listing agent can provide.
Importance of Screening Buyers before a
Showing
In 2006, a Maine man was convicted in New Hampshire on 5 felony counts
of sexual assault, plus criminal threatening, kidnapping, and several misdemeanors. The man was named “The Real Estate Rapist” in local newspapers
because he approached residents of homes that were listed by real estate
brokerages, instead of contacting a listing agent or licensee. One of his victims was a 19-year-old woman. The Real Estate Rapist knocked on doors
that had For Sale signs in the yard and asked the residents to view the home.
Once he gained entry into the home, he proceeded to sexually assault, kidnap, and otherwise threaten the residents, generally young women.
Listing agents can hang “Do Not Inquire Within” riders on the For Sale
signs. They can also recommend that sellers do NOT show their home to
buyers who have not been pre-screened, which protects the clients from the
unthinkable (as seen in New Hampshire), and it saves the sellers time and
hassle. Oftentimes, buyers who are not working with a real estate licensee
are not serious about purchasing property. Others do not have a realistic
idea of how much home they can afford. The recent case of the “Real Estate Rapist” in New Hampshire is reason enough to want all potential buyers screened before a showing! Sellers should be cautioned about showing
property themselves. The simple act of making an appointment with a real
estate licensee is a significant deterrent to those who may want to steal from
or harm home sellers.
While the actual percentages change from time to time and among market
areas, studies show 80–90% of sellers who attempt to sell their homes themselves end up listing with an real estate agent (US News and World Report,
2008; National Association of Realtors, 2012). Common reasons sellers end
up listing with a real estate licensee are market exposure, knowing how to
price correctly, and seller frustration with buyers who are not pre-screened,
pre-qualified or pre-approved for financing, and generally not serious about
buying. Most buyers who are truly ready to buy a home will approach a real
estate licensee.
Before screening potential buyers, you should ask your principal or managing broker if there is a safety/screening protocol for your office. Part of
your job as a real estate licensee is to take as much time and stress out of
the selling experience as possible. If a buyer approaches you, you should
do the following:
1.
Ask if they working with another agent.
2.
Ask if they have been pre-approved for financing and with whom.
3.
Know the person you are taking into your client’s home. If
possible, meet them in your office first and have them fill out an
identification form. Photocopy their driver’s license and note the
make, model, and license plate number of their car.
4.
Get a full name and phone number. Call the number to verify it is
not false. Put the name in an internet search, and if possible, try
to verify that it is real.
5.
Let someone in your office know when you are going to the
listing and when you will be back. If a person is planning to rob
the home, they may compromise your safety too.
6. Attend a showing with another agent. Perhaps one of you can stay
in the car with cell phone in hand.
7. Trust your instincts! If something doesn’t feel right, you should
protect your client and simply decline a showing.
If a buyer has a difficult time with any of the things listed above, perhaps
they are not serious about buying a home. Going through these steps will
likely screen out predators and thieves, as well as the “tire-kickers” and
nosey neighbors. It simply protects your client, who is your principal. You
must do what you can to keep your principal and their home safe, even if
it means turning away someone who may or may not be serious about purchasing the property. A serious buyer should not have a problem with any
of the aforementioned steps. Think about how many times you show your
driver’s license--when you cash a check, buy alcoholic beverages or cigarettes, or use a credit card. Driver’s licenses are copied to test drive a car or
adopt a pet from a shelter, and people usually have to provide a name and
phone number when having a pizza delivered! A home is a MUCH bigger
purchase than most cars, pets, and certainly pizzas.
and emailed all licensees, warning them not to take a call from that number,
and if they did, to politely decline a showing. Most of the agents (including
the author of this course!) had been contacted by this buyer regarding many
of the listings held by the brokerage. No one knows what would have happened if one of the agents ignored their inner voice and conducted a showing for this individual. We all want to provide the best service for the seller
clients. Sometimes this includes refusing to show a property to a buyer who
doesn’t seem legitimate. Let your managing or principal broker know about
situations such as this and trust your instincts.
Summary
In this chapter, we covered some of the more common household items that
should be protected prior to listing a property (before photographs are taken
and before any showings). Such items include jewelry, antiques, medications, cash and checks, bills with account numbers, bank statements that
include images of cleared checks, spare keys, photos that are too personal,
personal documents, such as Social Security cards and passports, briefcases, purses, computer bags, and small electronics, like iPods, iPads, and
laptops. We also talked about the importance of screening buyers prior to
showings. Real estate licensees should design their own checklists to be
used consistently.
If the buyer is working with another licensee, tell the buyer to contact the licensee. If a licensee contacts you, ask for the buyer’s name. Also, ask if the
buyer is a buyer client (under an agency agreement), or a buyer customer
(without an agency agreement). Has the other agent verified their identity?
This is yet another layer of protection; plus, having another agent involved
increases the safety for you, your client, and their belongings.
Example
A buyer calls you and asks to see one of your listings as soon as possible.
You go through your list of questions:
•
Is he working with another agent? (No)
•
Where have they been pre-approved for financing? (Nowhere –
he says he has plenty of money)
•
Will he meet you in your office first so you can get a copy of
his driver’s license? (No, he wants to meet you at the house. He
doesn’t have time to meet you before a showing).
•
Will the buyer fill out an identity form? (No, that is ridiculous; he
has NEVER had to do anything like that in previous transactions).
This buyer becomes increasingly agitated and insistent on seeing the house
without bothering with any of these formalities. You have a very uneasy
feeling about this situation.
Consider: What should you do? We will go over a suggested response on
the next page, but take some time and consider how you would/should respond in this situation.
Example - Resolution
This exact situation happened to a number of licensees within a brokerage.
All the agents who talked to this buyer felt uneasy about his aggressiveness. The managing broker was alerted to the situation, called the police
43
Chapter Three:
Working with Seller
Clients: Conducting
the Showings
In this chapter, we will talk about showing the property. Should the showings be assisted (with the listing agent present) or is a lock box a better idea?
What are some pros and cons of using a lock box for unassisted showings
and some benefits of accompanying buyers? Next there will be tips for protecting vacant homes from theft, vandalism, fraud and squatters. We will
address ideas of what to do with pets, and how to close up after a showing,
specifically, making sure doors and windows are locked, and heat and lights
are turned down. Finally, we will share safety tips on hosting an open house.
To Lock Box or Not to Lock Box?
Lock boxes are a wonderful convenience. Different regions of the country
have different customs when listing homes. In some areas, it is customary
to have listing agents conduct showings most of the time, while in other
areas it is rare for a listing agent to be present during a showing. Lock boxes
may be the norm in some places–either Supra Boxes or combination boxes-while other brokerages may prefer to hold a key in the office for buyers’
agents to pick up.
What is the best way to keep a listed home secure? In an ideal situation, a
sales team would be present to show the property. Buyers would be thoroughly screened prior to a showing and not allowed to be alone in any room.
The ideal situation, however, is not always possible, so let’s discuss the pros
and cons of different types of lock boxes.
Technologies like the Supra Systems have many wonderful features. The
showing agent must subscribe to the service to get a special key. Their information is made available to the listing agent, and the system records when
and who enters the property. The advantages are obvious, and that is why
such systems are so popular. The downside is that many real estate licensees
do not subscribe to these services, so they need to find another way to enter
the property. Records can become inconsistent and the listing agents often
consider a simple combination lock box instead.
A combination lock box does solve the issue of licensees who do not subscribe to a key system, but once the combination is out, it is not possible
to determine who viewed a property or when they viewed it. Some buyers’
agents may be careless and write the combination on a listing sheet, which
they may in turn give to a buyer or discard for anyone to pick up.
Having either type of lock box visible from the street can make a home
more vulnerable to vandalism. In Pennsylvania, several homes were broken
into when thieves cut lock boxes off of front doors. The lock boxes where
smashed and the criminals entered the homes with the keys. They then proceeded to take copper pipes from the empty houses.
Some brokerages may have a person on duty who distributes keys to agents
working with buyers. Having this person sign out a key may help keep track
of who views the property, but keys can be lost, returned in an untimely
fashion and perhaps even copied. There is no doubt that assisted showings
help to keep homes, possessions, and keys safer, but having a key in a lock
box or available through an office makes scheduling the showings much
easier. What are the priorities of your seller?
44
Vacant Homes
What about vacant homes? There is virtually nothing to worry about in that
type of listing, right?
With vacant homes, especially empty ones, it is true that the items discussed
in chapter 1 may not be an issue. There is no need to advise sellers to secure
belongings that are not in the home. However, that does not mean that the
home is invulnerable to theft and other pitfalls. Every year, vacant homes
are subjected to theft, fraud, and squatters. With the popularity of online
classified ads, there is a new phenomenon of fraud. Much of this can be accomplished easily if a home is not closely monitored.
What can a seller of a vacant home do to protect their home from burglary and vandals?
•
Call the home owner’s insurance company and ask about vacant
home policies (and perhaps purchase the extended coverage–
most homeowners policies will cover only 30 days after the home
is vacated).
•
If possible, take pictures of the home before furniture is moved
out. Pictures of an empty home in the MLS can attract mischief.
•
Ask a neighbor to park their car in the driveway.
•
Ask neighbors to keep an eye on the home.
•
Have the Post Office hold or forward mail. Check the mailbox
and front steps regularly for mail and flyers.
•
Put a lamp on a timer, so it will turn on and off like someone is
still living in the home.
•
Install motion detector lights and/or a security system.
•
Make sure snow, leaves, or other debris is cleared away regularly.
•
Check in on the home regularly.
Consider: What do you think? What method(s) work best? Which methods
do you like to do most? What others did we miss?
What Can Happen if a Vacant Home is Not
Closely Monitored?
If an unethical person is able to obtain a key to a vacant home that is for
sale, they can easily show the home to would-be renters. It may be easy
to collect deposits and take off with the money. A home that is not closely
monitored is much more susceptible to rental fraud.
Craig’s List advises potential renters about this type of scam on their website: http://www.craigslist.org/about/scams. These scams occur when a
property is posted for rent, when in fact, it is not. The person posting the
rental may have nothing to do with the property but collects security deposits, first and last month’s rent, application fees, and more. While a court
may not find the seller liable for damages in this case, it would be prudent
to advise sellers about this possibility and suggest that they make the home
look inhabited (at least when photos are taken), so it is less inviting to this
type of scam. Avoiding the use of a combination lock box in vacant homes
may also be good advice.
In 2012 in Sarasota, Florida, there was a rash of rental scams in vacant
homes. Renters paid cash deposits, only to find they could not access the
home on moving day. The people posing as the landlords could not be found.
Vacant homes that are empty are also more exposed to theft. Police blotters across the country are riddled with reports of items stolen from vacant
homes, such as copper pipes, furnaces, gas fireplace inserts, and appliances.
There is vacant home insurance that can be purchased, and it may be a very
good idea for sellers to invest in that protection.
Conducting a Showing
Even after the buyer(s) have been carefully screened, there is work licensees can do to help keep seller clients and their possessions safe.
Whenever possible licensees should show property in-person and in teams.
This is especially important when going to a home without close neighbors
and/or with an unfamiliar buyer. While female agents may be statistically
more vulnerable to assault crimes, male agents have fallen victim, too.
When showing property it is helpful to be at the property before the buyer,
so you can adjust the heat or AC. Turn on lights and make sure the home is
presentable. A few extra minutes could make a big difference if the home
has dirty dishes in the sink, clothes on the floor, or a dead mouse in the dining room! Oftentimes, the property owner prefers to reduce energy bills by
keeping heat or air conditioning turned down. Comfortable room temperatures can make buyers feel better about a home, and the listing agent won’t
be distracted, thinking about rushing around to do things like this when they
should be focused on the buyers. Being early to a showing allows a licensee
to make the home more comfortable to show and causes fewer distractions
during the showing, which allows the licensee to better protect the seller’s
possessions. They can also protect the seller’s money by being sure to turn
down/off everything that was turned up/on!
There are ways to show properties that can minimize this risk to the seller’s
home and to the licensee. To start, always let the buyer walk into a room
first and never let them get between you and the door. When going into a
basement or attic, wait on the stairs or decline to enter the space altogether.
A cell phone in hand may help, as can pepper spray (check to make sure it
is legal in your area). Pepper spray comes in many containers that do not
raise alarm, such as a pen.
Much like the recommendations with open houses, it is a good idea to meet
the neighbors and ask that they keep an eye out for anything out of the
ordinary.
Having two people at a showing helps, if multiple buyers want to go in
multiple directions. The listing agents can follow them to answer questions
and make sure they don’t steal or damage anything.
Keep your phone with you and have a secret code that others know in case
you suspect something suspicious. For example: “I’m at the Main St. house
and … the flowers are blooming… the new floor looks great… the neighbors came by…,” some phrase that your colleague will understand means
you need assistance quickly. Using a code means you won’t add any additional risk to the situation.
Damage to a Property
Theft is highlighted in this course, but how many buyers will damage a
property to get a better look at something? They may want to know if there
is hardwood under the carpeting or if there is rot behind a piece of trim.
Something may look loose, and a buyer may want to jiggle it a little. Buyers
have been known to move appliances, scratching floors and damaging gas
or water lines. Even licensees who represent the buyer should not let this
sort of behavior occur. It is much better to ASK the seller if there is hardwood under the carpet then to rip up a corner!
Lock the Door Behind You
In some neighborhoods, you may want
to lock the door behind you once you are
inside to prevent others from entering
the home after you. A For Sale sign in
the front yard can invite crime into a
home. Seeing a strange car in the driveway may let a would-be thief or attacker
gain easy access into a home. The person gaining access to the home may
wish to cause physical harm to the occupants, to steal, or to squat. Such persons may quietly sneak in, unlock a window and sneak out, with the intention of coming back later. Locking the door behind you can help prevent
this from happening.
Doors and Windows
What to Do with Pets
What is the best thing to do with pets? Many property owners enjoy the company of their pets–dogs,
cats, birds-- but where should these pets be during a
showing? What if they get out or are frightened or
excited and cause damage? If possible, it is a good
idea for the owner of the property to take the pets
with them during a showing. Sometimes that is not
possible, so there are some options to consider. The
pet owners know the pets best, and should make the ultimate determination.
Should the pet wander freely? This may be alright for pets, such as cats, if
they are allowed outside or will not try to escape. Dogs can be placed in a
dog run outside or a kennel inside. Some pets may themselves be vulnerable
to theft, so keeping the furry family members safe is a top concern, too.
On that note, many buyers will
want to open doors and windows.
This is perfectly acceptable if
they wish to see how something
operates or to check if a door or
window sticks or is easy to lock.
As a real estate licensee, it is your
job to make a final check after a
showing to ensure all the doors
and windows are locked or left in
a state preferred by the seller.
Example
Accompanying the Buyer
During a home inspection in a multi-family home, the home inspector inadvertently locked all the doors and windows, including a deadbolt lock on
an apartment door. The listing agent knew that the tenants did not have a
key to the deadbolt, only to the door knob. She didn’t bother to check the
doors because she knew the tenants would return to the home soon after the
inspection.
Accompanying the buyer during a showing may be one of the most important things a listing agent can do to ensure the safety of the seller and their
belongings! Thieves and assailants are far less likely to commit crimes if
their faces are known. If possible, bring a sales team member to showings.
When the tenants returned, they could not open their door, so they broke
a storm window in the living room. Unfortunately, they could not get the
living room window open, so they proceeded to the basement, where they
45
kicked a window in, causing a few hundred dollars’ worth of damage. Luckily, the seller did not mind paying for the repair, but the listing agent could
have easily prevented the damage.
•
Ask a neighbor to park their car in the driveway.
•
Ask neighbors to keep an eye on the home.
While checking that doors and windows are shut and locked (or left as the
property owner desires), it is a good idea to check the heat, air conditioning
and lights. Buyers and home inspectors may turn these things on excessively to see how they work. How would you like to return home to find it
90 degrees in the dead of winter? Or even 90 degrees in the middle of the
summer?! Buyers may turn on heating and cooling systems to see if forced
hot air systems irritate their allergies. There are many reasons why these
systems may be activated. It is your job as a licensee to set them back to the
levels the property owners prefer.
•
Have the Post Office hold or forward mail. Check the mailbox
and front steps regularly for mail and flyers.
•
Put a lamp on a timer, so it will turn on and off like someone is
still living in the home.
•
Install motion detector lights and/ or a security system.
•
Make sure snow, leaves, or other debris are cleared away regularly.
•
Check in on the home regularly.
•
Keep a phone with you and have a secret code word that alerts
other agents if you feel endangered.
How to Host an Open House
During an open house, the listing agent may not have the opportunity to
screen every potential buyer who comes in the door. Many of the people
who view an open house may not even be potential buyers. Nosey neighbors, curious drivers and possible criminals may also stop by the home.
What can a listing agent do to minimize the risk to the seller and their belongings? There are many things we can do.
First, introduce yourself to neighbors and let them know you will be hosting
an open house. They will likely pay attention to people coming and going.
This may not only help identify a thief, but it may actually deter theft if it is
obvious that there are neighbors looking on. It may help market the house,
too. Having caring neighbors can be a wonderful thing!
Warn sellers that they are liable if a person gets injured while viewing their
home. Ask if the sellers have liability coverage in their home owners insurance policy. They should also pay attention to hazards, such as loose carpeting, wobbly stairs, areas that have low ceiling height and poor lighting, or
sidewalks that may be icy.
Hosting an Open House:
•
Introduce yourself to neighbors and let them know you will be
hosting an open house.
•
Warn sellers that they are liable if a person gets injured while
viewing their home.
•
When people arrive, jot down the make, model, color, and license
plate number of each car, and a basic description of the individuals
viewing the home.
•
Place yourself in a spot that is right by the front door and ask
viewers to sign in.
•
Whenever possible, get help from other licensees in your office
and position agents on each floor.
When people arrive, jot down the make, model, color, and license plate
number of the cars, as well as a basic description of the individuals. Place
yourself in a spot that is right by the front door and ask viewers to sign in.
This information could prove important if a crime does occur. It could also
be useful information to your sellers. They may want to know if a scheduled
showing resulted from the open house.
Whenever possible, get help from other licensees in your office. Position
agents on each floor to help answer questions more easily AND to protect
the seller’s belongings. Thieves often work in teams–one distracts, while
the other takes the valuables. It is more difficult to pull off that kind of theft
when more than one agent is on duty.
Summary
This chapter covered showing the property, including some pros and cons
of using a lock box for unassisted showings and some benefits of accompanying buyers. There were also tips for protecting vacant homes from theft,
vandalism, fraud and squatters, followed by ideas of what to do with pets
and how to close up after a showing. Finally, safety tips on hosting an Open
House were shared.
To recap:
46
•
Call the home owner’s insurance company and ask about vacant
home policies and perhaps purchase the extended coverage--most
homeowners’ policies will cover only 30 days after the home is
vacated.
•
If possible, take pictures of the home before furniture is moved
out. Pictures of an empty home in the MLS can attract mischief.
Chapter Four:
Working with Buyers with
Safety in Mind
Disclaimer
A licensee’s duty to a buyer as a buyer agent is slightly different in every
state. Licensees should keep up on the laws and rules in their states. This
document is meant to highlight examples of some of those duties, it is not
intended to be an all-inclusive list. Terms of a brokerage agreement and
company policy must also be taken into consideration. In this chapter, we
move to the other side of the transaction and talk about keeping buyers
and their assets safe, starting with meeting the buyer and disclosing the
difference between agency and non-agency relationships. We will examine
overlooked issues, such as leaving the buyer’s car in a safe place and safely
showing a property. Next, we will do a brief overview of disclosures and
safeguards, such as inspections. Buyers should be alerted to future safety
in the property and should conduct their due diligence with respect to the
sex offender registry and crime statistics for the neighborhood. They should
also consider obtaining title insurance, homeowners insurance, and flood
insurance. Finally, buyers should change the exterior door locks immediately after taking possession of a property.
One theme that runs through this chapter is disclose and refer. As a real
estate licensee, you must disclose material defects to all buyers, be they
clients (with an agency agreement), or customers (without an agency agreement). For clients, you must disclose material facts as well, for example if
you know a concrete manufacturing plant is being built across the street. As
a real estate licensee, you are a professional in the real estate transaction.
That does not mean you are an industrial hygienist, law enforcement officer,
or real estate lawyer. For technical questions, always refer your buyer to an
expert in the field who can give the buyer the best answer and protect you
from liability.
While you might want to save your buyers money, remember their health
and safety are priceless.
Learning Objectives
Upon completion of this chapter, you will be able to:
•
Explain safety tips for issues that commonly come up before and
during a showing.
•
Discuss the required disclosures and items that buyers should
investigate.
Fiduciary Duties
Buyers are exposed to significant risks when shopping for a home. Many of
these risks must be disclosed because of federal regulations (such as lead
paint disclosures), or state regulations (such as asbestos or radon). Recall
from Chapter 1 the Fiduciary Duties that all real estate licensees are required to provide to their clients:
Care: you show reasonable care for your clients in the transaction, which
could very well include their safety.
Obedience: you obey your clients’ wishes--most would wish to keep themselves and their belongings safe.
Loyalty: you are loyal to the client, which means placing their interests
above your own. You are their guardian in this transaction.
Disclosure: you disclose facts that are relevant to the transaction, and safety
for buyers and sellers may be an extremely important disclosure! (think:
lead paint, registered sex offender registry, etc...).
Accounting: you deal with funds and documents, which could include escrow funds for radon systems, or lead paint disclosures.
Confidentiality: you keep important information confidential, thereby
keeping your clients safe.
Chapters 1 and 2 covered how these duties apply to a seller client. Do you
see how they are just as applicable to the buyer-client? Both sides of a transaction face risks. It is our job as licensees to disclose, advise and protect our
clients from common risks in accordance with the law and our fiduciary
duties.
Before the Showing - Agency and
Non-Agency
Before the showing, get to know your buyer. Does your state have a brokerage relationship disclosure? It is vital that the buyer know the difference
between agency and non-agency relationships when working with a real
estate licensee. An agency relationship helps to protect the buyer. When an
agency relationship exists, the licensee keeps the buyer’s willingness to pay,
motivations, buying strategies, and personal information confidential. This
type of relationship also means the interests of the buyer are placed above
the interests of the licensee. In short, having an agency relationship with a
buyer adds a significant level of safety and protection for the buyer. Make
sure the buyer knows that the seller’s agent acts in the best interest of the
seller, and that they should avoid sharing personal information with that
licensee. Only an agency relationship will require that personal information
be kept confidential.
Before the Showing - Financing Pre-Approval
It is also wise to have the buyer pre-approved for financing, if it required for
the purchase of the property. How does this keep the buyer safe, you ask? It
keeps them safe from falling in love with a property that is out of their price
range or from losing a home they want because another buyer presented an
offer that included a commitment letter from a lender, thus making that offer stronger. Pre-approved financing could also save the buyer from losing
an earnest money deposit, if they cannot get financing before a contractual
financing deadline.
Before the Showing - The Buyer’s Car,
the Licensees Car
When going out on showings, it is common that the buyer leaves his car and
ride in the real estate licensee’s car. However, you must consider the safety
of the buyer’s car when it is left. It is in a safe neighborhood? If you leave
or return to the car in the dark, is the parking area well lit? Is there a place to
park the car where it is less likely to be hit by another car door or shopping
cart? Making these sorts of parking suggestions will show the buyer-client
that you are trying to keep them safe through the entire transaction.
If a licensee drives buyers in their car, it is wise to protect the buyers by having good insurance coverage. Do you have liability coverage or just
47
collision? Collision may protect your car, but what about the passengers?
Make sure your coverage insures passengers in the event of an accident.
At the Showing
Next, when viewing a home, it is vital that the buyer knows the listing agent
represents the seller. They should never divulge personal information that
may affect their bargaining position in a sale. Most consumers are unaware
of confidentiality rules.
Locking Doors
When viewing a home, take note of the neighborhood. Should the doors be
locked once everyone is inside the home? With foreclosures, short sales and
vacant homes, many of them could be “winterized,” with electricity and
heat turned off to save money and prevent pipes from bursting. If a property
is winterized, set up a showing during daylight hours. It is difficult to see the
details of the property when viewing it with a flashlight.
Disclosures
A variety of hazards are common in different parts of the country. Each
state has its own list of mandatory property disclosures. These disclosures
may include:
•
Water Supply System (type, location, any malfunctions, date of
water test, problems)
•
Insulation
•
Heating System (type, age, company that serviced, date of
service, annual fuel consumption, malfunctions)
•
Waste Water Disposal System (type, size, location, malfunctions,
date of instillation, date of service, name of servicer, more info
needed for systems within shoreland zones)
•
Hazardous Materials
• Asbestos
• Lead-based Paint
• Radon
• Underground Oil Storage Tanks
•
Other Material Defects
Consider: What other hazards are there? Are there any on this list that are
unique to your area?
Hazards of Special Interest: Lead
According to Colorado State University (Fact Sheet number 9.538), more
than 75% of homes built before 1978 contain lead paint. According to UL,
that figure jumps to 87% for homes built before 1940. Lead paint can contribute to nervous system and kidney damage, learning disabilities, diminished bone and muscle growth, behavioral issues and even death. It is especially dangerous for children 6 years and younger.
Lead paint is the only federally mandated property disclosure. Sellers, landlords and real estate licensees must ensure that buyers and renters receive a
lead paint disclosure AND the lead paint pamphlet from EPA/HUD, if the
property is for sale or rent as housing and was built before 1978.
It is vitally important to inform your buyers of the hazards of lead paint.
Email the above PDF file and ask for confirmation of receipt and/or obtain
paper copies from EPA, HUD, or your local Board of REALTORS®.
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Hazards of Special Interest: Radon
Radon is another deadly hazard that is prevalent in much of the country (to
see if radon is common in your area, see the QR code). Radon is a natural gas that results from the breakdown of radioactive materials commonly
found in soil and rocks. It is invisible and odorless, and tends to accumulate in basements and lower levels over time. Radon can also be present in
water. It is estimated that radon is second only to cigarette smoking as a
contributor to lung cancer in the United States.
The Environmental Protection Agency recommends taking action if Radon
exceeds 4 pCi/L in the air. The EPA has proposed guidelines for areas with
radon in the water that ranges from 300 pCi/L to 4,000 pCi/L, depending on
the source of water.
It is important to warn your buyers of the dangers of radon, recommend
that they test for it, and let them know that radon can be mitigated in most
situations.
Home Inspections
Most licensees know the importance of
home inspections and readily provide
buyer clients with a list of reputable inspectors. Oftentimes, however, the buyer
may under-inspect or decline the inspections all together.
When potential issues become apparent,
getting a professional opinion is generally a good idea. The next few pages will contain some common examples
of transactions that would have benefited from a home inspection.
Home Inspections: New Construction
Your buyers are thrilled to find a newly-constructed home that suits their
needs. Why should they have a home inspection when the home is brand
new? It is in perfect condition, right?
Consider: What do you think? Should the house be inspected? If so, for
what reasons? New Construction Suggestion
It is true that the property probably had the municipal building inspector out
to sign off on the home during the various stages of construction, but the
building inspector may be looking for particular safety and code requirements. There are many things that a municipal building inspector is not
responsible for inspecting, such as water quality from a well or radon levels
in the basement. Building inspectors are human and may simply miss material defects, especially if the builder is actively trying to hide them!
A basic home inspection should be recommended even if the home is new
construction.
Home Inspections: The Additional Items
Your buyers may have requested a basic home inspection but now wonder
about the add-on items, which can be expensive. Should they get the home
inspected for lead paint? Should they do additional water tests for radon or
heavy metals? Should the septic system be inspected? If the home is on a
public sewer, should the line be inspected?
Consider: What do you think? Should they add on the other items to be
inspected? Which ones are more vital? What factors play into the decision?
The Additional Items Suggestion
The first question to consider is how common is the issue in the area or
with that type of construction? For example, if the home was built in 1850,
lead paint is a common occurrence, but not so for a home built in 1985. In
any event, it is a good idea to refer the buyer to an expert. The 1985 home
may have salvaged doors, windows, or fireplace mantles that contain lead
paint. Real estate licensees are not industrial hygienists. Refer the buyer to
a licensed or certified inspector.
Home Inspections: The Additional Items #2
Let’s say you are showing a home that was built in 1905 and is on public
sewer. The listing agent insists that any sewage issues are the responsibility
of the town and there is no need to have an inspection.
Consider: Is the listing agent correct? Is there really no need for an inspection? What do you think?
The Additional Items #2 Suggestion
While it is true that the sewer line is maintained by the town, what about
the line that goes from the home to the street? Most likely that is the responsibility of the home owner. You may want to call and ask an expert if
inspection is warranted. If a sewage line is old, it may have deteriorated and
replacing it could be expensive!
Crime Rates
Safety is a concern for most people,
though not all buyers will research
the safety of an area they are considering buying in. Some buyers will
ask if a neighborhood is safe or do
research online, while others won’t
think about the issue until it is too
late. Real estate agents are not law
enforcement officers. It is not a good
idea to take on the liability of making safety statements. Refer buyers to key
websites and the local police department.
One list in particular may be of interest to buyers--the Sex Offender Registry. Each state maintains their own registry. Let the buyer look up the
information for them to ensure they know where to locate the information if
they want to check it later.
Protecting the Buyer’s Earnest Money Deposit
Purchasing property, especially a home, can be a very emotional experience. Negotiations can be emotionally taxing, so it is the job of the licensee
to be the voice of reason, the buffer, and sometimes the peacemaker. Many
transactions are completed with a minimum of negotiations, but some are
fraught with haggling over price, repairs, timelines, and other details. Prepare your buyer for the possible scenarios so they do not come as a surprise.
Make sure they know when their earnest money deposit will be returned
and when they risk losing it due to certain transactional issues.
Current Market Conditions
This section refers to buyer-clients only. Licensees should not give advice
on market values after the initial solicitation of agency services, if the licensee acts as a transaction broker, facilitator, or non-agent (i.e., no agency
agreement).
Buyers frequently make poor decisions because they hear misleading information about market conditions. They may hear that it is a “buyer’s
market.” which makes them think that making purchase offers significantly
lower than the list price is an ideal strategy. While that strategy may work
in some cases, it may also lead to insulted sellers who will then refuse to
negotiate or will not counter-offer with their lowest acceptable price, both
of which could ultimately harm your buyer’s chances of purchasing a property at the best possible price. On the other hand, if buyers hear they are in
a “seller’s market,” they may feel unnecessary pressure to offer more than
market value for a property.
As a real estate licensee, you have the best tools to assist your buyer-clients
(remember, you should not give price recommendations to customers, just
clients).
What are the best tools to assist your buyer-clients, you may ask?
Facts!
• Show your buyer-client examples of recent sales that are comparable
to their ideal property.
• Calculate the ratio of sale price to list price of recent sales in their
target market: Is it 90%? 95%? 102%?
• When looking at these facts, also note the Days on Market, Original
List Price, and any special circumstances, such as a short-sale or
foreclosure, of the recent sales.
Arm your buyer-client with facts so they know what the current market
conditions are and what they can expect in their search for the best property.
Keep your buyer safe from overpaying and safe from losing a property they
really want to buy.
Example
You are working for a newly-married, young couple as their buyer agent.
They are looking for their first home. Of course, they want their dream
home, but after many, many (many!) showings, you hope they get a sense
of the market and find a home that suits their needs.
The buyers eventually find a home that they fall in love with and wish to
make an offer. While investigating the home, you see that it has been on
and off the market every year for the last 5 years without selling. You also
notice that 3 homes on the road have gone through foreclosure and sold for
50-75% less than the list price of the home in question. When you run a
CMA on the property, your estimate indicates that it is overpriced by 20%.
Consider: What should you do? Example - Resolution
Hopefully, you have already talked to your buyer-clients about the market
conditions. This property may be at risk of appraising low. Warn your buyers that they may lose their deposit if the appraisal comes in low and the
financing contingency deadline has passed.
It may be tempting to let the buyers proceed with the transaction without
warning them. It may feel like they will never find an acceptable property.
Nevertheless, be aware of your duty to care for your clients and keep their
earnest money deposit safe. Equip your buyers with the facts and advise
them as best as you can. Once you show the facts and give your advice,
the ultimate decision is up to your buyers--”agents advise, clients decide.”
If your advice encourages your buyers to keep looking, that may work out
best for you in the long run! Clients appreciate agents who actively work
to keep them safe. They will be more likely to recommend you to others in
the future.
It is a good idea to show your buyer a copy of the Binder or Purchase and
Sales Agreement used by your brokerage. Perhaps it is a standardized form
49
available from your state’s Association of REALTORS®. It could also be
a form specially designed for the brokerage or one drawn up by attorneys
for the transaction in question. In any event, it is important to go over the
terms of a typical Purchase and Sales Agreement ahead of time, so the buyer
is aware of the terms and conditions, timelines, and contingencies. The licensee should refer the buyer to an attorney if there are any questions or if
the buyer wants advice on certain contingencies in a contract.
There is a database of claims that insurance companies can access to see if
a property has a history of claims. This was of particular concern in Texas
when a series of water-related and mold claims prompted insurance companies to deny coverage on certain properties. In other cases, a property may
be uninsurable because it has older electric wiring (knob and tube, or 60
amp fuses). Buyers would do well to make sure the property is insurable
well before closing.
The licensee is also responsible for keeping the buyer on track. How many
days should the buyer have for inspections? (Note: it is a federal law that
10 days must be allowed for lead paint inspections). Should there be a buffer for more experts to come in or for contractors to give estimates? When
should all documentation for financing be in? When should the buyer ensure the property is insurable? When will the appraisal, title search, and
other applicable work be done? The licensee must keep track of all these
things for their buyer-clients. In addition, they should remind the buyer to
have utilities switched over on or soon after the closing date. Many utility
companies will charge more if utilities are turned off, then turned on, rather
than a simple name change.
Real estate licensees frequently get questions about Title Insurance. Most
lenders require that the buyer make a one-time payment for title insurance
to cover the lender. It is up to the buyer to decide if it is worth it to cover
them. Many buyers will ask their real estate agent if title insurance is worthwhile. Remember two things: 1) The safety of your client is priceless, and
2) Real estate licensees are not title insurance experts. Let the buyers know
that it is usually a good idea to purchase title insurance, and that they should
talk to a title company for the best advice. Protection after Closing Change the Locks!
What if everything is going smoothly, until a significant undisclosed material defect is uncovered in the home inspection? Depending on the purchase
and sales agreement, the buyer may have three choices, but MUST execute
their choice BEFORE the last day specified for that particular inspection, or
they waive their right for a remedy. A buyer may wish to consult with a real
estate attorney to design or better understand a legal contract.
Here are the three common choices in a typical Purchase and Sales Agreement:
Why guess? There could be many sets of keys
in the hands of many people. Here are a few
common examples of individuals who may
have keys to a newly-purchased home:
•
The previous owners (or the owners before them)
•
People who rented the home a few years ago
1.
Buyer can declare the purchase contract to be null and void and
receive his or her earnest money deposit back.
•
A few neighbors who have keys in case of emergency or because
they walked a dog that used to live there
2.
Buyer can ask the seller to remedy the defect, by repairing it,
reducing the purchase price, or receiving cash back at closing.
•
Contractors who worked on the house
3.
Buyer can accept the property “as-is” and execute the contract
as planned.
•
Family and friends of the previous owners
•
The listing agent
•
Another buyer-agent who forgot to return the key
The licensee should stay aware of the terms and any Purchase and Sales
Agreement. In some states, it is common to allow the seller to declare the
contract null and void if the buyer requests a remedy to a defect. It is important to be cognizant of the terms of the agreement when making recommendations to buyer-clients.
Protection after Closing - Insurance
Most lenders require buyers to obtain homeowners insurance when purchasing property with the help of mortgage funds. Buyers are well advised
to talk to an insurance agent to assess their particular insurance needs. There
are basic, broad, and multi-peril policies, among others. Every property is
different and every property owner is different. It is best to refer the buyer
to an insurance professional rather than advise them yourself.
However, you should alert the buyer to the need for homeowners insurance
and the potential need for other insurance, like flood insurance. A flood
certification may be required by the lender. If the buyer is a cash buyer, you
may want to advise him to look into flood certification for his own protection.
An often overlooked insurance issue is the existence of past claims on a
property. Scan this code for an article that details the risk buyers may face
in this scenario.
50
How many sets of keys exist for the property
the buyers just purchased?
It may be surprisingly inexpensive to have locks re-keyed. Another option
that may add a little style (and safety) to the newly-purchased home is to
purchase new door knobs and/or deadbolt lock sets from a local hardware
store.
Summary
In this chapter, we covered safety concerns for buyers and their assets.
From the first meeting, the buyer must be made aware of the difference
between agency and non-agency relationships. We also went over some often overlooked issues, such as leaving the buyer’s car in a safe place and
safely showing a property. Next, we did a brief overview of disclosures and
safeguards, such as checking crime rates, having inspections done, obtaining certain kinds of insurance (title insurance, homeowners insurance, and
flood insurance), and changing exterior door locks immediately after taking
possession of a property.
One theme that runs through this chapter is disclose and refer. While you
might want to save your buyer money, remember their health and safety are
priceless!
1. Real Estate Licensees are experts in:
a. Home inspection
b. Real estate law
c. Title insurance
d. None of the answers shown
2. What is the most important reason that breakables
should be secured prior to a showing?
a. They are valuable for reselling purposes
b. They may have tremendous sentimental value
c. They distract the buyer from envisioning himself in
the home
d. They are vulnerable to being broken by a clumsy
buyer
3. In what way(s) does a Supra lock box provide home
security for listings?
a. Can be unlocked from a brokerage office
b. Collects data on who enters a home and when
c. Releases a warning sound when someone attempts to
physically remove the lock box without authorization
4. Most lenders require what type of insurance that is
paid in a one-time payment?
a. Homeowners’ insurance
b. Renters’ insurance
c. Title insurance
d. Mortgage insurance
5. Vacant and empty homes frequently run the following
type(s) of risk(s) to the sellers:
a. There are no significant risks to sellers when the
homes are empty
b. Copper pipes may be stolen
c. Appliances may be stolen
d. Both copper pipes AND appliances may be stolen
6. How does pre-approved financing protect a buyer?
a. Prevents the buyer from falling in love with a
property out of his price range
b. Provides protection from losing a home to another
buyer with the same offer who has a commitment
letter from a lender
c. Reduces the risk of losing earnest money if financing
cannot be completed before the contract deadline
7. To prepare for closing, what recommendations should
a buyer-agent provide to the buyer?
a. Investigate title insurance
b. Change the locks immediately after the close
c. Register the deed at the county courthouse
immediately after the close
d. To investigate title insurance AND change the locks
after the close
8. Why is it a bad idea to display family photos during a
showing?
a. Photos with children or young women provide a
target for predators
b. Buyers don’t want to see who lives there
c. Photos give the home a cluttered look
d. Photos are often stolen from homes
9. Is it okay for spare keys to be left on a hook or in a
“junk drawer” when showing a home?
a. No. They clutter the home’s appearance.
b. No. They can easily be stolen.
c. Yes. They provide a “homey” appeal.
d. Yes. If they are clearly labeled.
10. The EPA suggests taking action if the Radon levels in
a home exceed:
a. 4 pCi/L
b. 40 pCi/L
c. 100 pCi/L
d. 400 pCi/L
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3 CE Credit Hours (Approval #564.002258)
Many real estate agents operate in a certain specialty or “niche,” and perhaps with a little thought, many more would take
the time to discover the benefits of carving out a niche for themselves. When agents market themselves as experts in a
certain aspects of the industry, it not only helps the agent, but the client/customer as well. Customers need to know who the
most knowledgeable, experienced professional in the area is. If there is an agent who specializes in the topic the customer
needs assistance with, it is good for the industry if that customer is made aware of that agent. This feature is designed to
help agents identify a niche that they may want to specialize in and to be able to market themselves as an expert so that
all customers are receiving the best care possible by an experienced expert in the industry.
Chapters:
•
Chapter One: What is Niche Marketing
•
Chapter Two: What is YOUR Niche Market
•
Chapter Three: Implementing Your Niche Marketing Plan
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Compare and contrast the mass marketing and niche marketing approaches
•
Discuss the process of thinking strategically about developing a niche
•
Discuss different niches that are available and how they apply to their abilities and interests
•
Discuss the opportunities available in combining niches to target an even more narrow group
•
Explain how being a referral resource could prove to be a valuable niche
•
Explain how social media can help build lasting relationships with clients
•
List some time management tools and the benefits of each
“Really good information on time management and on analysis of operating the business.”
~ Carole
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Chapter One:
What is Niche Marketing?
1908: Harvard Business School opens
1922: Radio advertising commences
1940s: Electronic computers developed
1941: First recorded use of television advertising
1950s: Systematization of telemarketing
1970s: E-commerce invented
How did we go from the Mom and Pop corner store to conglomerate WalMart, Target and other national chains on every corner?
1980s: Development of database marketing as precursor to CRM
Much of traditional marketing practice prior to the twentieth century was
based on rules-of-thumb and lack of information. Since then, information
technology has become the marketing frontier, providing new channels of
communication as well as enhanced means of collecting and analyzing marketing data. As a result, marketing specializations have emerged, especially
sales versus marketing and advertising versus retailing. And of course, our
purpose together here, Niche Marketing.
1980s: Emergence of computer-oriented spam
Starting in the 1990s, a new stage of marketing emerged called relationship
marketing. The focus of relationship marketing is on a long-term relationship that benefits both the company and the customer; a relationship based
on trust and commitment. One of the most prominent reasons relationship
marketing developed was the discovery, referred to as Kotler’s idea, that it
costs the average business about five times more to obtain a new customer
than to maintain the relationship with an existing customer.
1995-2001: The dot-com bubble temporarily re-defines the future of marketing
While relationship marketing is largely held as the impactful stage of marketing, we’ve entered into a new social/mobile marketing era, where businesses are connected to customers 24/7.
Marketing Timeline
Let’s take a stroll through history and appreciate a timeline of marketing
innovation:
1980s: Emergence of relationship marketing
1984: Introduction of guerrilla marketing
1985: Desktop publishing democratizes the production of print-advertising
1991: IMC gains academic status
1990s: CRM and IMC (in various guises and names) gain dominance in
promotions and marketing planning
1996: Identification of viral marketing
2000s: Integrated marketing gains acceptance and the first academic research center for integrated marketing opens
So, how has niche marketing evolved and where will it take us? The segmentation of products and markets has been quietly evolving in business
over the past 30 years. The catalyst for change to a more segmented industry structure has been competition, expense control and the demand for
specialization of business in general. The result is the development of niche
market products and strategies.
Consider: What do you think has been the single most significant contribution to the way business owners communicate to their customers (either on
this list or not)?
What is Niche Marketing?
If you’re anything like most real estate professionals, then you love the fastpaced environment and diversity this career offers you. That being true,
then creating a niche market might sound limiting to you at first. However,
having a niche doesn’t mean you’re not diversified or that you can’t expand
into other niche markets later--it’s primarily about focus.
Real estate niche marketing is not difficult; it just takes some thought. The
old school real estate mindset is that it’s a numbers game. And although
it seems as though you would be more successful marketing to the largest
number of people, the truth is that you will only attract clients who are interested in what you have to offer–your product, your niche. By creating a
niche and targeting your efforts, you can be even more successful than you
would be marketing to everyone.
1450: Gutenberg’s metal movable type (printing press), leading eventually
to mass-production of flyers and brochures
1730s: Emergence of magazines (a future vector of niche marketing)
1836: First paid advertising in a newspaper (in France)
1839: Posters on private property banned in London
1864: Earliest recorded use of the telegraph for mass unsolicited spam
1867: Earliest recorded billboard rentals
1880s: Early examples of trademarks as branding
1905: The University of Pennsylvania offered a course in “The Marketing
of Products”
To do that, you have to create a beginning point. This will be an important
step in getting off on the right foot. Too often business owners create a
laundry list of services they provide, hoping to broaden their market and
expose their potential. Resist that urge. More isn’t always better. At this
point in your business, it’s not what you can do, it’s how well you do it
and how focused you are. Even though you could, would you list all of
the following on your business card: real estate agent, office manager, listing specialist, buyer/seller representative, foreclosure mentor, short-sales
coach, area specialist, marketing expert, transaction coordinator, home
stager, photographer, referral system vendor, administrator, brochure writer,
market educator, resource center, website owner, and so on? With all of that
buzzing around, it’s hard to start your day, much less determine your focus.
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Establish Yourself as the Expert
Example - Wal-Mart
When people want something done, they want an expert, not someone who
just appears to be decent at a lot of things. It doesn’t matter if you are actually really good at all of them. Having a niche allows you to be the “go to”
person in a particular area of your field. For the purposes of creating your
Niche Marketing plan, focus is the key. Remember, you can always expand
and diversify later. Having a focused beginning point, a niche, will make
you more money in the the long term.
You might remember when a visit to Wal-Mart offered lots of options;
shelves were lined with a variety of brand choices in every department.
Nearly every brand imagined was displayed. However, in the last decade or
so, Wal-Mart has developed its own product, “My Essentials”, and slowly,
but surely has begun to reduce the number of competitor products offered
to a very select, SKU-worthy few. Why is that?
Niche Marketing defined: Concentrating all marketing efforts on a small,
but specific and well-defined segment of business. Niches do not “exist”
but are “created” by identifying needs, wants, and requirements that are
currently not being addressed or are being poorly addressed, and then developing and delivering goods or services to satisfy those needs/wants. Simply put, niche marketing, also referred to as micromarketing, is a business
strategy aimed at being a big fish in a small pond, instead of being a small
fish in a big pond. Example - Organic Food
Niche Marketing versus Mass Marketing
Big companies usually equal big and deep pockets, especially when it
comes to their marketing budget. Small businesses typically can’t compete
but still offer equally valuable services. So, whereas big companies might
have their sights set on the “mass market,” also referred to as macromarketing, the rest of us small entrepreneurs realize the key to success is in satisfying the individual and his or her very specific needs. We’ve already defined niche marketing, but how about mass marketing? In
short, it is a difference in strategy. Whereas niche marketing is segmented
focus, mass marketing is the “shot gun” approach, intended to create market
coverage by appealing to the whole market with one offer or one strategy.
For example, most real estate firms focus on all real estate matters, and
even more recently, many are making efforts to be the one-stop shop for
all things real estate; mortgage, closing agents, insurance. Mass marketing
focuses on a wide variety of products to a wide audience with the broadest
message intended to reach the largest number of people possible. By reaching the largest audience possible, exposure to the product is maximized. In
theory, this would directly correlate to a larger number of sales or buy-in
to the product.
Mass Marketing defined: An attempt to appeal to an entire market with one
basic marketing strategy utilizing mass distribution and mass media. These
efforts typically derive from the study of marketing activities, institutions,
and processes from the national (societal) perspective.
Mass marketing is the opposite of niche marketing, as it focuses on high
sales and low prices. Mass marketing aims to provide products and services that will appeal to the whole market. Niche marketing targets a very
specific segment of the market. There will be some examples on the next
few pages.
Example - Proctor & Gamble
Multinational manufacturer, Procter & Gamble (P&G), in recent years divested itself of smaller brands, such as Comet and Duncan Hines, so they
could focus their efforts on higher-yield, more stable brands with more
global appeal. Meanwhile, the big box retailers, such as Wal-Mart, as well
as regional big name supermarkets, are reducing the number of brands they
stock. In other words, these companies took the stance that if you’re not a
top three brand, then you’re not SKU-worthy (SKU stands for stock-keeping unit).
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Also in the last decade, more and more specialty stores have sprouted, and
with great success. For example, Fresh Market, Trader Joe’s and World
Market specifically target two niche markets: a very specific demographic
and hard to find products. Think vegan, gluten free, all natural, local produce and craftsmen. Moreover, even though these companies are national
chains, they advertise to target and even present in appearance the idea that
we are “neighbors serving neighbors.” This marketing concept attracts the
“shop local” consumer, younger generations, community-minded folks, and
those seeking healthier options.
Example - Amazon
Amazon.com is another noteworthy example of a successful niche market. I was surprised to read recently that more than half of Amazon’s book
sales derive from non-bestsellers--these are the obscure titles and small,
unknown authors that show up on its sales rankings at 100,000 or below. Of
course, Amazon.com also sells its fair share of New York Times bestsellers
and other blockbusters, but more than half come from readers who prefer
non-mainstream titles and who refuse to have their tastes limited by what’s
most popular.
Amazon has aggregated many niches, and through that effort has created
a huge and very successful mass business, simply by understanding and
satisfying the individual needs and tastes of a niche market. And with the
expansion of digital media, Amazon has taken its niche market to an entirely new level. Remember back to the beginning of this course when I
mentioned that you could diversify later? Amazon is an example of how
focusing on a small niche market initially can offer an even greater opportunity for growth later.
What do These Examples Mean for You?
So, we’re real estate professionals, not a huge company like Amazon. That’s
fair, but the concept and message is the same -- don’t be afraid of niches.
Embrace them. Even more importantly, the Amazon example compels us
to redefine the very definition of a niche. Be consumer sensitive--find the
“obscure titles” in real estate and the demographic that demands them.
Carving out your niche is clearly a different path to marketing than the “big
bang” or mass marketing approach used by national real estate firms. But
it makes a ton of sense, given the reality of today’s rapidly diversifying clients and their needs. As such, building your business around a collection of
well-positioned “little bangs” can lead to creating your very own “weapons
of mass distraction” from the mainstream.
The Essential Foundation
Sometimes, in order to move forward, we need to step back to the basics
and create a new starting point. As the manager of your business, you’ll
need a plan, a road map if you will, that will help you go from where you
are to where you want to be. I strongly suggest that every business owner
create a thorough and strategic business plan. For the purpose of this course,
we’ll assume you’ve already completed my Strategic Business Planning
course; however, we’ll still need a mini plan to determine and define your
niche market.
houses your clients wish to buy and/or sell will be there with or without
you, but whether or not their needs are met and in a satisfactory and timely
manner, are solely dependent upon your abilities. You should be at the center of your niche marketing plan, because you--your strengths, experiences,
education, reputation, and track record--are the product. Therefore, when
attempting to create your very own niche market, I strongly suggest that
you first review your career history, personality, strengths, and weaknesses. Give consideration to what you have you learned during the course of your
professional career, where you are currently in your career, and how you
arrived there.
Every good plan benefits from past experiences. The key is incorporating
those experiences with the successes of your existing business model, along
with the skills that make you unique. Combine and use this information to
define your future niche marketing plan. Be empowered with your progression and use that progression to define your niche.
To create a niche marketing plan, you’ll need to give thought to various
topics, from exploring your personality to conducting market research,
researching available opportunities, reviewing your current business processes and creating your prospect pool. You’ll also need to ask and answer
plenty of questions. So let’s get started.
Here are a few questions you’ll want to ask yourself:
1. What part of your business do you most enjoy?
2. What parts do you do really well?
3. Where do most of your clients come from and who are they?
4. What sort of real estate product do you find yourself selling most?
Considering your answers to the four questions above, identify 5 niche markets that could be strong possibilities for you.
Now take a hard look at your competition. Who else in your area is focused
on these niches? What do they do well and not so well, and what would you
do differently to set yourself apart from your competition?
What sort of challenges can you anticipate having in each of these niche
markets and how would you overcome them? Establishing a Vision
Establishing a clear vision and understanding of your new niche marketing
business plan, as well as its strengths and weaknesses, can be the difference
between success and failure. Be sure to develop and define a clear mission,
goals, and objectives. Defining your niche marketing plan will most likely
involve more work, especially more creative thought, than you ever expected. However, don’t get discouraged. Think of your niche marketing plan
in two ways. First, imagine that your plan is a creative writing exercise, in
which you can map out the business of your dreams on paper. This perspective will really allow your imagination to guide you and help you visualize
what you want. Secondly, try comparing your plan to a master plan of a
metropolitan area. Your plan, like a city’s master plan, is the roadmap of
future development and defines the look and feel of your community (your
business). Instead of zoning, think marketing styles!
Reviewing History to Establish the Product
When it comes to real estate, the most successful component of your business is you. That is truly what you’re selling--your personality, your ability
to communicate, and shape your clients perspective, you, you, you. The
Whatever you do, don’t create this plan and then file it away and forget
about it. Mapping out your niche market plan also serves the purpose of
allowing you to “make mistakes on paper” before making them in wasted
dollars and time. Mapping out your plan on paper allows you to thoroughly
work through it, by considering the elements, building a strategy, completing research, acquiring resources, and adjusting where necessary. As time
goes on, review the plan and its projections regularly to determine not only
your progress, but also the success of the plan and whether it is necessary to
make adjustments. Your niche marketing plan should be a working document, just like a strategic business plan.
Success Tip: Once you’ve fully developed your plan, share it with a trusted
advisor or consider hiring a business coach. A fresh set of eyes may offer
you invaluable feedback, and at the very least, will affirm that you’ve been
thorough in your thought process.
Strategic Thinking Process
Throughout this chapter, I’ve referred to the niche marketing plan process
as strategic planning. What I haven’t shared is that there is a difference
between planning and strategic planning. While planning is still a very
thorough and detailed process, strategic planning segments the process to
a more methodical platform. The main difference is how information is
formulated, processed, and then implemented, typically with more focus
on business resources. For our industry, compare strategic planning to the
highest and best use of business planning and implementation.
An important element to understanding the nature of strategic planning is to
recognize the difference between strategy formulation and implementation.
Strategy formulation includes the planning and decision-making that goes
into developing a company’s strategic goals and plans. For example:
•
Assessing the environments
•
Analyzing core competencies
•
Creating goals and action plans
Strategy implementation refers to the means associated with executing the
strategic plan. These include:
•
Creating teams
•
Adapting new technologies
•
Focusing on processes rather than functions
•
Facilitating communications
•
Offering incentives
•
Making structural changes
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To be a successful business owner and an effective market leader, it is also
critical to develop strategic thinking skills. The good news is that throughout this chapter we have already been building your niche marketing plan
using these strategic processes. These processes will help bring your business vision, mission, goals and objectives to fruition through team work,
resources and problem-solving. They are also useful in helping any business confront change, plan for and make transitions, and be in a position to
accept new opportunities.
SBA Criteria - Organization
The Small Business Association (SBA) offers five criteria to help you define your ideal outcome through strategic thinking. Each of these will be
discussed on the following pages.
Organization
The organization of your business involves your employees, the organizational structure of your business, and the resources necessary to make it all
work. What will your organization look like? What type of structure will
support your vision? How will you combine people, resources, and structure together to achieve your ideal outcome?
SBA Criteria - Observation: From a Holistic
Viewpoint
When you are looking down at the world from an airplane, you can see
much more than when you are on the ground. Strategic thinking is much
the same in that it allows you to see things from “higher up.” By increasing
your powers of observation, you will start to become more aware of what
motivates people, how to solve problems more effectively, and how to distinguish between alternatives.
SBA Criteria - Driving Forces: Motivation and Focus
Ask yourself, “What are the driving forces that will make my business a
success?” Then answer that question as it specifically relates to:
•
Your company’s vision and mission.
•
What you want people to focus on in your business.
•
How you will motivate others to perform.
•
Individual and organizational incentives.
•
Empowerment and alignment.
•
Qualitative factors, such as results and experience.
•
Commitment, coherent action, effectiveness, productivity and
value.
SBA Criteria - Ideal Position
Working through these first four phases of the strategic thinking process
should help you define your ideal position within your business. Be sure to
critically answer the following:
•
What conditions are necessary to be most productive?
•
What is the best niche market for you?
•
What opportunities may exist either currently or in the future for
your business?
•
What are the core competencies or skills required in your
business/niche?
•
What strategies and tactics will you use to pull it together?
Working through these five areas will help you clearly define and visualize
exactly how your niche marketing goals can be accomplished. Just like
defining your niche, if you focus, your concept will be stronger and more
credible.
Consider: What core competencies or skills are essential to being a successful real estate agent? After you share, consider which of those skills you
can improve upon the most.
Example - Toyota
Success Tip: Seek out and learn from other successful niche seekers. Let’s
look at Toyota as our example:
SBA Criteria - Views: A Different Mindset
When solving a problem or preparing for change, a view is simply a different angle to consider.
There are four viewpoints to consider when forming your business strategy:
•
Environmental view
•
Marketplace view
•
Project view
•
Measurement view
These viewpoints can be used as tools to help you think about outcomes,
identify critical elements, and adjust your actions to achieve your ideal position.
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Toyota, a huge company with a global focus on the auto business, is an excellent niche marketer. They were one of the first companies to realize there
was a group of car buyers who would be very interested in environmentally
friendly cars. Toyota answered this need with the development of the legendary Prius, the first mass produced hybrid car. Where other car manufacturers saw Toyota taking a huge risk, Toyota saw it as an opportunity to
identify a new niche and establish its brand in that niche. In marketing, it
is often the first brand to market, if executed successfully, that can own the
niche market with their brand.
Once Toyota took the plunge, it pursued an effective niche marketing plan.
It didn’t promote the Prius in just any media. It focused on media outlets
that were watched, read or listened to by people concerned about the environment. For example, it heavily promoted the car through environmental
groups and their publications. As the only game in town at that time, Toyota
not only dominated the niche, it was the niche. Today, with increased competition in this niche market, the Toyota Prius is still highly regarded as the
niche’s leading brand.
Simply identifying holes in the market and filling them is often times not
enough. It takes extensive research, careful planning and execution, and
extreme aversion to risks to successfully develop, introduce, execute and
dominate a niche market with a specific product or service.
Consider: What are some niches out there in the real estate market? Which
ones are most in need of qualified professionals to jump in and fill the void?
Which ones are saturated with competition?
What Now?
Before we move onto the quiz, let’s look at a summary of what was discussed in this chapter and how you can apply it.
Establishing yourself as an expert in a niche can be huge for you and the
potential customer. Remember the example of a business card with a ton
of “specialties” on it. Think about the customer’s perspective. The person
with the wordy business card may be saying, “Yeah, I’ve done a short sale
once or twice. I’m experienced. That’s going on my card!” But, if you’re
an expert in the short sale realm and that’s your niche, you need to make
people aware of that. You need to get them thinking, “Hmm, this guy over
here listed short sales as something he’s good at. But, this guy specializes in
short sales. It’s his bread and butter. We’re going with him.” It just makes
sense! Ultimately, you’re doing the customer a HUGE service by making
them aware of your expertise.
Once you figure out your niche (or maybe you already have one), you will
need to get a feel for the need of that niche in your market. There will most
certainly be a need for you niche, but you must find out how that niche is
already being served by others. What are they doing well? How can you top
them? Remember, you’re the expert! No one knows that niche better than
you. So, no one should have better insight on how to serve those customers
than you do.
Lastly, sometimes less can be more. Mass marketing can be, and often is,
effective, but niche marketing has potential for you to tap into a specific
area of the market and clean up! Hypothetically, with a mass marketing approach, you may be hoping to get 1% of short sales, 1% of listings, 1% of
buyers, etc... But with a niche, you’re aiming to get the majority of a certain
type of customer by becoming the go-to agent in that niche. You can still be
involved in other aspects of the industry, but you own that area.
Marketing Plan is the roadmap to the future growth and success for your
business.
As discussed earlier, a great way to discover possible niches is to write out
your interests, your skills, strengths, connections – your sources; family,
friends, classmates, referrals, expiree’s, FSBO’s, asset managers, etc. Since
our goal is to grow your business, first identify the primary source of your
current business, be specific and break it down. For example, if the majority of your business comes from listings, but those listings were referred,
then referrals would be your source. Then, make a list of all the things you
really enjoy about real estate, and all your strengths in this business. Again,
be specific. Ok, so now what? Well, now try different ways of combining these connections, your strengths, into a problem you would enjoy helping your clients solve. Then compare that with your market research and competition.
There’s your niche!
You’ll find that discovering your niche and building your business around
that core product, to include yourself as a product; will be a very freeing approach. It really gives you permission to focus on the parts of your business
that you enjoy most, and channels your strengths, but most importantly it
focuses your daily efforts.
Let’s get specific. The next 18 pages will consist of examples of Niche real
estate marketing opportunities.
For Sale by Owner Properties
Don’t discount the for sale by owner property as not worth your time. These
sellers will, in many cases, find that they really don’t have the ability to
successfully market their home and will decide to list with a real estate professional. After all, our profession was established and continues to thrive
because there is a need – so get out there and show them! Structure a marketing plan around helping these sellers to learn what they need to know to
market their property and they will frequently see the complexity of the task
and make a decision to list with a real estate professional. If you’ve been
their adviser, you’ll likely get the business; you, the FSBO Niche Marketing expert.
Consider: What did you read in this chapter that you can apply to your business? Anything you will start doing? Anything you will stop doing? Chapter Two:
What is YOUR Niche
Market
Defining Your Niche Market
Defining and properly marketing your niche is the key to developing a profitable business, especially in today’s market. If your business is to survive
and prosper, taking the time to identify your purpose, plan, develop your
Niche Market and to define what differentiates your business from your
competitors will be a key component to your success. Remember, a Niche
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Resort and Vacation Homes
Condominium Buyers
Nationally, there has been a huge growth in the number of condominiums in
the last decade. In some cases, the owners are investors who wish to rent it.
This provides another area in which you can be the expert helping them to
select the most rentable properties. It can also lead to referrals to management firms or to your own business.
Property Management
If you’re lucky enough to live in an area that appeals to vacationers and
those looking for getaway properties, this can be a very successful niche
market for you. Even in a down economy people see the value in vacation homes as income opportunities. Families and friends are combining
resources to buy these properties, plan their vacations and then turn the remaining weeks for profit. With most of the prospects coming from outside
the area, a good internet marketing strategy can position you as the area
expert and cut down significantly on the competition. Providing usable
information to out-of-area buyers will get your business, and at some point
they’ll likely be your sellers also.
Single Home Buyers
With almost 90 million unmarried and single Americans, this is a group you
just cannot ignore. 55 Million households are headed by unmarried individuals. Women make up about 54% of this group according to the Census
Bureau. Real estate professionals that can embrace the differing needs of
these heads of households will surely find a wealth of opportunity.
An agent can make a very nice living managing short and long term rentals
for their clients. Within some offices, cooperative marketing has been done,
for example with a vacation home buyer agent and a management agent
working together. A vacation home buyer may want to use the property
only part time and rent it out for income when they aren’t there. Or perhaps
consider partnering with agents, even of multiple firms, who have vacant
listings with more than 200 days on market, and guaranteeing them the
professional courtesy of returning their client when they are ready to re-list.
The Internet Buyer
This is a strategy that has been very successful, especially in markets with
a high percentage of technology savvy buyers or those relocating from outside the area. With more than 70% of internet buyers indicating that they
ended up working with the first web agent that contacted them, you can see
the potential. Moreover, consider being creative in how you present these
properties to your prospects to save them time and effort by previewing the
property and providing a video of the home and area.
Baby Boomers and Seniors
Different income considerations, as well as sometimes special housing requirements, make this group a great niche market. Determine their needs
and develop marketing and services that are tailored to them. Look into the
SRES® Designation (Seniors Real Estate Specialist) to position yourself as
a specially trained professional serving the needs of this age group.
Luxury Homes
The luxury home niche looks quite inviting, with the high home prices usually generating correspondingly high commissions to the agents. They do
result in a higher per-transaction commission, but don’t think that there
isn’t some trade-offs. Luxury homes require special marketing venues that
generally require a larger investment on the part of the listing brokerage.
Overall, the percentage of net profit after marketing can be similar to lower
priced homes. It’s a great niche for some though.
First-Time Buyers
First-time buyers are new to the entire process, with anxieties about financing, inspections and just about every facet of the transaction. They want and
need our help. It’s a great feeling helping them into their first home, and this
niche market is a large one. Develop marketing and transaction information
materials that will help them to understand the process and view you as the
expert they need to carry them through it. They’ll be a huge source of future
repeat business and referrals.
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Combining Niches to Find Your Perfect
Marketing Strategy
Take any two or more of the above specializations and combine them, if it
works for you. You could be an Internet Buyer Agent specializing in Farms
and Ranches. Or perhaps you’d like to serve only sellers of high-rise condos
in the city. It’s your business and your success.
A few other Niche Markets to consider:
•
Investors seeking income producing and/or small multi-unit properties.
•
Handicap accessible properties.
•
Golf communities or other hobby related properties.
•
Farmland and acreage. Country living. Off the Grid living.
•
Waterfront properties and or properties with boating access.
•
Parents of college students looking to buy verses pay for on or off-campus housing.
•
Commercial real estate, in itself is a Niche Market, but can even be broken down into several more segments.
•
Short-sales, foreclosure and other distressed properties.
•
Divorce and Estates.
•
Executive temporary furnished housing.
Referral Resources as a Niche Market
Ok, so we’ve defined several different real estate tracks above that could
be viable Niche Market for you, but how about we consider referrals as a
Niche Markets themselves.
Although 84% of clients are comfortable referring friends and family to
their adviser, only 29% actually do, according to survey results from Julia
Littlechild in Anatomy of a Referral.
So how can you ensure that your clients find the opportunity to bring you up
in conversation? Yep, you got it, Niche Marketing!
President of The Client Driven Practice coaching firm, Stephen Wershing
says:
“A niche is not a demographic, a niche is a need.” By forming a niche,
Wershing says clients will be able to recommend you when they hear
friends, family or colleagues, with a specific problem. More importantly,
a problem you’ve created a solution for being becoming the expert in
that Niche. So rather than a broad “he’s really nice” comment, the
referral can say “he specializes in helping clients in divorce situations
and can best guide you in this process.”
John Anderson, head of practice management at SEI Adviser Network
in the US, says “the more you remind clients of the value-add and
specific solutions you provide, the better they’ll be able to describe
what you can do for other people.”
Options for Referral Resources
Accountant’s: These local number crunchers have clients that very often
need to invest in tax-friendly solutions, such as real estate, or even those
who need to liquidate their real estate assets for one reason or another.
Attorneys: Family law attorney’s make great referral sources as they often
manage divorce situations where their clients need to sell their current home
and perhaps buy two separate homes. Or perhaps an Estate attorney dealing
with estates that need to sell their real estate assets to finalize probate.
Medical Professional’s: Admittedly this is a very difficult group to infiltrate; however, doctors are great referral sources. Consider building a relationship with your local hospital physician relocation and/or public relations department to get your foot in the door. Market yourself as the expert
for busy executive professionals.
Corporate Recruiter’s/Human Resource Manager’s: Perhaps your local
market is home to large corporations, plants or other organizations that have
a direct line to employee’s moving in and out of the area. Find and build
a relationship with the folks at the head of these departments and sell your
executive relocation services.
Non-Profit’s: This one is my personal favorite. Not only is it a Niche
Market, but it’s an opportunity to give back to your local community. Visit
some of your local non-profit organizations and introduce yourself as their
community advocate. Offer to sponsor their organization for the year, and
as such you’ll donate a portion of your net real estate commission for every
closed transaction to their organization, and you’ll do so in the name of your
client. Offer to do some cross marketing efforts, host their social events at
one of your listings – a Community Open House. Check with your
tax professional, but I believe this would provide an attractive business tax
deduction.
Success Tip: Receptionists are the gatekeeper’s, make nice and they’ll help
you get your foot in the door.
Combining Niches
Let’s go one step further. How about we get even more specific and combine two of the above Niche Markets? For example, perhaps your Niche
will be selling condos to parents of college students who were referred to
you by the campus admissions office.
Although we’ve yet to discuss how to Market your Niche, take a minute to
consider marketing strategies for this Niche example.
•
What is the best way to get your foot in the door with the Campus
Admissions office?
•
How do you target the parent, your client, but cater to the student?
•
If you must be neutral between the College, the parent and the
student, what is your brand?
•
How will you build a database of these college friendly, safe, yet
affordable properties?
•
What qualities and experience must you possess to seamlessly
execute these relationships and goals?
These sort of questions will need to be asked and answered at every step
of development, from planning to implementation. Doing so will help you
determine if a particular Niche is a good fit for you. Speaking of “good fit”,
let’s talk research.
Developing Your Niche Market
So how can your small business dominate your own niche market? Concentrate on these four basic concepts for niche marketing success:
1. Unique product or service.
2. Marketable product or service.
3. Choose a niche market that’s available.
• Niche markets by virtue tend to be smaller, leaving very little room for competition.
4. Market, market, market.
• Marketing is the most important component for niche market, and needs to target exactly the right kind of customer/client.
You can try to be an expert in many phases of real estate, or you can specialize in a niche market and become the authority in that market. There are
many highly successful real estate agents and brokers that have narrowed
their real estate marketing niche to focus on a specific geographical area, a
type of property or a category of consumer. Recognizing the opportunities
that are out there and selecting a niche that appeals to you can be a lucrative
strategy.
While location is the most obvious divider for real estate, perhaps your
niche involves other factors. You can target specific property types, such as
income properties, condos, waterfront homes, luxury homes, or new developments. Perhaps you specialize in different demographics such as Spanish
speaking clients, senior citizens, empty- nesters or first time buyer’s.
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Figure out not only who has a need for your product or service, but also who
is most likely to buy it. Think about the following factors:
•
Age
•
Location
•
Gender
•
Income level
•
Education level
•
Marital or family status
•
Occupation
•
Ethnic background
Also consider the Psychographics of your target Niche Market. Psychographics are more personal characteristics of a person, including:
Remember, the goal here is to capitalize on your passions and interests so
that you can make money doing something you enjoy, while providing a
service that solves a problem for your clients. Don’t short change yourself
by short cutting the process. Although research is boring and typically not
a strength for those with a sales mindset, it is a necessary evil to this success
strategy. Not to worry, in this chapter I will provide you with some very
powerful research resources and tips.
Defining your Niche Market is only part of the equation. Now we must
gather and correlating the research with your strategy will also help you
target your efforts and build your brand. Think of it as building an argument
for why the Niche you’ve chosen won’t fail.
Here are some research suggestions and a few questions to ask and answer:
•
Personality
•
Attitudes
•
Is there sufficient demand for your niche? Why?
•
Values
•
•
Interests/hobbies
•
Lifestyles
•
Behavior
What makes your business different from the competition? Create your own Unique Selling Position (USP). Study your
competition to find out what they emphasize about their product. Then decide on something that will make your business unique
from the others.
•
Perform a keyword search for your niche on the internet. Make
sure you break down your niche concept into other keywords and
search again. Review and evaluate your findings and the impact
on your business.
•
Consider using a wordtracker tool to see how many people are
searching each month on keywords related to your niche.
Once you’ve decided on a target market, be sure to consider these questions
designed to best help you evaluate your decision:
•
Are there enough people that fit my criteria?
•
Will my target really benefit from my product/service? Will they
see a need for it?
•
Do I understand what drives my target to make decisions?
•
Can they afford my product/service?
•
Can I reach them with my message? Are they easily accessible?
While we want your Niche Marketing Plan to be specific and focused, don’t
break your target down too far. Determine how your product or service
will fit into your target’s lifestyle. How and when will they use the product? What features are most appealing to them? What media do they turn
to for information? Do they read the newspaper, search online, or attend
particular events?
A well-defined Niche should consist of people with the same specialized
needs that you offer. You should be able to provide a compelling reason for
individuals in this group to do business with you instead of your competition. Also make sure that the target group is large enough to sustain the
volume of business needed to meet your financial goals.
Success Tip: Remember, a narrow sales focus is one of the most powerful
marketing tools.
Niche Market Research
Once you have a list of possible niche topics, you need to see which ones
are selling online. The goal is to eliminate risks by narrowing successful
Niche strategies. By analyzing markets correctly, you’ll discover where
money is already being made, and you’ll substantially increase your potential for success by weeding out the dud markets, and ensure that you’re
spending time on profitable niche markets. There’s nothing worse than
spending a lot of time, energy, and money on a market that has no potential
for sustainable, long-term profits.
Another reason to do the research; “If you don’t know your customer, then
you don’t know your business.” says Robb Mandelbaum, author of How to
Conduct Market Research, Inc.com. He continues to say that “because it’s
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so hard to hang on to customers you don’t know intimately, you will forever
be chasing new ones.”
Here’s an example: according to overture (at the time of writing
this course), the keyword phrase “camping equipment” was
searched 76,164 times in one month. If you do a search on
Google.com for camping equipment you will find 1,610,000 web
sites show up. That’s a lot of competitive.
•
Consider giving a survey to the public about your niche. Ask
questions specific to your product/service. Keep it short, but
allow them an area to write in their thoughts. Make sure you
survey the proper target group for your niche. Consider offering
a survey incentive like winning a gift card.
How to Find Out What People Want
Now for the research; where do you go to figure out what people want? Fortunately, there are a number of websites and resource centers that make
answering these questions very simple. Hit the internet and search trends;
you’ll find a number of resources that publish weekly, monthly, and annual
trends; interest comparisons, top lists and market research reports. And
in great detail; you can even find various online services that publish the
number of times keywords and phrases are searched over any given period
of time.
Here are a few market research sites and services suggested by Rosalind
Gardner, a blogger, speaker and Internet Marketing consultant, best known
for her “Super Affiliate Handbook”:
•
Google Trends lets you compare the world’s interest in your chosen niche markets. For example, I entered ‘coffee’ and ‘tea’ and
discovered some significant spikes in the interest in coffee (shown
in the graphic below). This site allows you to enter up to five topics and see how often they’ve been searched for on Google over
time. It also displays how frequently your topics have appeared in
Google News stories, and which geographic regions have searched
for them most often.
Google’s Insights for Search lets you compare search volume patterns across specific regions, categories, time frames and properties. Check out the examples of how you can use Google Insights
for Search accessible from the homepage – you can go DEEP with
this one!
Tools to Strategically Analyze Research Data
•
Magazines.com lists their 10 Top Titles on their homepage. At the
time of writing, these included Sports Illustrated For Kids, Time,
People, InStyle, Woman’s Day, Money, Newsweek, Sports Illustrated, Women’s Health and Disney Adventures. So what topics
do we see there? Sports, general news, women’s issues, fashion,
kids and finances.
Situational Analysis is an understanding of your business’ external and internal situation. It is a common-sense approach to organize, provide and
consider relevant information. The purpose is to offer a formula that will
help you process information so that you can make decisions and take action accordingly.
•
EBay Pulse is a daily snapshot of current trends, hot picks, and
cool stuff on eBay, listing popular searches, largest stores and most
watched items. Although eBay Pulse page shows an overview of
the entire eBay marketplace, you can use the drop-down menu to
refine and filter the lists to show content for specific categories on
eBay.
Situational Analysis: Overview of What it Is
•
Yahoo’s Buzz Index focuses on the entertainment industry, providing their most popular searches on a daily basis for actors, movies,
music, sports, TV and video games.
•
comScore Networks provides insight into consumer behavior and
attitudes by compiling reports based on a global cross-section of
more than 2 million consumers who have given comScore explicit
permission to capture their browsing and transaction behavior, including online and offline purchasing.
•
JupiterResearch provides research, analysis and advice to help
guide technology vendors and service providers on market opportunity. Guest access is available, however, to quickly gain access
to salient sections of recent Jupiter Research reports, try Googling
“jupiter research ____” (_____) being the name of the topic you
wish to study.
•
•
•
•
Amazon best sites for doing market research. Search any of their
departments, i.e. books or baby or and you’ll see either a link for
Bestsellers or Top Sellers as well as:
•
Hot New Releases
•
Most Gifted
•
Most Wished For
•
Movers & Shakers
Google Adwords Keyword Tool is also a free tool that reports on
search performance and seasonal trends on keywords and keyword
phrases that you enter into the search box. Statistics show the relative amount of users searching for that keyword on Google.
WordTracker shows you exactly what people are looking for online by showing you exactly which keywords and phrases they’re
searching for. Wordtracker’s suggestions are based on over 330
million keywords and phrases that people have used over the previous 90 days. Although WordTracker offers a free trial, I recommend that the week-long pass for $27.59 is really worthwhile if
you want to do justice to your market research!
Regardless of the Niche you select for your business, use the sites recommended above to find out how much of a potential market exists BEFORE
you make the leap to implementing a marketing plan. A Niche Marketing
plan that hasn’t been properly and thoroughly research is like listing a home
with performing a CMA, or worse, based on Tax Assessment alone.
The process so far has presented a lot of questions, required a ton of research, so now what? Now, you’ll need a strategic formula to process the
data and make strategic decisions.
•
Analysis of Customer’s needs, resources, other relevant
information
•
Mapping of all products in the marketplace.
•
Plotting of Competitor’s positioning.
•
Charting of competitor’s potential future actions.
•
Determination of strategic Collaborators.
The Five C’s to Analysis
One commonly used formula is called the 5 C Analysis; company, collaborators, customers, competitors and climate. This formula focuses on these
five key areas which are critical to any business’s situation.
•
Customers: market size and growth, market segments, customer
benefits (tangible and intangible), motivation, decision maker,
retail channels, consumer information sources, buying process,
buying frequency, quantity, and trends.
•
Climate: (macro-environmental): political & regulatory,
economic, social/cultural, and technological environment.
•
Competitors: actual or potential, direct or indirect, products,
positioning, market shares, strengths and weaknesses of
competitors.
•
Collaborators: distributors, supplies, and alliances.
•
Company: produce line, imagine in the market, technology,
experience, culture and goals.
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A six key area was added later:
•
Competitive advantage: competitive advantage, determination of
your core competencies, analysis of which core competencies
can become competitive advantages, and calculation of how a
sustainable competitive advantage can be constructed.
SWOT Analysis
you actually like what you’re doing. If you’re the square peg, don’t try to fit
yourself into the round hole!
We went over several potential niches in this chapter, but don’t limit yourself to the ones listed in this course! You would be selling yourself short.
Also, don’t be discouraged if you’re having trouble finding peers in your
desired niche. While it may be encouraging to search Google for people
who have had success doing what you want to do, finding no success stories
may just mean that no one has done it quite right and you have no competition!
Here’s an exercise you could do on your own:
Take a sheet of paper and start writing down every aspect of your job that
you enjoy. Why did you start in real estate? What is keeping you in the
profession? What type of listings or activities do you get excited about?
Just start an all-out brainstorm. Then, take a look at your list and find out if
something on your list fills a need in your market. If you got a large chunk
of the business associated with one of those items (which is ultimately the
goal!), will there be enough there to make the endeavor worth your while?
You might have to cross off items like “making money,” because it’s hard to
say how one could possibly make money by making money.
In the next chapter we will discuss how to implement a niche marketing
plan. So, circle those items and have them in mind when you start the next
chapter.
Chapter Three:
Another commonly used formula is the SWOT analysis. Same purpose at
the 5 C’s, however, it evaluates the Strengths, Weaknesses, Opportunities,
and Threats involved in a particular project or business venture. It involves
specifying the objective of the project or business and identifying the internal and external factors that are favorable and unfavorable. See diagram
on the right.
•
Strengths: attributes of the business that are helpful to achieving
the objective(s).
•
Weaknesses: attributes of the business that are harmful to
achieving the objective(s).
•
Opportunities: external conditions that are helpful to achieving
the objective(s).
•
Threats: external conditions which could do damage to the
objective(s).
Formulating and mapping out information in this format will simplify the
decision making process by determining not only whether the objective is
attainable, but if it’s in the best interests of your business. If it wasn’t, then
you’d select a different scenario or objective and repeat the process.
What Now?
The quiz is coming up next, but first here is a quick summary of this section
and some points to ponder.
Choosing your niche shouldn’t be stressful. Actually, it should be fun! After
all, you should just be taking something that you are passionate about and
using it to take care of others. When choosing your niche, first consider
what those things that you are passionate about are. Then figure out how
that passion fills a need in the market. It’s important to start with something
you enjoy, because the expertise will come much more naturally if
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Implementing Your Niche
Marketing Plan
How to Market a Niche Effectively
Now that we have an understanding of what niche marketing is, the benefits
of incorporating it into your business, your areas of strengths, and possible
niche markets for you to explore, let’s discuss implementation.
How do I market a niche? Real estate niche marketing begins with your
website. This is where you should brand yourself as the local expert in your
niche and blog about topics of interest to your target market. But it doesn’t
end there. Post links to your niche-focused web pages on all of your communication channels, including Facebook, LinkedIn, Twitter, WordPress,
YouTube, Craigslist, email drip campaigns via Constant Contact, and snail
mail to your sphere of influence.
Creating a niche-specific website is very effective. When assembling your
website, be sure to use your niche-specific key words. Specific key words
will help direct your next potential client to you when they utilize a search
engine to locate services or businesses within your niche. In short, stick to
words relevant to what it is that you are marketing. However, the larger
the niche, the more difficult and expensive it becomes to manage when you
consider the cost of online advertisements. Do not forget to make sure your
website is mobile-friendly and viewable.
Also, remain aware of your online resources in regards to the potential
growth of other marketers within your niche. It is very possible that your
niche has become the same niche of countless others, creating an overgrowth of competition and challenged revenue.
Another great resource for marketing your niche is to seek out major real
estate websites, such as Zillow.com and REALTOR.com, and establish your
free agent profile. Did you catch that word “free”? You’d be surprised how
many free or very affordable resources are available that you might not be
tapping into. I would also suggest that you go one step further and consider
paying for an enhanced agent profile on any of the major syndicated sites
for increased visibility. Make sure your bullet points highlight your niche
services and link back to your niche website, social media outlets, and blog.
Further in this chapter, we’ll discuss how to partner with your vendors as an
extension of your team. However, for the purposes of implementing your
niche marketing plan, let’s start with asking your vendors to highlight you-your niche website, your blog and your brokerage--in their blogs and websites. This creates a win-win for you both by providing fresh content and
highlighting successful relationships and exposure for your niche. Consider
doing a guest feature with video.
Despite their popularity, some of these media outlets might be new to you
and perhaps a little intimidating. Don’t let them be. These free and inexpensive outlets are exactly what you need to market to your niche audience.
If you really struggle and the thought of social media and marketing make
you that nervous, then farm out the work. There are virtual assistants, social
media consultants and even local college students who would welcome the
opportunity to lend you their web skills.
Whatever you do, don’t miss an opportunity to share. Be sure to that everyone you contact knows your area of expertise. Get out there and network.
You are now a walking billboard, more than ever, and your niche sets you
apart. Once people know that your site offers an effective way to stay upto-date on the type of property listings they want to see, they will come
back over and over again until you sell them the perfect home. Real estate
niche marketing can be what sets you apart from the big guys in web traffic
and sales.
As real estate expert Scott Allen writes in ”Success Guide for Real Estate
Sales,” real estate agents often become so wrapped up in the daily tasks of
servicing clients that they forget to focus on developing future business.
Allen points out that for these individuals, “Their success is limited by the
number of hours in the day and/or the number of leads they get lucky to
come across.” On the other hand, agents with a marketing plan will generally see more robust sales and personal satisfaction over the long term.
And finally, don’t forget to be specific. As an example, let’s consider the
byline you might use on your website. “Arranging Richmond, Virginia
Real Estate Opportunities” will have a much harder time sticking out than
“Expert in Downtown Shockoe Bottom Metro Homes.” The former ad line
cannot hope to compete with much larger, more established real estate firms
who have big firm dollars and countless marketing tools at their disposal. However, the second focus has a clear message for potential buyers--this
person specializes in downtown Richmond metro homes in Shockoe Bottom. As buyers generally zoom in on the neighborhood they’d like to live
in, the second marketing approach will attract more leads. So, don’t be
afraid to be specific, very specific. After all, it’s your niche and you are the
area expert.
Social Media as a Niche Marketing Tool
The shifting market has forced an uncomfortable reality on real estate
agents: innovate or fold up shop. Marketing real estate used to be a ground
game. Just stick up your sign and wait for the phone calls to pour in, right? Well, that is not the “sign” of the times currently, and frankly, I for one,
hope it never is again. Our industry needed a good flushing, and these
“hard times” have required those who weren’t taking real estate as a serious
profession, especially those less than ethical folks, to pack up and ship out.
Some might say that business is harder to come by, but I disagree. I find that
we just need to get creative...so let’s get going!
We’ve touched on social media throughout this course, but let’s dive in
a little deeper. One real estate marketing tool that many thriving agents
swear by is social media. Facebook, Twitter, LinkedIn, YouTube, Pinterest
and other social media sites are now crucial ingredients in marketing. Real
estate is no exception.
Let’s discuss how real estate agents are using social media to sell properties,
using the most inventive and effective ways. First, though, let’s consider
why social media is an effective tool.
Friends of Friends of Friends
Social media is an excellent real estate marketing tool for not only targeting
your reach, but also expanding it. Social media sites make it easy for people
to share information with their friends. For example, if you post a customized video listing to your 300 Facebook friends, and a couple of them post
it to their 300 friends, you’ve just tripled your reach.
However, the real power of social media as a marketing tool is that it is both
far-reaching (you can post a public message to your board) and targeted
(you can send a message to just those people who might be interested). As
in many industries, marketing real estate is about getting your message in
front of the type of people who are most likely to be interested. Why go
door-to-door with your message/product, when you can have the people
specifically looking for your product knocking on your door?!?! Recently, for example, I sold a home to a buyer (let’s call him Mark) that
was a friend of a friend (who we’ll call John) via Facebook. I had never met
or spoken to Mark, and my friend John had only chatted with him online
because they had several football friends in common. But because I had
posted a listing via Postlets on my Facebook page, it appeared on John’s
page, which Mark saw and BAM! a connection was made. Mark reached
out to me and asked me to help him with his search. The best part about this
story, aside from earning a lifelong client and commission, is that I didn’t
have to spend a single dollar, not one, to find this client. Facebook is free. Postlets.com is free.
Social media allows users to share stories with everyone they know or just
a few specific people they think might be interested. And now with Facebook’s promote and target market shares, we’re taking things to a whole
new level of direct marketing. Make sure your reach is expanded, and think
6 degrees of separation.
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Page vs. Timeline
The first step in using any social media site as a real estate marketing tool is
setting up a company profile/page. LinkedIn recently joined with the market leader Facebook, allowing users to create a company profile.
Once you’ve built your company profile/page, it’s time to participate. Rather than seeing social media as a one-way conversation, like most advertising, it’s important for you to see it as a two-way street. Be sure to provide
helpful information, encourage users to ask questions, leave comments, and
make suggestions. Schedule at least 30 minutes on your calendar every day
to interact and respond. However, don’t make your page all about business-be personable, share your thoughts and your hobbies, be real. Allowing
followers to connect with you beyond what you do for a living can make
them feel vested in your success.
In addition to posting your listings, provide expert information for your prospective clients. For instance, if one of your clients recently asked a question about closing costs, you could post a quick video response or provide
them with a blanket net sheet. This user-centric approach will keep visitors
returning to your page for ongoing advice. Become the resource center for
all things in your niche market.
Syndicating Your Niche Marketing Online
There are many free or affordable resources online that can help improve
your online image and syndicate your information and listings. Let’s examine four of these resources:
•
•
•
•
Postlets.com: Postlets is a free tool that makes advertising
properties across a variety of sites quick and easy. Effortlessly
send a listing to several online real estate sites, upload classified
sites with generated HTML codes, and take advantage of social
media marketing all at one time on one site. You can choose from
a variety of professional looking flyer templates and brand them
with your photo and logo.
Virtual Tours: This is a great way to present and market your
listings with a “wow factor” for sellers. My personal favorite
virtual tour product is TourFactory.com, but there are a variety
of products out there, some even free, that you can use. Some of
my favorite virtual marketing features are the presentation, agent
branding options, free agent website and syndication to dozens
of top real estate marketing websites, including REALTOR.com.
The seller statistics, which is a great tool to show the progress
of your marketing, is also fabulous for developing and adjusting
your pricing strategy.
REALTOR.com: Even if you’re not an enhanced member of
this site, there are still a lot of great and free resources available
to you here. However, since nearly 90% of all buyers search
online before even contacting a real estate agent, you might want
to consider this marketing engine a valuable investment tool for
your business.
Pay Per Click (PPC) ads: Anytime you’re in a business with a
specific customer niche, pay per click advertising is a must for
success. With Facebook PPC ads or Google Adwords, you can
tailor your ads so only very specific demographics, your niche,
see them. Each click represents an interested candidate for your
tools. If you don’t work within a niche market, PPC can get very
expensive, whereas the opposite is true if you’re trying to attract
a tailored list of people to your ads.
These are just four examples of helpful tools for marketing your real estate
niche. Using such websites to create and distribute content ensures listing
information is consistent across the internet and you’re branding yourself
as the niche expert. Furthermore, online listings and tour videos are easy
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to post all over the web, from Craigslist to Facebook, LinkedIn to Twitter.
You’ll find that your social media followers are more likely to share such
rich, interactive content, than simple plain text. To successfully market real
estate with social media, keep searching for online tools that allow you to
create engaging, sharable content and that help set you apart!
Before we move on, here are three quick helpful tips from Susan Freidman,
author of “Riches in Niches: How to Make It BIG in a Small Market”:
•
“People pay more for services from perceived ‘experts’ than
generalists.”
•
“Credibility occurs when you’re visible in your ‘niche’ industry,
community or geographic region.”
•
“Marketing is less complicated and expensive when you target
niche markets or client profiles.”
Consider: Do you use any of the four tools listed? How do you feel about
them? What other tools are out there?
Benefits of Niche Marketing for You and Your
Clients
Now that we’re nearing the end of this course, I want to focus on how
implementing the previously-discussed concepts into your business will
better serve you and your clients. I also want to introduce a few additional
management concepts that will help you effectively manage the new business you’ll bring in.
Whether you are just getting started as a sole proprietor or owner of a wellestablished brokerage firm, it is important to plan for and examine how you
build and run your business. For new businesses, build a foundation that
allows you to think and grow big; lay the groundwork for growth now. For
more established businesses, this shift in our industry might already have
you considering big changes in company objectives and focus. This chapter
is composed of thought-provoking tools that will hopefully have you asking
and answering these questions.
The foundation of being a self-employed real estate agent is essentially the
same as any other business--managing an office, creating internal office systems, dealing with human resources, overseeing sales and transaction systems, managing staff and vendors, marketing, accounting, etc... So whether
your career path is simply managing your own book of business, managing
someone else’s business, or opening your own firm, the management concepts in this chapter will provide you with a framework for success.
The Pareto Principle - 80/20 Rule
Throughout this course, we’ve touched on finding and focusing on your
strengths. This strategy derives from the 80-20 rule, also known as the Pareto Principle, Pareto’s Law or the Law of the Vital Few, which states that,
for many events, roughly 80% of the effects come from 20% of the causes.
To help you better understand and implement this concept into your business, allow me to introduce Steven D. Strauss, a lawyer, author and speaker
who specializes in small business and entrepreneurship. You might recognize him for his latest book, The Small Business Bible.
Steve explains that the 80-20 rule in business says 80% of your profit comes
from 20% of your customers. But the idea is a bit more complicated than
that.
The truth is peaks and valleys occur because when we’re busy doing the
work (managing the pipeline), we’re not busy creating the work (filling the
pipeline). Therefore, when you take time from prospecting and redirect
your focus to managing the transaction, your business shifts from a peak to
a valley. Suddenly, you find yourself in this vicious cycle of work, work,
work and manage, manage, manage.
Well, it’s time to break that cycle by implementing a niche marketing plan,
as well as the other strategic concepts discussed in this course. Before we
wrap up, we will look at a few key management tools.
Key Management Tools for Success
Some background: The rule of 80-20 was first stated in 1906 by Italian
economist Vilfredo Pareto, as Pareto observed that 20% of the Italian population owned 80% of the wealth. Since then, the 80-20 principle has been
applied to other scenarios, such as:
•
0% of your time creates 80% of your results
•
20% of your inventory takes 80% of your space
•
20% of your suppliers account for 80% of your stock
The essential idea is that only a few things are responsible for the vast
amount of your productivity and results. Think what an amazing insight
this can be for your business.
If you have five things to do today, the 80-20 rules states that only one of
those will be vitally important; the other four will be much less so. Figuring
out which one is most important can not only go a long way to making you
far more effective, but it can also yield amazing results.
To create truly spectacular results, consider applying Pareto’s Principle, judiciously, across the board. Steve provides us with the following examples:
All this new business you’ll be attracting is great, but what good is bringing in new business if the systems and processes are not there to effectively
and efficiently manage them? Not to fret. There’s good news ahead. When
implementing a strategic niche marketing plan, there are key steps you can
take to help minimize the peak and valley cycle and maximize your success.
The following pages will introduce these critical steps.
Management Tools - Systems
One sure fire way to jam up the pipeline, and to keep your business from
running smoothly, is not having the proper systems in place. There are
hundreds of systems out there, some free and some costly, that can help you
stay in front of and manage your relationships and transactions from the
initial introduction to beyond closing.
Invest in your business foundation and take the time to get your systems in
place and organized. Otherwise, your business growth will constantly be
limited and you’ll find your pipeline constantly jammed. Moreover, when
you are ready to add staff members, you’ll need systems in place that allow
your team to work efficiently and effectively without depending on your
constant input.
•
If 20% of your employees produce 80% of your results, figure out
who those employees are and reward them appropriately.
•
If 20% of your products produce 80% of your sales, know what
those products are and display and price them accordingly (a.k.a.
your niche).
•
If 80% of your profit comes from 20% of your customers, figure
out who those customers are and reward them.
I advise every client and every agent to build their business as if it will
become a huge corporation with multiple departments, all intended to run
without you. So often my clients hit a glass ceiling because they’ve built
everything with them at the controller, thus limiting growth and making a
simple vacation nearly impossible.
•
If 80% of your visitors see only 20% of your web pages, discover
which web pages they visit and why, and figure out how to
monetize those pages.
Management Tools - Database
You get the idea. The important thing is to begin to notice in your business
which 20% of activities, people, and/or products are responsible for 80% of
your success. Spending more time on the things that have the best chance of
making the biggest difference can go a long way to making you more successful with less effort. Work smarter not harder.
Being able to access your contacts quickly is important to the success of
your business. I regularly consult with agents to assist them in marketing
and growing their business. One of the very first things I ask to see is their
database. If they cannot quickly show it to me on a mobile device, which
preferably syncs to their other back office systems, then I know they are
limited in their ability to grow.
Surprise Result of Implementing a Niche
Marketing Plan
Organize your contacts.
•
Google: Talk about FREE. Google has a ton of resources
available to help you manage your database and to sync it with
multiple other systems. Visit Google App Marketplace, and if
you don’t already have your business email hosted by Google, do
it now. Sorry Apple user’s, it’s just not the same.
•
Top Producer: It’s true they’ve been around a long time and,
yes, it has taken them a while to catch up with the times, but
Top Producer is nearly there. They have created a Real Estate
Transaction Management Center that is highlight worthy. The
entire system is now Cloud-based and social media-integrated in
some very cool ways. Top Producer also manages the transaction
Once I began implementing the 80-20 rule, niche marketing, and other strategies into my real estate business, I found a surprising result. When properly applied, these business strategies, along with a niche marketing plan,
help me manage the peaks and valleys of my business.
At some point or another in your real estate career, you’ve probably felt the
strain of chugging up and down that mountain, but you might not have figured out what was happening or why. In fact, most agents don’t even realize
that these ups and downs are happening or how they are a direct result of
their actions, or rather inaction.
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from conception to close, automates much of the client touches,
syncs with Google and incorporates the latest technology. One of
many things I love about this system is how clients and vendors
can log into their “Transactions” through a private portal to get
updates on the transaction, make notes or upload files. Talk about
a wow feature and streamlined processes! While Top Producer
does fall short in some areas, I am pleased that they continue to
work to improve the system and have incredible tech support.
•
Solve360/Norada: I’ve research many project management
systems, especially those that sync with Google and Constant
Contact, and I like Solve360/Norada the best. While they do have
a self-assertive tone in their marketing, they’ve earned it. When
used properly, this is a great tool to streamline your database,
projects, pipeline, email and teams, all in one system.
When working with clients, make sure you keep detailed notes about how
and when you met. Also keep notes on your conversations and interactions,
as well as their personal information, such as spouse and kids’ names, birthdays and anniversaries. Keep records of the times they’ve referred you or
the marketing you’ve sent them. This may sound a bit much, perhaps even
borderline stalking, but when this information is applied in the right way,
your clients will feel that you’re vested in them and your relationship.
For instance, say you learned via Facebook that a client’s child, Henry,
broke his arm at school. If you make note of that and schedule a follow-up,
such as sending a get well card for Henry, these sort of high touches and
level of care that will set you apart from your competition. Think about
it–when was the last time you got a get well card from a vendor, and if you
did, would you feel more inclined to give them your repeat business?
Oh and P.S. not just your clients, Vendor’s too. For one, they buy and sell
houses and know other people who buy and sell houses. But also for when
your client looks to you to refer a contractor, you’ll want to show them how
organized you are by how quickly you can provide them with three names
and telephone numbers for your Class-A Contractors.
Management Tools - Vendor Relationships
When it comes to vendors, I could write an entire class on interesting ways
to use and collaborate with them to grow your business, but here are just a
few highlights to get you started.
We all have vendors that we need and use in some capacity. If you are anything like the agents I know, you suggest or refer business to your vendors
regularly. But are you paying close attention to what they are doing for you
and your business? Is this relationship a two-way street?
Here’s a collaborative concept. Reach out to your vendors and let them
know that you’re redeveloping your business model, and part of that transition is how your trusted vendors will play a very active and key role in your
business. Explain to them how important they are to you, your business and
your clients, and how excited you are about how your new business model
will position them as a direct extension of your team.
Here are a few suggestions on how to take these vendor relationships from
a one-way street to two:
•
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Mutual Accountability: ask your vendors to be accountability
partners with you; share your business growth goals and your
niche concept, and explain how they can help you achieve these
goals. Communicate to them how you expect your clients to be
managed and that in the spirit of being a team, you want to be
kept in the loop, not just now, but in any future business with your
clients as well. Promise to do the same when you’re prospecting.
•
Value: ask your vendors to bring value to your clients and
collaborate in marketing. They can provide content for your blog
(before-and-after pictures are a big hit), sponsor an ad on your
website, or “like” your Facebook page. Perhaps they can help
sponsor an Annual Client Appreciation event or even participate
in a client mailer/email to your “sphere of influence,” providing a
special discount just to your clients. In return, write them a stellar
testimonial on their LinkedIn company profile. You can also
compile a trusted vendor list on your website and link to theirs.
•
Future Business: Remind your vendors that you’ve enjoyed
working with them and value the relationship. Let them know
that you’re building a referral-based business and that you want
your vendor partnerships to be mutually beneficial, especially by
regularly sending them referrals, as well as asking for them. Give
them a verbal commitment of how many clients you intend to
send to them each year and ask them to match that, at least by
half. And that brings us full circle to accountability, not just for
you, but for them as well.
Management Tools - Time Management
Time management is a struggle the majority of us face, and as real estate
agents, we juggle multiple tasks, phone calls, emails and other to-do’s on
a daily basis. Making the most of your time and avoiding time-wasting
activities is critical to your success.
Recent studies have shown that the average person wastes anywhere from
2-4 hours per day checking email, chatting with co-workers, surfing the web
and commenting on their favorite social media sites. With stats like that, it’s
a wonder we accomplish anything at all!
Imagine how productive we might be if our time and our tasks were better,
and more strategically, organized.
The challenge is implementing systems and tools that simplify your life
without adding an additional layer to the process. Here are a few helpful
tips on easy ways to get organized and better manage your day!
Time Block
If only you could see my Google Calendar; it is a beautiful color-coded
personal assistant that syncs with my smartphone, my desktop, my laptop,
and my team’s calendars. Sure, I store my appointments like most people,
but I also incorporate other strategies that will help me focus on the 20%, as
well as create some balance.
At first this exercise might be a bit challenging, but I promise that if you
stick with it, you’ll be a well-oiled machine in no time. At first, try using a
stopwatch on your phone, or even a simple egg timer, to help you stay on
track.
Here’s the exercise: time block every part of your day that is significant to
your success. Not just business, but personal, too. While we tend to think
of these two aspects of our lives as separate, it’s nearly impossible, especially when you are self-employed. So stop trying already and let’s merge
the two.
Which parts of time management are most important to success? Here are
ten critical components that I incorporate into my time-blocking regimen.
As for how much time is necessary, that is entirely up to you, but be sure
to measure your results so you can adjust as needed. And for those of you
who are visual, like me, think of these time-blocking components as fuel
for your success, with all components co-existing in order to produce maximum results.
Personal Time:
•
Social: quality time spent with family and friends, perhaps even
volunteering and/or a book club.
•
Fitness/Health: gym, yoga, walking, sports, and mental health
exercises, such as crossword puzzles and meditation.
•
Spiritual: whatever your belief system, be sure you’re creating
the time, and if you’re not, consider perhaps keeping a journal or
reading.
•
Financial: planning and managing short and long-term financial
goals and frequent health check-ups.
•
Hobbies: doing the things you love to do that feed your energy in
a positive way--being in nature, riding a bike, photography, etc...
Management Tools - To-Do Lists
A to-do list is a must to keep you focused and on top of those important
tasks. It’s essential that you start your day with a fresh perspective and a
clean sheet of paper. Whether it’s a yellow legal pad, your smart phone or
an old-fashioned organizer; get the to-do list out of your head and into a
system that works for you.
Subscribing to the theory that “it doesn’t exist if it isn’t written down” gives
you power over your to-do list. Creating a list is a mental exercise that
eliminates the stress associated with feeling as if you’ve forgotten something. It also forces your brain to release that task. We can only retain so
much information at any given time. Having a consistent place to capture
important information will increase your productivity and make it far less
likely that you’ll miss an important meeting or phone call.
Business Time:
•
Networking: if you’re not already associated with a networking
group, join one! Consider a BNI, Toast Masters, Real Estate Investor Groups, Women’s Council of REALTORS, or check out
MeetUp.com for other business groups that might even tie into
your niche. Here’s a tip: more is not better. Join one or two
groups, commit to 12 months and work it.
•
Prospecting: prospecting can be many things, but I’m going to
ask you to do several. Here’s a good weekly starter plan:
•
25 phone calls; past clients, old contacts, FSBO’s, etc...
•
15 business cards handed out to new contacts, not including
those given out at events.
•
7 Facebook & LinkedIn posts (your blog can count as one)
•
5 written note cards
•
1 blog post
•
1 business or social event
•
All current clients contacted to report market conditions,
give stats, get a pulse, offer assistance, and ask for referrals.
•
Management: block time each day to manage current clients and
their transactions. This is a working “in your business” task.
•
Planning: set aside time to review your current business structure
and activities. Design and plan for growth. This is a working “on
your business” task. Go back through these course materials and
your Strategic Business Plan. Review and adjust.
•
Education: continuously seek a higher education by taking
classes, earning designations, or even reading up on the latest
research and trends. This will help set you apart from your
competition and better serve your clients and niche market.
Despite being a technology guru and incorporating technology into every
aspect of my business, I still love sticky notes. One of the first things I do
every morning is transcribe my to-do’s onto mini-sticky notes and place
them onto my Action Board on my desk, which has three columns: top
priority tasks, important tasks and low priority tasks. Each to-do task goes
on one sticky and I post them on my action board according to importance.
This helps me manage my day and my tasks by priority. Is there technology
out there that would do the same? Sure, but I’m a visual person and I like
being able to move tasks around. And the best part is balling them up and
throwing them away once they’re done. Try it!
Management Tools - Embrace Technology
Change is scary, and shifting your business from what you’re doing now to
these strategic concepts, can be very stressful. So let’s make it as easy as
possible and use technology to our advantage, even embrace it!
Find balance in your life. If your personal life is suffering, then so will your
business and vice versa. Time-blocking will help you achieve balance in
both aspects, and you’ll find, as I did, the happier you are, the more successful you’ll be. But in order for you to gain the best results, you must
time-block these 10 components on your weekly calendar.
Success Tip: Be consistent. Move the block of time around as necessary.
Dedicate as much or as little time as you feel you can to each component.
Commit to trying these techniques for 90 days and review the results.
There are many time management tools and other useful technologies out
there, and when used effectively and consistently, they have the ability to
not only significantly improve your productivity, but to create that “wow
factor” your future clients are looking for.
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Most REALTOR Associations regularly offer classes on technology and
how to incorporate these tools into your business. Additionally, the National Association of REALTORS dedicates an entire section on their website for technology tools for REALTORS. Tap into your resources, ask
your colleagues, and do a Google search so you can take every advantage
possible to work smarter, not harder.
What Now?
Social media is a HUGE lever that, when pulled effectively, can help get
the word out about your expertise like no other form of marketing. Remember the example of the post on Facebook that was originally seen by
300 people, but later 900+ were exposed to it? This type of example is
not at all far-fetched. It happens every day. You probably have a couple of
close friends that you could approach and say, “I’m trying to get the word
out about my niche. Could you share my post on your wall?” Just a simple
request to a close friend could put your message in front of several hundred
people that you may never have been able to reach.
We briefly touched on Pinterest earlier in the course. It’s a relatively new
social media site that real estate agents are using more and more. We included a QR code to a short video that we put together that outlines how
you, as an agent, can utilize Pinterest to boost your effectiveness.
We also discussed the Pareto Principle. This is the idea that 80% of effects
come from 20% of the causes. If this principle holds true (which it often
does), think about what that means for your business. Possibly 80% of
your time contributes to just 20% of your production, and the remaining
20% of your time accounts for 80% of your production. Imagine if you
identified which tasks, clients, and activities constituted that 20%, then
flipped the numbers and focused on those things for 80% of your day.
Here’s an activity you can do on your own:
Earlier, we discussed to-do lists. To-do lists and the Pareto Principle are
a match made in Heaven! Make up a to-do list for the day. Be specific
enough that the list accurately portrays your work day, but not so specific
that you’re including something like “showering” or “eating breakfast”
(those are things that should always make the list). Then take a step back
and start asking questions about each item. How many of those steps are
about taking care of your client? Because that’s what it’s really about,
right? If you are on top of everything and your client feels like you have
her back, she may give you a referral and you get more business. It’s a winwin! If you find several things on your list that are not adding value to your
clients, it may be time to reevaluate your work day a bit.
How much time are you putting into each task vs. how much are you getting out of it? You may find that you’ve been toiling over some short sale
listings and making very little impact, but have had a large amount of
success assisting first-time home buyers (or vice versa). Maybe it’s time
to shift your focus.
Another good question to ask yourself is, “What happens if I don’t do this
task?” It may very well turn out that you are doing things that contribute no
real value to you or your clients, but you do them because “that’s the way
it’s always been done.” Wouldn’t it be better if you stopped doing those
things (or at least spent less time on them), and focused your energy more
on things your clients need?
Consider the Pareto Principle as well. Are you spending 20% of your time
on 80% of your clients? Is 80% of your clientele coming from 20% of your
marketing?
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Niche Marketing: Narrow your Focus
Select the best answer for each question and mark your answers on the Answer Sheet (last page of book)
or complete your exams online at www.McKissock.com/VARE.
1. What does the 80-20 rule in business suggest?
a. 80% of your revenue will come from 20% of your
clients
b. 20% of your cost items will contribute to 80% of
your expenses
c. 20% of your sales staff will contribute 80%
of the sales
2. What is the significance of niche marketing for a real
estate business?
a. It helps identify the promotional channels
to be used to reach the target segment
b. It helps in hiring the right talent
c. It can help the business be identified
as an industry leader
6. Which of the following social media tools can a real
estate company use to promote its business?
a. Contests on Facebook
b. Creating listings via Postlets.com
c. YouTube videos
d. All of the above
7. Which of the following statements on social media is
FALSE?
a. It is a great tool for expanding your reach
b. It can act as a highly targeted real estate marketing
tool
c. It enables mass reach from the comfort of your
office
d. Social media campaigns are easy to execute
3. Which of the following factors must be evaluated by
a business owner for determining a niche segment?
a. Area of interest
b. Academic/professional qualifications
c. Position of competitive strength
8. Which of the following statements on marketing a
real estate niche is TRUE?
a. Pay per click marketing is an inexpensive marketing
tool that may be used by any real estate business
b. With Google Adwords, campaigns can be tailored to
match certain demographics
c. Postlets.com is a paid marketing website
4. Which of the following is the number one marketing
tool available to a real estate firm that wants to
market itself?
a. Business website
b. Business cards
c. Personal networking
d. Social media
9. Which of the following factors can be classified as
part of the demographics for identifying a niche in
real estate?
a. Lifestyles
b. Income level
c. Interests/hobbies
d. None of the answers shown
5. Which of the following tools do NOT offer project
management capabilities?
a. Norada
b. Top Producer (Real Estate Transaction Management
Center)
c. Facebook
d. Solve360
10. Which of the following is a good example of
a lifestyle-based niche marketing strategy?
a. Country living
b. Commercial real estate
c. Handling estates of divorce cases
d. Investment real estate
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Index
Guidance Document on necessity for brokerage agreements as a means of
providing information or guidance of general applicability to the public, the
Real Estate Board is issuing this guidance document in order to assist its
licensees in understanding the requirements of § 54.1-2137 of the Code of
Virginia.
To ensure that the Real Estate Board’s broker and salesperson licensees
comply with § 54.1-2137. Commencement and termination of brokerage
relationships, the Board directslicensees to review the following information.
The following are relevant excerpts from the Code of Virginia:
§ 54.1-2137. Commencement and termination of brokerage relationships.
….
B. Brokerage agreements shall be in writing and shall:
1. Have a definite termination date; however, if a brokerage agreement
does not specify a definite termination date, the brokerage agreement shall
terminate 90 days after the date of the brokerage agreement;
2. State the amount of the brokerage fees and how and when such fees are to
be paid;
3. State the services to be rendered by the licensee;
4. Include such other terms of the brokerage relationship as have been agreed to by the client and the licensee; and
5. In the case of brokerage agreements entered into in conjunction with the
client’s consent to a dual representation, the disclosures set out in subsection
A of § 54.1-2139.
….
§ 54.1-2137. Commencement and termination of brokerage relationships.
A. The brokerage relationships set forth in this article shall commence at the
time that a client engages a licensee and shall continue until (i) completion
of performance in accordance with the brokerage agreement or (ii) the
earlier of (a) any date of expiration agreed upon by the parties as part of
the brokerage agreement or in any amendments thereto, (b) any mutually
agreed upon termination of the brokerage agreement, (c) a default by any
party under the terms of the brokerage agreement, or (d) a termination as set
forth in subsection F of § 54.1-2139.
….
§ 54.1-2130. Definitions.
As used in this article: … “Brokerage agreement” means the written
agreement creating a brokerage relationship between a client and a licensee.
The brokerage agreement shall state whether the real estate licensee will
represent the client as an agent or an independent contractor.
“Brokerage relationship” means the contractual relationship between a client
and a real estate licensee who has been engaged by such client for the purpose
of procuring a seller, buyer, option, tenant, or landlord ready, able, and willing
to sell, buy, option, exchange or rent real estate on behalf of a client.
“Client” means a person who has entered into a brokerage relationship with
a licensee.
….
“Customer” means a person who has not entered into a brokerage relationship
with a licensee but for whom a licensee performs ministerial acts in a real
estate transaction. Unless a licensee enters into a brokerage relationship
with such person, it shall be presumed that such person is a customer of the
licensee rather than a client.
….
“Ministerial acts” means those routine acts which a licensee can perform for
a person which do not involve discretion or the exercise of the licensee’s own
judgment.
….
The Code of Virginia requires a written brokerage agreement when a
brokerage relationship, as defined in § 54.1-2130, is created. When a customer
becomes a client is based upon the party’s intent. A licensee needs to use his
judgment based upon a customer’s words and actions to make
a determination as to when the intent to enter into a brokerage relationship
is established and therefore, requires a brokerage agreement. Is the party
looking for the licensee to provide advice and counsel requiring the licensee
to exercise his judgment or discretion for the purpose of procuring a seller,
70
buyer, option, tenant, or landlord ready, able, and willing to sell, buy, option,
exchange or rent real estate? If so, this would require a written brokerage
agreement as these acts don’t fall within the definition of ministerial acts. Has
the party engaged the licensee for the purpose of procuring a seller, buyer,
option, tenant or landlord ready, able and willing to sell, buy, option, exchange,
or rent real estate? If yes, then a brokerage relationship is established and this
requires a written brokerage agreement.
Below are some examples of situations which require the licensee to use his
judgment to determine the party’s intent:
• Many acts may be ministerial or could require a written brokerage
agreement depending on the party making the request and his intent.
For example, showing a house may be ministerial if the licensee takes
the party to see what the typical features are in homes in the market area
or to gather information on the market or area. However, if the party
asks the licensee to show him real estate because his intent is to have
the licensee procure someone who is ready, able and willing to sell, buy,
option, exchange, or rent real estate then a brokerage relationship exists
requiring a written brokerage agreement.
Another example relates to a request for a multiple listing service
(MLS) search. If a party requests a licensee to provide MLS search
results without the intent to engage the licensee for the purpose
of procuring a seller, buyer, option, tenant or landlord ready, able
and willing to sell, buy, option, exchange, or rent real estate then
a written brokerage agreement is not necessary. However, if a
party requests MLS search results having the intent to engage the
licensee for the purpose of procuring a seller, buyer, option, tenant
or landlord ready, able and willing to sell, buy, option, exchange,
or rent real estate then a written brokerage agreement is necessary.
• If a party asks the licensee for general information about items such
as tax rates, HOA dues, schools or typical features of property in the
area, these acts appear to be ministerial. However, if the party asks
these questions about specific property because his intent is to have
the licensee procure someone who is ready, able and willing to sell,
buy, option, exchange, or rent real estate, or if he asks the licensee to
provide the licensee’s opinion as to those features or properties that have
those features, then a brokerage relationship exists requiring a written
brokerage agreement.
• Many licensees may perform marketing activities in order to induce
a party to engage them for the purpose of procuring a seller, buyer,
option, tenant, or landlord ready, able, and willing to sell, buy, option,
exchange or rent real estate. For instance, if a party asks the licensee
to provide him with a valuation or analysis of real estate or an MLS
search for informational purposes and does not yet intend to engage
the licensee to procure a buyer or seller for the real estate, a written
brokerage agreement is not necessary. However, if at the time the party
asks the licensee to provide the valuation and the party intends to use
the valuation or analysis of the real estate for the purpose of having that
licensee procure a buyer for the real estate, then a written brokerage
agreement is needed.
As a further example, a licensee may provide marketing materials
and a competitive market analysis to a prospective seller who is
interviewing for the purpose of retaining a licensee to sell their
property, without the necessity of a written brokerage agreement.
The party’s intent can change during the performance of ministerial
acts by the licensee. The licensee needs to be aware of when the
intent of the party changes from that of customer to client, and
get the party to sign a written brokerage agreement before
performing any nonministerial acts for that party. It is important
for brokers to have policies in place to guide their licensees, based
upon the firm’s business practices, in determining when a written
brokerage agreement is required and procedures for obtaining such
agreements.
Notes
Notes Page
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Notes
72
Notes Page
Illinois Proctor Exam Instructions and Options
The Illinois Department of Financial and Professional Regulation outlines that successful completion of CE hours requires the licensee (that’s you!)
pass a proctored exam with a minimum score of 70%.
Important notes:
• A practice exam must be completed before you are eligible to take the proctored exam
• One exam is required per course
• The exam is closed book; you will not be permitted notes or reference materials once you begin
• If you do not pass the first attempt you will be provided one (1) more attempt to be taken within 30 days of the original exam date.
o If the second attempt does not result in a passing score, you will need to retake the entire course (free of charge) and will be
permitted two (2) more attempts.
Who can be a proctor?
An eligible proctor is someone who does not have a vested interest in whether or not you pass the exam. This rules out family, coworkers, employers,
etc. You are not permitted to be your own proctor.
Examples of eligible proctors would be teachers, librarians, police officers, community volunteers, religious leaders or someone who works in the
public service industry.
Looking for an exam option that fits your schedule? We have three choices on how to take your proctored exams.
Option #1 – McKissock Provides the Proctor
McKissock will be offering a proctor for exams after each Managing Broker onsite seminar for FREE! Registration starts at 4:30 p.m. the day of the
seminar. Be prepared with scrap paper and a writing utensil – the exam will be provided by the proctor. You will also need to bring the completed
assessment page from the correspondence book or proof of the online assessment exam completion. Results will be communicated with 48 business
hours either by phone or email.
Option #2 – Choose Your Own Live Proctor (Paper Exam)
Contact McKissock within 24 hours of your scheduled exam and we will fax or e-mail the exam directly to your proctor (e-mail is preferable). This
communication will include exam instructions and guidelines, as well as a proctor sign-off sheet. This needs to be signed by both you and your proctor
and returned with the exam. Your exam can be mailed, faxed or e-mailed back to our company (contact information provided below). Your exam
will be graded within 48 business hours of receipt and your results communicated to you via phone and (upon passing) e-mailing of your completion
certificates.
Option #3 – E-Proctored Exams
So you’ve finished the information in the book and want to take your proctored exams online – now what? Visit www.McKissock.com/ILRE and select
the Correspondence Course Exam(s) you would like to purchase and proceed to checkout. If you are a returning student you will input your existing
username and password. If you’re new, you’ll be asked to create one. Now you have your very own MyMcKissock page. To access an e-proctored exam
you’ll first need to make sure your practice exams have been completed. Then you can find your course under “Completed Courses” and select the
E-Proctor Exam option. Your proctor will need to sign-in (a link is provided for proctor registration) for you to access the exam. Your results will be
provided immediately upon completion and if you pass you will have immediate access to your completion certificate.
And know that we have a great Customer Loyalty Team who is happy to assist you with any portion of this process. Call an Education Specialist at:
1-800-328-2008, 8 a.m. – 8 p.m. EST Monday through Friday and 12:00 p.m. – 3:30 p.m. EST Saturday and Sunday.
Have more questions about Proctored Exams? visit http://faqs.mckissock.com/category/proctored-exams/
Proctored Exam Instructions
73
Book & Individual Course Evaluation Form
Congratulations on completing your course(s)!
Please take a moment to complete the survey below and send your responses with your
registration form, and answer sheet.
Name: ____________________________________________________ Phone: __________________________
1. How likely is it that you will recommend McKissock to others? (Circle one.)
(0 - Not At All Likely; 10 - Extremely Likely)
0 1 2 3 4 5 6 7 8 9 10
2. The course material in the book was presented in a clear, concise and well-organized format.
(Circle one.)
0 1 2 3 4 5 6 7 8 9 10
(If less than a 5, please explain.)
_____________________________________________________________________________
_____________________________________________________________________________
Individual Course Evaluations
Individual Course Name
Course Rating
(1-5)
1=Worst; 5=Best
Course Material Met
Course Objective
(Yes or No)
Course was
Affordable
(Yes or No)
Illinois Core A - Fair Housing, Agency, License Law and
Escrow
Illinois Core B - Legal Issues
Please list any recommendations that you may have in regards to the course(s) you completed.
_____________________________________________________________________________
_____________________________________________________________________________
Please list any course subjects you would like to see in the future.
_____________________________________________________________________________
_____________________________________________________________________________
Email: [email protected]
74
www.McKissock.com
Fax: 1-814-723-0281
Book and Individual Course Evaluation Form
First Name:
Company Name:
MI:
Company Address:
Last Name:
Suite/Apt#:
Suffix:
City, State, Zip:
License Number:
Work Phone:
License Exp Date:
Cell Phone:
License Level:
Email Address:
Get all 12-hours of CE in this book for FREE when you register for one of our live 2015 seminars.
Collinsville Seminars (Select a Date):
Jan 28-29
Feb 23-24
Mar 30-31
Orland Park Seminars (Select a Date):
Feb 3-4
Mar 2-3
Apr 2-3
Schaumburg Seminars (Select a Date):
Feb 18-19
Mar 19-20
Apr 6-7
Location: Doubletree by Hilton,1000 Eastport Plaza Drive, Collinsville, IL 62234
Location: Homewood Suites, 6245 S La Grange Rd, Orland Park, IL 60467
Location: Holiday Inn Itasca, 860 W Irving Park Road, Itasca, IL 60143
Course Name
Hours
Price
12
$75.95
Illinois Core A - Fair Housing, Agency, License Law and Escrow
3
$25.95
3
$25.95
3
$25.95
3
$25.95
12-Hour Package
Price
Total
$237.00
$237.00
$237.00
Total
Total Price
Payment Method
Check Enclosed
Credit Card:
MasterCard
Visa
Credit Card#: Discover
American Express
Exp. Date:
Print Name: _____________________________________________ Signature: ____________________________________
1. Complete and pass your assessments online at www.McKissock.com/ILRE. Once this step is complete, simply choose your
preferred method to complete the proctored exam portion of each course and we’ll issue your certificates of completion.
or
2. Email [email protected] or Fax in the Registration Form, Assessment Answer Sheet, and Course
Evaluation Forms in with your payment to: 1-814-723-0281
Questions? Call 1-800-328-2008 and one of our knowledgeable customer service representatives will assist you.
75
Illinois Real Estate CE Assessment Answer Sheet
Fax or Scan and Email in this completed Student Assessment Sheet along with your Registration Form, and Course Evaluation Form.
OR
Complete your assessments online at www.McKissock.com/ILRE.
Once this step is complete, simply choose your preferred method to complete the proctored exam
portion of each course and we’ll issue your certificates of completion.
For LIVE Proctor exams you must bring this completed assessment page to be eligible to sit for the proctor exam.
Name: ____________________________________________________ Phone: __________________________
Illinois Core A - Fair Housing, Agency, License Law and Escrow
1.
2.
3.
4.
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76
Pg 51
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www.McKissock.com
Fax: 1-814-723-0281
Illinois Real Estate CE Assessment Sheet

REAL ESTATE

Transcription

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