TABLE OF CONTENTS - Tucson Association of REALTORS

TABLE OF CONTENTS
AAR BLANK FORMS ....................................................................................................................................... 5
A BIG Game Changer is Coming! ................................................................................................................... 5
ADRE ADVERTISING COMPLAINTS ON THE RISE ........................................................................................... 5
AD WRITING WISDOM .................................................................................................................................. 5
Agent Safety Reminder 8/19/08 ................................................................................................................... 6
A Little Leak, A Lot Of Trouble 06/24/08 ...................................................................................................... 7
Answer All Questions Carefully 2007 ............................................................................................................ 8
Antitrust Awareness...................................................................................................................................... 9
ANTITRUST NEW YEAR’S RESOLUTIONS ..................................................................................................... 10
APPRAISAL FRAUD....................................................................................................................................... 10
APPRAISALS – WHAT’S YOUR PRACTICE? – 2007........................................................................................ 10
ARE YOU READY FOR YOUR CLOSE UP? ...................................................................................................... 11
ARE YOU REXTING? ..................................................................................................................................... 12
ASK TO SEE THE HOA DEMAND .................................................................................................................. 12
A SLAP IN THE FACE…OR CURE NOTICE OPPORTUNITY? ............................................................................ 12
Attention Landlords: If you don’t know what a service animal is, it could cost you big time! ................... 13
BANK OF AMERICA – CHANGING PROCESS AND PROCEDURES (AGAIN) ................................................... 14
BE CHOOSEY AND BE NICE – 11/4/08 ......................................................................................................... 15
BE SAFE WITH KEYS 01/08/08 ..................................................................................................................... 16
BEWARE! SECRET SHOPPERS ON THE PROWL ............................................................................................ 17
BEWARE WHEN YOU SELF-SEVER YOUR LICENSE! ...................................................................................... 18
BUSINESS CARDS – INNOCENT INCENTIVE OR RESPA VIOLATION – 2007 .................................................. 18
CBS CODES .................................................................................................................................................. 19
CHINA DRYWALL SYNDROME OR THE NOT-SO-GREAT DRYWALL OF CHINA ............................................. 20
CLIENT’S CONFIDENTIAL INFORMATION .................................................................................................... 22
COPYCAT! BEWARE COPYRIGHT! ................................................................................................................ 22
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DEBT RELIEF ................................................................................................................................................ 23
DEEMED RELIABLE BUT NOT GUARANTEED ............................................................................................... 24
DID YOU KNOW? FHA HOME LOAN CHANGES – IN EFFECT JUNE 2013 .................................................... 25
DID YOU READ THE NEW HOME BUILDER CONTRACT? - 2007................................................................... 26
DO YOU KNOW WHAT PROCURING CAUSE IS? .......................................................................................... 27
DODD-FRANK .............................................................................................................................................. 27
THE DOG ATE MY HOMEWORK – 03/04/08 ............................................................................................... 28
DO NOT CALL REGISTRY – ARE YOU VIOLATING? ....................................................................................... 29
DON’T’ BE A VICTIM…PRACTICE SAFE SHOWINGS ..................................................................................... 29
DON’T FALL INTO THE DEEP END – USE THE “APPROVED” POOL SAFETY NOTICE..................................... 29
DON’T POOH-POOH A DRAIN INSPECTION ................................................................................................. 30
DO WE HAVE DATE?.................................................................................................................................... 31
DUTIES TO REALTORS® ................................................................................................................................ 33
EMAIL ETIQUETTE ....................................................................................................................................... 33
EMAIL PROTECTIONS .................................................................................................................................. 34
FAIR ADVERTISING PRACTICES .................................................................................................................... 34
FAIR HOUSING – 5 KEYS TO REDUCING LIABILITY ....................................................................................... 35
FAIR HOUSING RED FLAGS .......................................................................................................................... 35
FIRE PROTECTION........................................................................................................................................ 36
FIXING AN AFFIDAVIT OF AFFIXTURE .......................................................................................................... 36
GARAGE DOOR REPAIRS.............................................................................................................................. 37
HEADS UP! DISCUSS TITLE INSURANCE FOR NEW HOMES ......................................................................... 38
HOME WARRANTY = RISK REDUCTION – 03/10-09 .................................................................................... 38
HOW DO YOU STAND OUT? ........................................................................................................................ 40
IF YOU ARE LISTING SHORT SALES, DO YOU KNOW WHAT HAFA IS? ......................................................... 40
IMPUTED KNOWLEDGE CAN BE DANGEROUS ............................................................................................ 41
IMPORTANCE OF 5 YEAR C.L.U.E. REPORT .................................................................................................. 42
INNOCENT CONVERSATION OR BOYCOTTING? .......................................................................................... 43
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IS YOU BUILDER LIENING ON YOU? ............................................................................................................ 43
IS YOUR BUILDER LIENING ON YOU? PART II – BUYER’S PERSPECTIVE...................................................... 44
IS YOUR VACANT LISTING COVERED? ......................................................................................................... 44
LOAD IT & LOCK IT....................................................................................................................................... 45
LOAN & INVESTMENT FRAUD ..................................................................................................................... 46
MARS UPDATE FROM NAR.......................................................................................................................... 46
The Misconceptions of Showing homes with Tenants in Residence .......................................................... 47
MOVING COMPANY SCAM ALERT! ............................................................................................................. 48
MORTGAGE INSURANCE UNDERWRITING UN-WRITING ............................................................................ 50
NO FIFTY SHADES OF GREY HERE – BUSTING MYTHS ABOUT THE FAA AND UNMANNED AIRCRAFT ....... 51
NO LSR…NO LOAN TERMS! ......................................................................................................................... 53
NO MORE LSR – REST IN PEACE .................................................................................................................. 53
ONLINE MAPPING MEASUREMENTS – WATCH OUT! ................................................................................. 53
OWNER/AGENT DISLCOSURE...................................................................................................................... 54
PATHWAYS TO PROFESSIONALISM ............................................................................................................. 56
PERSONAL PROPERTY TAX ON RENTAL PROPERTY ..................................................................................... 56
PROTECT YOUR BUYER WITH REO’S – AKA LENDER OWNED, FORECLOSED, BANK OWNED ..................... 58
PURCHASE CONTRACT WITH FINANCING CONTINGENCY REQUIRES LOAN STATUS REPORT (LSR) ........... 59
RADON – THE INVISIBLE RISK ...................................................................................................................... 59
READ BEFORE SIGNING….THE PUBLIC REPORT........................................................................................... 61
RISK REDUCATION WITH PROFESSIONAL DESIGNATIONS .......................................................................... 62
SAY IT FAIRLY QUIZ...................................................................................................................................... 63
SELLER HELD OPEN HOUSEIN USING COMPANY SIGNS…WHAT’S IN YOUR POLICY? ................................. 63
SEPTIC OR ALTERNATIVE WASTE WATER SYSTEMS – NEW REGULATIONS ................................................ 64
SHORT SALE “AGREEMENT NOTICE”........................................................................................................... 64
SHORT SALE CAUTION................................................................................................................................. 65
SHORT SALE TOOLS ..................................................................................................................................... 66
SHORT SALES ............................................................................................................................................... 67
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SHORT SALES AND EARNEST MONEY COLLECTION .................................................................................... 68
SIGN, SIGN, EVERYBODY SIGN..................................................................................................................... 69
SIX OR MORE REQUIRES PUBLIC REPORT! .................................................................................................. 69
SMOKE ALARMS, FLASE ALARMS, MAINTENANCE AND DISCLOSURE ISSUES ............................................ 70
SOMEONE STOLE MY IDENTITY! WHAT NOW? ......................................................................................... 71
STEAL MY IDENTY? NOT WAY! THINK AGAIN ........................................................................................... 72
STOP LOSING YOUR SIGNS! ......................................................................................................................... 72
TEST YOUR “BINSR” IQ! ............................................................................................................................... 73
TOO COOL ................................................................................................................................................... 74
TO SURVEY OR NOT TO SURVEY?................................................................................................................ 75
UNDERSTANDING THE POOL BARRIER LAWS ............................................................................................. 76
UNINTENTIONAL FIXTURE ........................................................................................................................... 76
UNKNOWN PROPERTY TAXES ..................................................................................................................... 77
UTILITIES AND INSPECTIONS ....................................................................................................................... 78
VACANT HOME ISSUES................................................................................................................................ 78
VACANT LAND LANGUAGE LOOPHOLE ....................................................................................................... 79
WHAT DO YOU DO WITH THE EARNEST MONEY CHECK ON A SHORT SALE? ............................................ 81
WHAT’S IN YOUR AD? ................................................................................................................................. 81
WHAT’S YOUR ANSWER WHEN THE JUDGE ASKS…… ................................................................................. 83
WHEN “NONE” MEANS “SOMETHING!” ..................................................................................................... 83
WHEN OVER COMMUNICATING IS A GOOD THING! .................................................................................. 84
WHY SHOULD I CARE ABOUT DATA SECURITY AND PRIVACY? ................................................................... 85
WHY WOULD YOU DO THIS?....................................................................................................................... 85
WORKING WITH INVESTORS? WATCH WHAT YOU PROMISE! .................................................................. 85
WHEN WORKING WITH PROSPECTIVE TENANTS ARE YOU USING THE READE FORM? ............................. 86
YOU BE THE JUDGE…RACIAL STEERING? .................................................................................................... 87
YOU VERIFIED THE “FLOOD PLAN” – BUT DID YOU REALLY? ...................................................................... 87
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AAR BLANK FORMS
Q: A family member has found a buyer for his property on his own, without REALTOR® assistance, and
has asked me for a blank AAR Purchase Contract. Am I allowed to give him one?
A: No. Copyrighted forms provided by Arizona Association of REALTORS® (AAR) and Tucson
Association of REALTORS® (TAR) are designed and made available via ZipForms for use by AAR and
TAR members only. The ZipForms User Agreement that each member executes prohibits distribution to
third parties. For Sale by Owners (FSBO’s) not enlisting the services of a REALTOR® should be referred
to a legal advisor.
A BIG Game Changer is Coming!
On August 1, 2015 the current HUD 1 will be replaced by the Closing Disclosure. This change is coming
from the Consumer Finance Protection Board (CFPB) and will affect your business if you represent
Buyers and Sellers. Don’t wait until the last minute to get informed about this change because it is not
just a new form! Lenders, escrow and agents will have new rules and procedures to follow to ensure
transactions close in a timely manner. Read about the changes here:
http://files.consumerfinance.gov/f/201503_cfpb_tila-respa-integrated-disclosure-rule.pdf or contact your
local lenders and/or escrow officers for more information.
ADRE ADVERTISING COMPLAINTS ON THE RISE
ADRE is interested obtaining compliance, not in in initiating discipline. Take an extra few minutes to
review your advertisements to ensure they meet the required of the law. If you have any questions about
the legality of your advertising, contact your broker or ADRE. If you have questions about the legality of
your advertising on the web, contact Tom Adams at 602-468-1414. Be sure to have your link, ad copy or
URL handy when you call. The Commissioner’s Rules, A.A.C. R4-28-502, set forth the rules for all
advertising.
AD WRITING WISDOM
The fair housing act makes it illegal to advertise any preference or limitation, or encourage discrimination
due to Race, Color, Religion, Sex, National Origin, Handicap or Familial Status. The English language is
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extensive and so is imagination. Anyone can write captive and persuasive ad’s about a property. Just
avoid alluding to the kinds of people who might live in a particular home, because that is where the
misconception sneaks in.
In other words, mention number bedrooms not number of people; in an ad specify “no drinking” and “no
smoking,” no non-drinkers and non-smokers. Even a phrase as simple as “handyman’s dream” could, in
the wrong context, be construed as indicating preference for a single make. The solution? Stick to “fixerupper.”
Emphasize amenities, not potentials participants; tennis courts, not tennis players; paths, not bicyclists.
Emphasizing a property’s proximity to certain landmarks also creates some potential problems. A home
advisor advertised near a “church,” or “synagogue,” or “temple,” could be interpreted as a attempt to steer
a certain religious group to or away from the area. Stick with the geographical descriptions: “central,”
“northwest.”
After writing an ad, re-read it to see if any word could be translated as a s discrimination against a
particular protected class. Consider avoiding the usage of certain words like: Adult, Single, Bachelor,
Couple Family, Executive, Exclusive, Integrated, Physically fit, Active Adult, Empty Nester, etc.
Get a second opinion to protect yourself. Have your broker approve the wording.
If the ad seems to be in a gray area ask yourself if you want to take the risk. Remember, just because
someone prints it does not make it legal!
Agent Safety Reminder 8/19/08
The Scenario
Perhaps the classic safety risk scenario occurs when an agen received s “sign call” from somebody who
says they want to see the property the agent has listed – and they want to see it now, and it is after dark
and it is not in a high traffic area. The caller says they are leaving town in the morning on business for
two weeks and they don’t want to miss an opportunity to buy this house as it seems perfect for them. The
agent hasn’t had a sale in over two months and knows better than to do this, but decides to take a chance –
after all, this would be a double-dip. And anyhow, this person sounds normal enough over the phone.
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The Risk
The risk should be obvious and is VERY REAL! It is not necessary to discuss the gruesome details of the
crimes that might be committed. An agent – male or female – should never sow a property under such
circumstances. There have been numerous articles written, training seminars given, weekly meeting
discussions held, and private conversations over lunch about tis type of scenario and the risk involved.
We have all heard about actual incidents occurring when a fellow agent did not perhaps behave as wisely
as they might have. The statistics continue to accumulate.
What to Do
Ideally, it should become routine standard practice for all agents under all circumstances to never show
property to prospects, customers, clients (or whatever you want to call them) unless they have come inot
your office, met with you, surrendered their driver’s license(s) for photocopying, and you are in
possession of their written pre-approval for financing (e.g. and LSR).
Understandably, when you receive that phone call you are tempted to take the risk because you need the
income and you think that if you don’t show the property immediately as the caller is insisting, then
another agent may take the chance and beat you out of a commission. However, if there is widespread
commitment to following the procedure, then we can help reduce everyone’s risk of encountering a
criminal. Also just as importantly, this practice would provide additional protection for the homeowners
who have their property listed by us in the MLS as it would reduce the likelihood of the property
becoming a crime scene. Isn’t that part of our fiduciary duty to them?
A Little Leak, A Lot Of Trouble 06/24/08
Vacant home listings present many challenges and risks for real estate agents. One risk among the events
that has one of the greatest potential dollar amount of damage is a water leak inside the home. What
might reduce the risk?
The Scenario
The home has been vacant for weeks, there have only been sporadic showings, and you have just done
your periodic check of the property, locked up and went on your way. The, minutes later, by pure change,
one of the old, cracked water supply hoes on the clothes washer simply splits open and starts leaking
water at full pressure. The water leaks for days, soaking the flooring and walls throughout most of the
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house, until finally it builds up enough to start running out from under the garage door. Finally, a
neighbor notices and calls the owner – who then calls you.
The Risk
The amount of damage done is unbelievable. This initial estimate is $25,000 and there is some question
about whether the homeowners’ insurance is going to cover this event. Not only is there water damage,
but here is now a very real potential for a mold problem as well.
What to Do
Consider advising your clients to turn off the water supply to the house. Where the water supply comes
from underground (from the meter or the well), there should be a cutoff valve located such that the supply
to the house can be turned off, while allowing water to go to the irrigation system.
On some houses, this will be a simple matter – while on others, they may have to hire a plumber to make
some modifications. Whatever this expense may be, it is well worth the reduction in risk of major water
damage.
Keep in mind that the toilets will not be functional at this point. So, signs should be placed on each toilet
advising visitors to not use them as the water supply has been turned off.
Periodically (perhaps monthly), the water supply should be turned back on for the few minutes it will take
to run water in all of the plumbing fixtures such as sinks (don’t forget the one in the garage), tubs,
showers and toilets. This will ensure that the drain traps are kept full of water which prevents sewer
gasses from coming back into the house.
Answer All Questions Carefully 2007
As a real estate practitioner, it is especially important to answer all questions carefully. Don’t be tempted
to exaggerate or fabricate answers, information, or property descriptions in pursuit of income.
The Scenario
Someone – a prospect, a customer, or a client – asks you a question related to real estate or about a
particular property or transaction. Naturally, you would always like to be able to say whatever it will take
to get that person to ultimately move in a direction that causes a commission check to be deposited into
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our bank account. Nothing is wrong with that. So, how best to do it? Tell them what they want to hear?
Tell them only the good parts of the information you have? Make up something that sounds favorable,
even if you don’t know whether it’s true or not? Exaggerate or “puff” the information to make it more
favorable? Or maybe just tell a lie? Well, hopefully your answers to these questions are obvious and fall
on the side of accuracy and truth.
The Risk
The risk associated with doing anything short of providing correct, complete, and truthful information can
range from simply doing damage to your reputation, or all the way to civil liability for damages. If the
other party – the prospect, customer, or client acts upon the information you provide to their detriment
and they suffer a loss as a result, you may be held accountable and liable. Remember too that telling only
a portion of the truth is a form of lying.
What to Do
Provide a prompt answer to all inquiries with all of the factual information you have. When you don’t
have some or all of the information necessary to satisfy the question being asked, simply say so and
promise to try and obtain it. If you don’t think you are supposed to provide a complete, truthful answer
because doing so may jeopardize your fiduciary relationship with your client, then simply state that fact
and politely refuse to provide an answer. Do not alternatively fabricate a false answer instead of simply
telling the truth.
As in all things, complete honesty is the best policy. The truth, the whole truth, and nothing but the truth
is really the only way to go in this business. And, the truth is always a lot easier to remember than a lie.
Antitrust Awareness
A little competition is a good thing, right? Learn why awareness of antitrust issues is important for real
estate professionals, along with information on avoiding antitrust problems. This field guide provides
guidance for brokers, articles and books about this essential legal issue and updates on the Department of
Justice case against NAR.
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ANTITRUST NEW YEAR’S RESOLUTIONS
1. Perform an informal antitrust audit by discussing the issue with your agents. Ask relevant
questions of your firm’s managers and agents to learn their level of sophistication and awareness
of the fundamentals of antitrust.
2. Give a written “pop quiz” on antitrust followed immediately with a group or individual discussion
with the participants to discuss the errors they made on the test.
APPRAISAL FRAUD
Be aware that appraisers have felt pressure from lenders, mortgage brokers and real estate agents to
overstate property values to close a sale. Do not participate in schemes to inflate the sales price to “make
a deal.” Lawsuits have been brought against mortgage brokers paying appraisers to come in higher. The
inflation of home prices may be helping to push a real estate bubble. Most top lenders are introducing
stricter guidelines and requiring the use of a neutral third party (such as Land Safe) to assure a “true
value.” Remember to keep it ethical. Avoid exaggeration or concealment of pertinent facts. Limit your
comment on the appraisal if it is outside the scope of your competency. Articles 1, 2 and 11.
APPRAISALS – WHAT’S YOUR PRACTICE? – 2007
The Scenario
You represented the buyer on a successfully closed transaction. A few weeks later, they contact you and
are very angry claiming you failed to disclose two important facts from their appraisal: the proposed
zoning change on the property by Pima County, and the considerable difference in the stated square
footage of the MLS as compared to the actual square footage on their appraisal.
The square footage of the home as indicated on the MLS listing was 2100 sq. ft. When the Buyer’s
contractor and architect began their preliminary inspection for the remodel, they discovered the home to
be considerably smaller. In checking he appraisal, the client noted that the square footage of the home to
be only 1800 sq. ft. The client is now holding you accountable.
The Risk
As stated above, these facts represent only two possible items on an appraisal that may be of material
importance to the Buyer of a property. What is your practice or that of your company when it comes to
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reviewing the appraisal? Do you review the appraisal? Do you and your client review the appraisal
during the Inspection Period? Do you and your client review the appraisal at all?
Proposed zoning changes may severely diminish your client’s ability to add on to the property as planned.
They may no longer be able to perform the “remodel” they wanted, and as a result may hold you
responsible.
If most agents and buyers allow the lender to order the appraisal at their leisure, and only see a copy long
after the Inspection Period is over, if at all, the buyers may have little recourse at a later date. This may
be especially true if it is an item that does not prohibit the buyer from obtaining loan approval in the first
place.
What to Do
Brokers and agents alike should be reminded that the appraisal is not the only source for determining
square footage and zoning. Section 6, Due Diligence 6a of the Purchase Contract directs the buyer at
their expense, during the Inspection Period, to make inquiries concerning suitability of the premises and
investigate applicable zoning codes. Further, 6b in bold print states any reference to square footage is
approximate and if a material matter to the buyer should be investigated during the inspection period.
Appraisals ordered by a lender are performed for acceptability and benefit to the lender. If the
buyer/borrower wants a copy of the appraisal they should contact the lender, prior to the purchase, to
verify that the lender will release a copy of the appraisal to them before close of escrow. It is important to
note that not all lenders will do so.
ARE YOU READY FOR YOUR CLOSE UP?
These days technology seems to be created faster than we can learn it. The pace is so fast that there is
little time to access the risk involved in new technology before it starts being used. This has become
apparent in our industry with new tech tools that are cool to use but have some risk associated with their
use.
One new tech tool is the Drone, those very slick remote controlled video cameras that can fly just about
anywhere. And therein lies the problem. If you are considering using drone cameras to take videos of
your listings make sure you check with your broker first and read up on what NAR and the FAA are
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saying about real estate professionals and drones. http://realtormag.realtor.org/dailynews/2014/06/27/drones-used-for-real-estate-photos-could-be-grounded
ARE YOU REXTING?
Communicating via text with your real estate clients (rexting) is sometimes the clients preferred method
of contact. If you are using text to keep your clients informed ensure that your text message signature
identifies you as a real estate agent by including your name and the name of your brokerage. Texts can
also be saved as a document in a file on most smart phones. Then you can save the text messages as an
electronic or paper copy to your clients file.
ASK TO SEE THE HOA DEMAND
When escrow requests information for the closing statement from a Homeowner’s Association, they
receive a response from the HOA management company or responsible individual referred to as a HOA
Demand. This statement will show all fees due and payable to the HOA upon closing and any violations
of the CCRs that must be corrected prior to the close of escrow.
Most often, this notification is sent only to the escrow officer that requested it. The figures shown on the
Demand will be reflected on the closing statement. However, particular attention must be paid to any
violation(s) noted. This may be found at the bottom of the Demand, or on attached pages. If the
transaction closes without correction of a violation, the HOA may attempt to enforce the new buyer to
correct it immediately, much to their surprise!
If escrow sends copies to the Buyer and/or Seller Agent(s) upon receipt, the agent(s) have a responsibility
to review the Demand and inform their client of a violation noted. Occasionally, escrow may miss a
violation notice. It is good practice to ask to see a copy of the HOA Demand in such transactions.
A SLAP IN THE FACE…OR CURE NOTICE OPPORTUNITY?
So, you and the buyer are at the walk-through and sure enough, your suspicions are correct! The seller
has not completed the repairs and the buyer is furious and wants the house! With repairs! Oka, what
happens if one of the parties fails to fulfill a promise made in the Residential Resale Purchase Contract?
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Time is critical in these issues, knowing what the buyer is to expect, and when, are important factors in
the equation when a Seller is obligated to complete repairs. When would a buyer want to know that the
repairs have been completed? Are we advising our buyers what the contract stipulates?
Let’s say the seller fails to deliver paid receipts for repairs 3 days prior to COE date. The buyer needs to
issue a Cure Notice to the seller.
If the buyer is focused on buying the house, the buyer may be reluctant to issue such a notice, believing
the seller may take this as a slap in the face. But, without the Cure Notice issues, when can the nonbreaching party move toward a cancellation of the contract, or seek other remedies they may have in law
or equity? (Lines 275-276 of the contract).
The buyer does not have to cancel if the seller doesn’t “cure” the potential breach. But the buyer cannot
move forward with any other remedy either.
Attention Landlords: If you don’t know what a service animal is, it could
cost you big time!
If you don’t know the difference between a pet and a service animal, you could get yourself in a lot of
trouble by mistakenly violating fair housing laws. The most common violation by landlords is to charge a
pet deposit for what the law determines to be a service animal. By law, a service animal is not a pet, so a
tenant cannot be charged a pet deposit for the animal. So how do you know if you are dealing with a pet
or a service animal? Let’s tackle a few of the most common myths to help point you in the right direction.
Myth 1: Only dogs can be service animals.
Although this is commonly what comes to mind when we think of service animals, a service animal can
range from a miniature horse (no, I’m not kidding!) to dogs, and everything in between. For someone to
qualify an animal as a service animal, they must prove verification and connection. The need of the
animal must be verified by a healthcare provider. The connection means that the animal must be able to
help with the disability that it is being claimed to assist with. In other words, it is very unlikely that you
will legitimately come across a “seeing eye snake.” The animal must be able to legitimately assist with
the disability. But be careful, you cannot ask a prospective tenant what their disability is.
Myth 2: Only doctors can verify service animals.
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Service animal must be verified by a healthcare provider. By law, a healthcare provider can be a doctor,
nurse, psychologist, physician’s assistant, nurse practitioner, and many, many others. So if a prospective
tenant comes in with a letter from someone other than a doctor, don’t be too quick to dismiss it.
Myth 3: Service animals are only for physical disabilities.
A service animal can also be a “comfort animal” that is used to comfort a person with a mental disability.
This is where things can get really fuzzy. Although you may call a tenant’s bluff regarding the “seeing
eye snake,” it’s more difficult to do so if they claim the snake is a “comfort animal.”
Myth 4: Only certified service animals qualify as service animals.
Although this is a common misconception and there are many companies out there are trying to capitalize
on this misunderstanding, there is no state or federally recognized certification for service animals.
Myth 5: Landlords can avoid service animals with a “no pets” policy.
As mentioned above, by law, service animals are not pets. Not allowing a service animal is a direct
violation of fair housing laws.
There are many other concerns that may arise surrounding service animals, but these clarifications will
help get you pointed in the right direction. If you ever have a specific question about service animals, I
suggest you contact the Southwest Fair Housing Council. They can be reached at 520-798-1568 or on the
web at www.sfhc.com. If you ever have any doubt about a specific situation, it’s better to be safe and ask
the question, than to be sorry later that you didn’t.
BANK OF AMERICA – CHANGING PROCESS AND PROCEDURES (AGAIN)
Bank of America announced that the procedures for Short Sales processing will be significantly changed
for most short sale types. The changes are available via a reply of a webinar, and you are strongly
encouraged to take the time to listen to them. You can access the webinars with the following steps:
1.
Go to Bank of America Agent Resource Center at:
https://realestateagent.bankofamerica.com/default.aspx?cm_mmc=cre-mortgage-_-vanity-_mo01vn0024_realestateagent-_-100110
2.
Under the “Short Sale Resource Center” click on “Visit the Short Sale Resource Center” link;
3.
Click on “Watch Replays from Previous Webinars” to view three great videos.
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May 2012 – Preapproved Price Short Sales
April 2012 – Updates to the Short Sale Process
April 2012 – Task-by-Task Training on Updated Process
BE CHOOSEY AND BE NICE – 11/4/08
The Scenario
The phone rings and you’ve got a sign call on a listing that hasn’t been shown in two months. The caller
is loud and arrogant from the start, cursing about the fact that there are no flyers in the information tube
and demanding quick answers to their questions with no willingness to engage in a two way conversation.
They are just downright rude. And, they want you to show them the house NOW! Guess what, this may
be the nicest this individual is ever going to be!
Sure, you have a fiduciary responsibility to your sellers to do your best to find a buyer. And, you
certainly need the business. Maybe this person is just having a bad day and besides, you can make friends
with anybody – given the opportunity. Right? Maybe – maybe not.
The Risk
The practice of real estate is inherently a high risk/high reward business. Agents and brokers have
significant liability for their actions and words. Clients may or may not be aware of or considerate of that
fact. So, it is incumbent upon us to choose who our clients are going to be in order to minimize the risk
of frivolous legal action against us. Does the behavior displayed initially by this potential buyer predict
their likelihood of suing everyone in sight if all is not to their complete satisfaction?
Is this buyer just a chronic complainer who hates real estate agents and is going to be miserable to work
with? Or, perhaps they have just had a bad day or a bad experience with another agent that deserved their
disdain? As well all know all too well, there are a lot of stressed out people right now and the risk of
somebody deciding to sue us is probably greater now than any time in recent history. Hopefully, if you
decide to try to help this buyer, an initial interview may uncover what their “issues” are and they can be
dealt with and their volatility defused.
What to Do
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Bottom line, perhaps the best possible way to prevent legal action being taken against you is to follow
two simple rules: 1) choose carefully who you decide to take on as clients and, 2) Be nice.
As difficult as it may be, just being nice in the face of rudeness can sometimes disarm somebody
completely and bring them around to the point of reasonableness. Even if mistakes are made during a
transaction, if you’ve been respectful and nice to somebody, they are often forgiving and won’t take legal
action against you.
BE SAFE WITH KEYS 01/08/08
You may recall, with many of us “old-timers” kicking and screaming along the way, Tucson Association
of REALTORS® effected a gradual transition from the older, electromechanical style of key safe to the
latest in design, the GE Supra iBox key safe during November and December of 2006. As a friendly
reminder, you may find it helpful to re-visit the complete information about the iBox product by
accessing www.supraekey.com.
As with many other advances in technology, we have learned that these are far superior products with
many new advantages and features. The iBox has two lithium batteries rated for six years of service life.
And, there is a low battery level warning. There is a no-contact, infrared communication range of up to
three feet between the Supra key and the iBox – no more hassles with the key fitting into the key safe.
The new larger key compartment comfortably stores up to three keys. Electronic notes, flyers and
business cards can be stored in the iBox for showing agents to see. Leaving an alarm code or “beware of
big dog in basement” can ensure a smooth showing and result in higher client/seller satisfaction.
The iBox is compatible with a large variety of PDAs and smartphones as well as Supra’s entyr level
DisplayKey.
The new system trackes buyer’s agents access to the iBox and property showings. This information is
easily accessed by logging onto the “Kim” system:
https://www2.suprakim.com/aeiiiweb/login.asp?LOGINTYPE=LOGOUT&MLS=907MLSPOD=2.90
Another significant improvement in practical use is that the iBox can be programmed for restricted access
times in a number of useful ways. Virtually any access time range can be set to accommodate a property
owner’s schedule and desires. For example, a homeowner may decide they only want their door key to be
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accessible between the hours of 9:00 am until 6:00 pm – or literally whatever hours work best for them.
They also have the option of different settings for Saturdays and/or Sundays. Note that the iBox comes
from the factory with default settings of access from 7:00 am until 10:00 pm.
These time restriction settings can be accomplished by the agent if thy ear using an EKey – but not if
using the DisplayKey. DisplayKey users will have to bring the iBox into the MLS office for setting
changes to be made by TAR personnel. However, a new version of the DisplyKey, called the ActiveKey,
is scheduled for release next year that will have a larger display, more functionality, and not require a
cradle for updating.
Listing agents may want to consider asking the property owner what access times and schedule they want
programmed into the iBox to accommodate any changes that may be desired over the course of the listing.
Consideration may also be given to mirroring that schedule in the “Showing Instructions” and/or the
“Agent Only Remarks” on the MLS listing.
To minimize potential risk, agents may want to consider keeping a backup copy of the door key(s) in their
transaction file, just in case the ones from the iBox are accidentally carried off by a distracted buyers’
agent. New technology can’t always prevent human oversight or forgetfulness.
And, one final suggestion, it is an extremely good practice to remove the iBox at the earliest possible time
after it is no longer needed and absolutely no later than immediately after the transaction has “closed” and
ownership has transferred.
BEWARE! SECRET SHOPPERS ON THE PROWL
It’s a known fact. The U.S. Department of Justice utilizes secret shoppers throughout the country to pose
as buyers and sellers to track what agents are saying and doing. They may contact you by phone or by
internet. They may meet with you personally to shop for a house or claim to own property they want you
to list. They keep notes! They are looking specifically for antitrust violations to prosecute. Are you and
your agents prepared? Does your firm have a written policy advocating against any antitrust policy by an
employee or associate?
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BEWARE WHEN YOU SELF-SEVER YOUR LICENSE!
Real estate agents may elect to sever their license from their employing broker online with the Arizona
Department of Real Estate. Here are the appropriate steps to sever your license online from your current
broker:
1. Notify your employing broker of your intent to sever.
2. Review your independent contractor agreement and fulfill all its obligations.
3. Supply all applicable documents and information relating to your sales or listings to your
employing broker.
4. Return office keys and other materials relating to your employment to the broker.
5. Request permission from your employing broker to assist with any pending sale or owner bournd
by an existing listing agreement. Licensees will be required to attest to the Department they have
followed the above procedures when severing online. The Department will provide written notice
of an administrative severance to your employing broker. Beware! Failure to take the steps
outlined above, or making false or misleading statements to your employing broker, may subject
you to disciplinary action against your license by ADRE. So, do it right and avoid risk!
BUSINESS CARDS – INNOCENT INCENTIVE OR RESPA VIOLATION – 2007
The Scenario
A home buyer is having an inspection performed during the ten (10) day inspection period. The Buyer’s
Agent sets up the appointment and after the inspection the home inspector gives the selling agent his
business card. Printed on the back side of the home inspector’s business card received by the agent the
following statement appears….. “The inspection company will pay the sales agent a referra fee for
referring a client to their firm.”
The Risk
When the recipient of the card accepts the card and attempts to collect a referral fee a serious RESPA
violation may have occurred. RESPA specifically prohibits giving or receiving anything of value for the
referral of settlement services subject to certain exceptions. Violators of RESPA may receive harsh,
costly penalties, including treble damages, fines and even imprisonment.
What to Do
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Contact the home inspection company and tell them that you cannot receive a referral fee for referring a
client to them since this action may be viewed by HUD as a violation of the Real Estate Settlement
Procedures Act. Further, advise the owners and and/or supervisors of the home inspection company to
remove the statement from their business cards and any promotional material where it might appear. And
equally important, as a fellow professional in the real estate business, attend the next scheduled TAR
RESPA seminar and get updated on what you can and cannot do when it comes to working with
settlement service providers…it just may prevent you from becoming blindsided, save you some “big
bucks and even your license.
CBS CODES
The Scenario
An agent lists a property for sale that is currently occupied by tenants, and has an agreement in writing
between the owner and the tenants that allows a lockbox to be placed on the property. However, the
tenant has not waived their right to 48 hours notice to enter pursuant to the Arizona Residential LandlordTenant Act (AZRLTA). The listing agent acts accordingly and states in the showing instructions: “Tenant
occupied, 48 hours notice required, must call for appointment.” A cooperating agent is showing the house
for sale across the street, and the buyer notices the for sale sign across the street. The cooperating broker
does not see any cars in the driveway, rings the doorbell, and then accesses the keysafe to show the
property.
The Risk
Even though the cooperating agent is in violation of the showing instructions, the owner of the property is
ultimately liable under the AZRLTA for unauthorized access. A.R.S 33-1376 section B states “If the
landlord makes an unlawful entry …the tenant, the tenant may obtain injunctive relief to prevent the
recurrence of the conduct or terminate the rental agreement. In either case, the tenant may recover
actual damages no less than an amount equal to one month’s rent.” Agents should also take note on
how to properly calculate 48 hours notice. “Receipt” under the AZRLTA is considered when actually
received, OR five days after the date the notice is mailed certified or registered mail (see A.R.S. 33-1313).
Example: Notice to enter is mailed on Monday. The notice is considered received on Saturday. The
showing cannot occur before Tuesday. Email is not considered valid notice under AZRLTA unless the
tenant acknowledges actual receipt of the notice.
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What to Do
Protect against unauthorized showings using the Supra iBox keysafe. The blue keysafes used by the
Tucson MLS have a special feature called a “CBS Code”, which stands for “Call Before Showing.”
Here is how it works. A listing agent programs and activates a CBS code into the iBox before the box is
placed on the listing. The listing agent must mark in the “Showing Instructions” field that to show the
property agents must call the listing agent or office to get access. Once the iBox is on the listing, showing
agents will not be able to open the key container without the CBS code.
To have a CBS code programmed, or deprogrammed from the iBox, you may bring the iBox to the
Tucson Association of REALTORS® office, or if you have an eKEY you can program your iBox by
opening the shackle and choose Edit on the Keybox Details screen after the shackle has been released.
To show a property on a CBS enabled iBox, you will need to call the listing agent/office to obtain the
CBS code.
ActiveKEY: Turn on your ActiveKEY Select the “Call Before Showing” option. Enter the CBS code and
press Enter/OK to save the code. Finally, select Obtain Key and using your personal PIN code open the
box just like a regular listing.
eKEY: When attempting to access an iBox with a CBS code, you will be prompted to enter the CBS
code. Enter the code and point your key/fob at the box. This feature is not just reserved for tenant
occupied properties; it may used on any listing to prevent unauthorized access by a cooperating broker.
CHINA DRYWALL SYNDROME OR THE NOT-SO-GREAT DRYWALL OF
CHINA
The Scenario
Who is ready for one more thing to worry about? How about a new toxic material to check for in the
homes we help people sell and buy? Let’s get one that really stinks this time too. No more of that
odorless, colorless and invisible stuff. Well, it may be coming to a southern Arizona location that you
serve soon. It is called “Chinese Drywall.”
Due in part to the construction boom resulting from the widespread rebuilding that took place after
hurricane Katrina, and the unrelated housing boom in general, there was a shortage of drywall available
from U.S. suppliers. According to many authoritative sources, approximately 20 million square feet of
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drywall was imported from china between 2002 and 2008 and was used in and is exposing 50,000 to
100,000 homes to the toxic elements it contained. Progems have been reported in newly constructed
homes in more than a dozen states so far – mainly in the south and east, but also to include California.
Florida is probably the worst hit so far.
The problems are not limited to new construction, however. Any home that was remodeled involving
replacement of walls with the offensive drywall during this time period will probably suffer the same
problems.
Due to naturally occurring materials found in the tainted drywall, it emits a foul odor like rotten eggs.
This seems to be exacerbated by humid conditions and being closed in – as in home construction.
The Risk
Exposure to the toxic gases may cause a variety of health problems depending on individual sensitivities.
Symptoms are said to include headaches, respiratory ailments, irritated eyes, and nosebleeds. In addition,
the toxic gas is thought to be responsible for corroding copper and tarnishing silver, resulting in the
failure of everything from computers and TVs to air conditioners and refrigerators.
What to Do
Use caution and be aware and informed. First, make sure that your clients are advised about the potential
for this hazard just like all other possible structural/environmental hazards in a home, e.g., lead, asbestos,
radon, etc. Next, ensure that the home inspector that is employed is familiar with the issues and the
potential for concern with Chinese drywall. Ask them to make specific written remarks regarding this
issue in their inspection report.
Lab testing for sulfur and toxic materials is available for suspected product.
As with some other toxic materials found in homes (lead, asbestos, radon, etc.) there can be legitimate
and effective methods of mitigation and hazard reduction and/or removal if Chinese drywall is found.
Please take the time to further education yourself on this topic by visiting the following linked websites:
http://www.epa.gov/oswer/docs/chinesedrywall.pdf
http://www.chinesedrywall.com/
http://chinesedrywallblog.com/
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http://blogs.consumerreports.org/safety/2009/03/chinese-drywall-corrosion-health-problems-sulfurodor.html
http://www.cpsc.gov/info/drywall/index.html
http://pubs.acs.org/cen/science/87/8718sci2.html
http://www.cdc.gov/search.do?queryText=chinese+drywall&action=search
CLIENT’S CONFIDENTIAL INFORMATION
The Scenario
Agent for buyer receives a personal check from the buyer for earnest money in connection with an offer
to purchase.
The Risk
Client confidential account information on the check should be protected from third parties to avoid
identity theft.
What to Do
First and foremost, protect your client’s confidential information! Keep their earnest money check in a
safe, secure and private place until it is either deposited in escrow or returned to the client. Do not provide
copies of earnest money checks to anyone but your client unless they expressly instruct you to do so.
COPYCAT! BEWARE COPYRIGHT!
The Scenario
You just listed a great home, and you are given a copy of the builder’s floor plan by the Seller. The Seller
also gives you a disc with several professionally done photographs of the home – another gift to the Seller
from the builder. You proudly upload all to MLS, and await the Buyers’ agents to show and sell your
listing!
The Risk
The builder just happens to be scrolling through MLS listings, checking out homes he’s built in the past,
and notices your property’s listing. He recognized the floor plan is his, designed by him, and also notices
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the “glamour photos” that he shot of the home. He also recalls that he never gave permission to the
Seller, nor to you, the agent, to utilize his photographs or his floor plan design in any way. Guess what?
You have just violated his copyright!
He decides to contact you, the listing agent, and offers to let you continue to use his photos and floor plan,
but says that he expects you to immediately send him a check for $5,000.00. You are stunned, and
decline his offer. Too late! You have already used them, and have already violated his copyright. He
hires an attorney, and sues you for the copyright violations – plural violations – because it was several
photographs.
What to Do
Understand copyright laws have changes. The photographer, the architect, the sketch artic, the poet –
anyone who “CREATES” immediately owns the copyright to their creation. You do not have the right to
copy it, or fax it, or publish it in any way – including via internet – without the express permission of that
creator. To do so, violates their copyright, and makes you liable.
Make sure, if you are not shooting your own photos, that you have written permission from the creator
(the photographer) to use and publish his photos. Do not copy a previous agent’s photos from MLS, crop
the watermark, and then re-use; it’s the same problem: You have violated their creative copyright
ownership.
Be the creator, or make sure you have written permission to use!
DEBT RELIEF
The Scenario
President Bush signed into law HR 3648- Public Law 110-142 on December 20, 2007. This is the
MORTGAGE DEBT CANCELLATION RELIEF ACT.
A brief summary of this bill: Generally, individuals who are relieved of their obligations to pay some
portion of a mortgage debt on a principal residence between January 1, 2007 and December 31, 2008 will
not be required to pay income tax on any amount that is forgiven.
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The Risk
When consulting a homeowner who is in default and moving toward foreclosure, we often work with
them to obtain a “short-sale” payoff from their lender(s). During the distress that accompanies this type
of transaction, some agents are tempted to soften the impact by stating, “The President just signed into
law the Mortgage Debt Cancellation Relief Act and you will not have to pay the capital gains associated
with the deficit.” You may have made an untrue representation with that statement.
What to Do
This is a complicated bill with many, many provisions. The PROPER advice would be, “This is an issue
that you must discuss with your legal and/or tax advisor. We cannot give advice that falls out of area of
expertise.”
As per our NAR Code of Ethics, Article 11:
The services which REALTORS® provide to their clients and customers shall conform to the standards of
practice and competence which are reasonably expected in the specific real estate disciplines in which
they engage; specifically, residential real estate brokerage, real property management, commercial and
industrial real estate brokerage, real estate appraisal, real estate counseling, real estate syndication, real
estate auction and international real estate.
REALTORS® shall not undertake to provide specialized professional services concerning a type of
property or service that is outside their filed of competence unless they engage the assistance of one who
is competent on such types of property service, or unless the facts are fully disclosed to the client. Any
persons engaged to provide such assistance shall be so identified to the client and their contribution to
the assignment should be set forth. (Amended 1/95)
DEEMED RELIABLE BUT NOT GUARANTEED
Not when commission is involved. Make sure that you are a real estate practitioner personally review
your listings after they have been placed into the MLS.
The Scenario
You, the real estate practitioner, place a listing in the MLS with a cooperative compensation stating 4% in
the Coop Fee field on the MLS input sheet. After a period of time without receiving an offer the seller
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decides to reduce the listing price and subsequently requests that the cooperative compensation be reduces
to 3% of the gross sales price. You have the seller sign a status change form and you change the listing
price but neglect to change the commission in the Coop Fee field. Prior to you noticing that there is a
mistake on the listing, you receive an offer which is negotiated successfully and escrow is opened. You
do not realize that there is a discrepancy on the listing until you are reviewing the HUD-1 statement prior
to close of escrow.
The Risk
You will be obligated to compensate the cooperating broker the 4% of gross sales price die to the
information on the MLS listing at time of acceptance of purchase contract. The buyer’s broker’s
commission is not affected by the listing broker’s agreement with the seller. Unless otherwise agreed, the
listing broker is obligated to pay the buyer’s broker the amount of commission offered in the MLS,
regardless of any subsequent agreements between the listing broker and the seller.
What To Do
Review all new listing information as well as changed information on all listings as soon as possible.
Mistakes happen but can easily be resolved if corrected prior to acceptance of a contract. If you are
working with an agent and you realize a mistake, notify the agent in writing as soon as possible,
sometimes mistakes can be resolved easily if both parties agree in writing to make a change.
Communication is the key!
DID YOU KNOW? FHA HOME LOAN CHANGES – IN EFFECT JUNE 2013
rd
FHA home loans are under new changes as of June 3 , 2013. Earlier this year, HUD, which
oversees the FHA, announced their latest budget numbers and a slew of new methods they will use
to try make the agency’s finances more balanced. Specifically, here are the two most important
parts of their announcements for someone considering a FHA loan:
1. FHA Mortgage Insurance annual premiums (MIP) moved from 1.25% to 1.35% for borrowers who
make a 5% or less down payment as of April, 2013. The Up Front MIP fee still remains at 1.75% which is
typically financed on top of the base loan amount.
2. The policy that allows a homeowner to cancel the MIP on their FHA loan after 5 years if they are at
78% of the value of their home will be eliminated for any new FHA case numbers assigned after June 3rd,
2013 depending on the initial down payment at time of closing.
 For all mortgages regardless of their amortization terms, any mortgage involving an original
principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent
25
LTV (Loan-To-Value), the annual MIP will be assessed until the end of the mortgage term or for
the first 11 years of the mortgage term, whichever occurs first.
 For any mortgage involving an original principal obligation (excluding financed UFMIP) with an
LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term
or for the first 30 years of the term, whichever occurs first.
Information provided by: Paul Volpe (NMLS# 48278) of Nova Home Loans
DID YOU READ THE NEW HOME BUILDER CONTRACT? - 2007
The Scenario
Your clients are planning to look at model homes build by a new home builder and you know that you
need to be there on the first visit to register them. Everyone is excited by all of the opportunities and
discounts you can get from the builders these days. You spend days showing all of the new home sites to
your buyers trying to find the right one that fits their lifestyle. Once a home is selected and a decision is
made to purchase, we go see the site sales Agent. This is the point where our services and expertise
becomes invaluable. Negotiating and reading the entire contract, looking for stipulations is the key. Plan
on spending a couple of hours at a minimum to ensure the buyer is aware of what they are agreeing to.
The Risk
Are you fully representing your client if you did not read the builder contract and the Public Report?
Builders have the right to use their own contracts as stated in the Builder Broker Code. These contracts
are different than what we normally use as an Agent and mainly represent the new home builder, not the
Buyer. There are no guarantees that it will have the loan or appraisal contingencies built into it to protect
your Buyer, like the resale purchase contract does (see line 50-61 of the RPC 5/05). If the new home does
not appraise for full purchase price, your Buyer might have to complete the purchase or risk losing the
earnest money.
What to Do
Read everything the Buyer has to sign and make the recommendation that the Buyer have an attorney
review the documents before they sign anything. Negotiate with the builder to make the necessary
changes to the contract to add the contingency verbiage you need to protect your Buyer, before they sign.
Once you are under contract there is little hope that a builder will agree to something in the Buyers favor.
It is very important to fully understand what your client is about to sign and making sure they do too.
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DO YOU KNOW WHAT PROCURING CAUSE IS?
Do you know what procuring cause is? Or what the state co-broker commission in MLS means?
In today’s real estate market, REALTORS® are face with issues involving procuring cause and MLS cobroker commission agreements. Becoming more knowledgeable in these areas will help protect you and
your commission. AAR’s General Counsel Michelle Lind has written a great article on this issue. Click
here to learn more about this.
DODD-FRANK – Written by:
Scott Drucker, AAR General Counsel
The Consumer Financial Protection Bureau Issues Additional Regulations Pertaining to
Seller Carryback Financing
On January 20, 2013, the Consumer Financial Protection Bureau (CFPB) amended Regulation Z of the
Truth in Lending Act to implement recent amendments made by the Dodd-Frank Act. This final rule,
which is currently set to go into effect on January 10, 2014, incorporates requirements and restrictions
imposed by the Dodd-Frank Act in addition to better defining certain prohibited acts and practices.
Of significance to the issue of seller carryback financing are changes made to Regulation Z of the
Truth in Lending Act, 12 CFR § 1026. Pursuant to § 1026.36, which includes a definition of the term
“loan originator,” certain seller financers are to be exempt from the definition. Specifically, 12 CFR §
1026.36(a)(1)(i)(D) expresses that the term “loan originator” does not include “A seller financer that
meets the criteria in paragraph (a)(4) or (a)(5) of this section, as applicable.” Consequently, the
Effective January 2014, seller financing for only one property in any 12-month period can be offered
if:
1. The seller is a natural person, estate or trust;
2
The seller did not construct the home;
3. The financing does not result in negative amortization; and
4.
The financing has a fixed rate or does not adjust for the first five years.
Effective January 2014, seller financing for no more than three properties in any 12-month period can
27
be offered if:
1. The seller is a natural person or organization, i.e. – partnership, corporation, association, trust, estate,
etc.
2. The seller did not construct the home;
3. The loan is fully amortizing, no balloon payments permitted;
4. he financing has a fixed rate or does not adjust for the first five years; and
5. The borrower has the reasonable ability to repay the loan.
No exemption yet exists for the financing of four or more properties in any 12-month period, meaning
that, as of January 2014, such financing must be offered by a licensed loan originator.
Read more: http://www.aaronline.com/2013/02/the-consumer-financial-protection-bureauissuesadditional-regulations-pertaining-to-seller-carryback-financing/
Republished with permission by Scott Drucker, AAR General Counsel
THE DOG ATE MY HOMEWORK – 03/04/08
The Scenario
It is late Friday afternoon and a tech savvy buyers’ agent, after leaving a detailed message on your home
office phone recorder about that vacant listing of yours, sends a signed purchase offer (prepared with
ZipForm®) via email to your email address shown on the MLS listing. Just in case, she also sends a copy
to your home office fax machine.
You however – a struggling self-employed, one-man-show, owner/broker, have decided at lunchtime that
you and your spouse need to get away for a weekend to Rocky Point. None of your listings have been
shown for over two months anyway. It is time to just take a couple of days and get away from the stress
of this difficult market and recharge your batteries by “unplugging” for a short rest.
The Risk
You don’t’ discover it until Sunday afternoon on the rid back to Tucson, but your cell phone service
apparently went out and there are now six messages waiting for you on the cell phone. You later find out
there are four messages on the home office phone recorder also.
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The full price offer that came in specified a respond deadline of 5:00 pm on Saturday. Since the buyers’
agent did not hear back from you and there was no supervision for them to try to contact, the buyers were
put off and decided to keep looking. At 9:00 am, Sunday morning, they instructed their agent to
withdraw their offer by phone message, email and by fax. By noon on Sunday, the buyers found a house
they liked better and were no longer interested in your listing.
What to Do
Decide how you are going to explain this to you seller. No excuse is going to work very well. You migh
as well use the old standby: “The dog ate my homework.”
In this business, all avenues of communication: telephone messages, text messages, emails, faxes, snail
mail must be checked on a regular frequent basis – daily, at an absolute minimum – even in slow times.
DO NOT CALL REGISTRY – ARE YOU VIOLATING?
Are you doing everything you can to ensure that you are not violating the National Do-Not-Call Registry
rules? Test your knowledge of the federal guidelines by taking this quiz.
DON’T’ BE A VICTIM…PRACTICE SAFE SHOWINGS
1. Always keep a mobile phone at your side; program emergency numbers into speed dial.
2. Meet all new clients at your office and verify their identity.
3. Whenever possible, avoid being at the office alone.
4. Take a personal safety course.
5. Install deadbolts with full one-inch bolts on all entry doors to your home and the door to your
home office.
6. Make sure you know your route to and from each property you visit.
7. When you are alone getting into your car, the first thing you should do is lock the doors.
DON’T FALL INTO THE DEEP END – USE THE “APPROVED” POOL SAFETY
NOTICE
When it comes to swimming pools or any body of water on the property, we want to make sure our
29
client knows where to find the information needed to research all the Swimming Pool Barrier
Regulations for their area. Since the state, county and municipalities vary on these regulations, our AAR
Residential Resale Real Estate Purchase Contract in section 6g (see below) and the Buyers Advisory,
page
4, has the information needed to help find the rules and regulations for their area.
Section 6g – This section puts the onus on the buyer to: agree to investigate all Swimming Pool
Barrier Regulations, comply with and pay all costs of compliance and acknowledge receipt of the
Arizona
Department of Health Services private pool safety notice. Click link to get a copy
http://www.azdhs.gov/phs/oeh/pool_rules.htm
As a professional, you will be raising the bar just by making your clients more aware of this
information and giving them the “approved” Pool Safety Notice. As always, if you have questions
regarding this, please see your broker for advice.
DON’T POOH-POOH A DRAIN INSPECTION
The Scenario
A buyer’s agent shows a new construction home with a large tree in the front yard. A contract ensues.
The physical inspection reveals that the tree may cause problems in the future with the sewer lines and
drain pipes. Because of the relatively new construction of the home nothing further happens and the
parties involved determine it will be a long time before any potential problem would arise.
In a similar situation, but this time with an older home, a buyer’s agent prepares and successfully
negotiates a contract with a huge tree in the front yard. In this case, the physical inspector also reports
that the location of a tree and its size could cause drain problems. Because no problems have ever been
detected and/or experienced by anyone no additional inspections are conducted.
The Risk
Ignoring, overlooking and minimizing input from inspection reports, as depicted in the above referenced
scenarios for both a newer home as well as an older home, can result in a highly uncomfortable situation
with dire consequences.
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In the first case, after living in the new home for several months, the buyers experience a serious problem
where the plumbing was backing up into the home causing all kinds of unspeakable situations. The
plumber called in to clean and repair the mess determined that pieces of wood during the construction
phase were carelessly allowed to enter the commode drain causing the main drain to malfunction. The
buyers wanted to know who they could hold responsible for the mess and if the brokers/agents involved
could chip in and help pay for the costly repairs and damage.
With the older home, some months after occupancy, the sewer started backing up. This unsettling
situation was accompanied by an unbearable odor that had erupted. After coping the lines, the plumber
determined that the root (no pun intended) of this problem was twofold: large, overgrown tree roots were
responsible for the blockage; and the lines going to the house from the street, including the pipes under
the home were collapsing and that the cost of repair in this instance would come to $11,000.00. The
buyers were furious.
What To Do
When a potential problem is brought to the attention of your buyer have the inspector relate suggested
options for them to consider. For example, the physical inspector may recommend that a plumber
perform a “boroscope” (fiberscope) inspection. Ask you client what they want to do as a result of the
counsel and warnings from the inspector concerning the appearance of large trees on their property.
Record your discussion with the buyers and their subsequent decision. Whatever the cost of this
additional inspection (depending on the property some estimates range between $155-175) it sure beats
the alternative.
DO WE HAVE DATE?
The Scenario
The purchase offer was made late on the evening of August 14. Because of an emergency at their place
of business, the Sellers were not able to meet with their agent and sign their acceptance of the offer until
Friday evening, August 15at about 9:00 pm – but the buyers had given them until noon on Saturday to
respond so it was not a problem. And, several phone calls had reassured everyone that “we have a deal.”
The sellers’ agent did not fax the accepted contract to the buyers’ agent until about 10:00am on Saturday,
August 16.
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The Risk
The Sellers believed that they had an accepted, enforceable contract as of time of their signature – on
Friday, August 15. Their agent confirmed that, and helped them calculate that the routine 10 day
inspection period would begin the following day and run for 10 calendar days – through 11:59 pm on
Monday, August 25. Therefore, if the buyers do not deliver a Buyer’s Inspection Notice and Seller’s
Response (BINSR) from by that deadline, the sellers are off the hook for any repairs or rejection by the
buyers based on defects or material fact issues. The Sellers are aware that their property is in need of
many repairs including some major roof work but, because of many discussions prior to the offer, they
believe that they have agreed to a sale price that reflects those facts and trust that the Buyers will not
make further demands for concessions or repairs as promised – they simply could not afford them at this
price – and still be able to purchase the new home that they want.
When the deadline comes and goes, the sellers feel relieved and are much more comfortable about the
likelihood of closing on their old home and go ahead with their offer to purchase their replacement home
without a “Contingent on Sale” clause which had previously been refused. Thrilled with the noncontingent offer, the secondary Sellers rush to their agent’s office and accept immediately. The
completed contract is delivered to all parties and escrow is opened. All if this gets accomplished before
noon and everyone goes to an expensive lunch together to celebrate – this deal has been a long time in the
making.
At 3:00 pm the Buyers’ agent (on the first deal) delivers the completed BINSR to the Sellers’ agent –
asking for more than $25,000 in repairs. When the Sellers’ agent confronts the Buyers’ agent about the
deadline having already expired, he gets a friendly education from her. The deadline is 10 calendar days
after the contract date, which was August 16 (since it did not get delivered and received until that date).
So, their inspection period deadline is Tuesday, August 26 at 11:59 pm – they have 8 more hours to gobut they don’t need them.
What To Do
Pay attention to the details and understand the terms of the contract. The contract language is pretty clear
on this point: line 336 says, “Contract acceptance occurs on the date that the signed Contract (and any
incorporated counter offer) is delivered to and received by the appropriate Broker.” Therefore, contrary
to the mistake commonly made of using the date appearing on line 388 next to the Seller’s signature, the
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actual Contract Date could very well be later than that, dependent on the actual delivery date – or counteroffers and their delivery dates.
DUTIES TO REALTORS®
When previewing a home listed by another REALTOR®, do not offer a negative opinion on the merits or
validity of the other agent’s business model or practices to the seller. Article 15, Duties to REALTORS®,
states that REALTORS® shall not knowingly or recklessly make false or misleading statements about
their competitors, their businesses, or their business practices. Moral of the story: Resist the urge to
knock another REALTORS® way of doing business, especially to that person’s own clients. If you
believe there is a violation REALTOR® ethics, however, file a formal complaint.
EMAIL ETIQUETTE
It is important to understand that email users differ in their ability to read and handle email. The sender
or an email needs to be aware of the skill level and even the technical limitation so of their audience. To
conduct effective email communications, it is suggested that you do the following:
1. Create a useful subject line. This helps sort and locate messages in the future.
2. Check your spelling and use spell check before you send your email. Misspelled words can play
havoc on your image and reputation.
3. Respond to your email promptly. Except when it may have an emotional impact on you or when
it makes you angry. Remember once you hit the send button, you can’t bring it back.
4. Check your email multiple times daily.
5. Avoid using all UPPER CASE letters. It is a form of shouting and is hard to read.
6. Consider the size of an attached file. Make sure large files don’t create problems for the
recipient.
7. Use good professional judgment when describing situations and talking about others in your
email messages. Email is easily forwarded. What you say and how you say it might come back
to haunt you at some time in the future. Email lives forever!
8. Limit, if possible, your line length to 75 characters. This will ensure property wrapped lines and
a complete receipt of your message.
9. Keep your message brief and to the point.
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10. Send messages in plain text or rich text format.
11. Convey meaning through the occasional use of emoticons (“smileys” or characters strung
together to form a picture when read sideways, such as  a smile or  a frown.
EMAIL PROTECTIONS
Protect yourself! Remember that despite the ease and spontaneity of email, courts are still treating
electronic communications in the same manner as traditional written communications. Even merely
forwarding an email that contains defamatory statements could result in liability – for the forwarding
party, as well as the original author. Linking to another site that contains defamatory information also has
its risks, which can be minimized by posting a disclaimer. Any company that provides internet and email
access to employees should education them on defamation risks and prohibit the transmission of
defamatory statements electronically. Bottom line – treat all messages placed on the Internet as if they
were a postcard.
FAIR ADVERTISING PRACTICES
All forms of promotion done by a brokerage company and by individual sales associates, including
marketing brochures, newspaper advertising and radio ads, must comply with the nondiscriminatory goals
of the Fair Housing Act. Even owners of single-family rental homes aren’t exempt from the requirements
of fair advertising. To comply:

Avoid using language that indicates a bias against a protected class.

Use consistent language in all advertising for the same property.

Describe the attributes of the property, not of the prospects you think would like it. For
example, say “a beautiful fully-fenced backyard,” not “ a great backyard for children.”

Use human models of different ages, sexes and races in your advertising, if you se models.

Choose advertising media that cover a broad range of markets and don’t exclude certain groups.
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FAIR HOUSING – 5 KEYS TO REDUCING LIABILITY
Ensuring that your company provides equal service standards and encouraging sales people to keep
careful records provides a strong defense against charges of fair housing violations.
1. Develop a standardized list of questions salespeople can use to qualify all prospective sellers;
develop a similar list for buyers. Have salespeople take down responses to the questions on these
forms and keep them on file.
2. Establish specific formulas that salespeople can use to determine the price range of houses that a
prospective buyer can afford so that the salespersons judgments don’t seem based on
discriminatory criteria.
3. Keep a record of every property shown to buyers so that you can later demonstrate that you
followed the criteria established in the qualification process. If buyers make requests for specific
areas, note that in your records.
4. Keep phone logs of inquiry calls made to the company and train receptionists in a standardized
response to questions about the company’s services. Remember that a prospect doesn’t have to
become a client to sue for discrimination.
5. Record how the salesperson chose the houses that were shown and what criteria were used to
eliminate other potential homes.
FAIR HOUSING RED FLAGS
An ounce of prevention is often worth a pound of cure in correcting fair housing violations among your
staff and salespeople. Look for:

The use of racial comments or excessive use of sexual or ethnic humor by associates;

The use of inconsistent standards in qualifying prospects;

An unwillingness to attend fair housing training; or

Warning signals in client surveys that indicate a bias by an associate.

If you see a salesperson or member of your support staff engaging in any of these activities more
than once, counsel the associate on fair housing requirements immediately. If this conduct
persists, you don’t want him or her on your staff.
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FIRE PROTECTION
One of the problematic things which make Southern Arizona unique is that it is served by 25 different fire
districts. Properties in these districts are protected when they pay for this service through either property
tax or by subscription. Unfortunately, districts do not automatically include subdivisions or individual
homes and so unprotected properties must be annexed into these fire districts for protection. Unlike
cities, where annexations automatically include fire protection, fire districts are controlled by a board of
directors which are not part of cities and towns and they may not have made the decision to annex a
property.
There are also areas of Southern Arizona not covered by any fire protection, neither through subscription
nor through tax assessments. Recently we have learned some or even many Insurance companies may
drop their homeowners insurance upon renewal this year if the property does not have coverage. It is also
important to know that if a fire happens on an unprotected property, a fire district is only obligated to
protect human life and to prevent the fire from spreading to nearby structures. Should such a fire occur
on unprotected property, the homeowner will most likely receive a bill for this limited service, even after
their structure has been destroyed.
We believe this may be a potential problem for real estate agents and their clients. We must ensure that
our clients are aware of these issues and they must determine if their property or property of interest has
fire protection or not. We should let them know if there is no protection they may not be able to get or
keep a homeowners policy.
Suggest to your clients to use http://www.northwestfire.org/about/interactive to determine if a property is
properly covered for fire protection.
FIXING AN AFFIDAVIT OF AFFIXTURE
The Scenario
Lender-owned manufactured home is being sold. After the foreclosed and repossessed the property it was
discovered that the escrow officer had failed to properly record and Affidavit of Affixture with the county
recorder’s office. The file was misplaced that held copies of the Title and Affidavit of Affixture. Unable
to locate the original Title to the manufactured home in order to procure a new Affidavit of Affixture, the
title company attempted to contact the manufactured home dealer to acquire a copy of the original title.
Unfortunately, the dealership was out of business after filing for bankruptcy. The manufacturer of the
home was then contacted in an effort to obtain a Manufacturer’s Statement of Origin (MOS) so that a new
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copy of the title could be obtained. After six months of pleading with the manufacturer, the manufacturer
finally issued the required documentation. The MOS can be used to get a duplicate title after being taken
to the Arizona Motor Vehicle Department for processing, and a new Affidavit of Affixture may be drawn
up for future recordation.
The Risk
Without an Affidavit of Affixture being properly recorded, the manufactured home remains personal
property. Buyer is unable to procure financing to purchase the property without an Affidavit of Affixture
and the listing agent is unable to legally sell the property unless it is converted to real property.
What To Do
Regular written communication with weekly updates between the seller/listing agent, buyer/selling agent,
buyer’s lender, escrow officer, and the title company is imperative. Copies of written closing date
extensions should be provided to all parties, as necessary. Confirm with lender that delay in closing will
not affect the buyer’s ability to obtain loan funding, negotiate with the seller who will pay for additional
expensed to maintain buyer’s loan rate lock or for reimbursement of costs to re-draw buyer’s closing
documents due to the delay in the closing. Once a duplicate Title is obtained, escrow can record an
Affidavit of Affixture with other required closing documentation (Deed, Affidavit of Value, Deed of
Trust, Loan Note, etc.) to complete and close the sale.
GARAGE DOOR REPAIRS
The Scenario
Seller has a dent is his garage door, and it is noted during Buyers Inspection. BINSR requests that the
dented panel of the garage door to be replaced. Sellers’ Agent says, “No big deal…” and encourages
Seller to agree to that repair, which Seller does. Sounds like a simple repair, as the panel CAN easily be
slipped out, and a new one installed.
The Risk
BE CAREFUL! If the garage door is more than 6 months old, your Seller may discover that his garage
door is no longer being manufactured, and there are no replacement panels available! Garage door
companies change designs regularly, and most do not stock replacement panels at all!
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What will you Seller need to do to fulfill his agreement to replace the one dented panel? He will find that
he will be required to purchase an ENTIRE new door. Instead of a simple $75- $100 repair, the cost of
the new door will average $450 - $850.00 or more! He will be looking at you, his Sellers’ Agent to pay
for this, as it was YOUR recommendation to agree to this BINSR request.
In addition, almost all HOAs require that garage doors be PAINTED. Did the BINSR address who will
paint his one panel if it could have been replaced? Who paints the whole new door? Probably the
Buyers’ Agent will foot the bill for this, as he should have made that a part of the BINSR repair request.
(We have found that garage door paint jobs average about $135.00- $250.00 minimum, in case you’re
wondering.)
What to Do
If BINSR requests replacement of garage door panel, get an immediate quote to determine actual cost,
and if the panel is even available at all, BEFORE your Seller responds and agrees to the repair. And
remember the paint, too!
HEADS UP! DISCUSS TITLE INSURANCE FOR NEW HOMES
At a recent presentation of the Arizona Department of Real Estate, a point was made about a problem
with new construction and builders in these challenging economic times.
The Scenario
Our Happy Home Buyers closed on their lovely, newly constructed home. Several weeks after moving in
they are notified of a Mechanic’s Lien that has been filed on their home.
What to Do
Be sure your client discusses with the title company prior to closing the advantages of an extended ALTA
Homeowner’s Policy. One advantage is if an extended policy is in affect and a lien is placed before or
after close of escrow, your client is protected.
HOME WARRANTY = RISK REDUCTION – 03/10-09
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The Scenario
You are representing the Buyer on a residential resale property. You and the Buyer are working your way
through and completing the Purchase Contract and come to Section 6L , lines 257 through 263 where it
advises:
Buyer and Seller are advised to investigate the various home warranty plans available for purchase. The
parties acknowledge that different home warranty plans have different coverage options, exclusions,
limitations, service fees and most plans exclude pre-existing conditions.
A decision needs to be made at this point if a home warranty is going to be included in this contract.
Actually, the decisions to be made include: a. who will order it, b. any optional coverage, c. which
warranty company, d. what maximum cost and e. who is going tp pay for it. Or, one final option is to
decide to decline the purchase of a home warranty plan.
The Risk
Decisions and consequences. How well prepared is your Buyer to make wide decisions about this issue?
What is your recommendation going to be? Hopefully there has been an in-depth discussion about a
home warranty prior to coming to this point – and some home work done on their part. How often does
this happen?
Purchasing a new home without a home warranty exposes the Buyer and the Seller and the real estate
agent, and possibly the home inspector, as additional risk. Exactly what that is risk is and how
detrimental and expensive it may prove to be will depend on circumstances and actions taken – but have
now doubt about the presence of risk.
Another facet to consider on this topic relates to the errors and omissions insurance coverage that your
broker has. Some E&O coverage is limited or absent if a home warranty plan was not made part of the
real estate transaction.
What to Do
Buyers and Sellers and real estate agents must make sound decisions about purchasing a home warranty.
And, if the protection is desired, somebody is going to have to pay for it.
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Sellers should give strong consideration to paying for the home warranty. Even though they are not
named as the insured, it gives them great protection against future claims. It’s also a nice gesture of
goodwill. And, maybe it can be used as a bargaining chip for something else desired in the transaction.
If a Seller refuses to pay for a home warranty, Buyers should give strong consideration to doing so
themselves. It provides a lot of peace of mind and protection against potential major expense of repair or
replacement at a time when budgets are typically stretched to the max already.
If both parties to the Purchase Contract decline to purchase a home warranty, real estate agents should
give some consideration to paying for it as a prudent way to protect themselves from future claims of
liability.
Of course negotiate of a two or three-way split of the expense may also be possible.
HOW DO YOU STAND OUT?
Q: How do you stand out from other licensees, but remain authentic and trustworthy?
A: Use the REALTOR® trademark. For all members to realize this member benefit, the REALTOR®
trademark must be used correctly. Click here to watch an entertaining 3 minute video on how to preserve
and promote the meaning and value of the REALTOR® trademark. If you have additional questions on
the proper usage of the REALTOR® trademark, contact Cheri at [email protected] or 382-8772.
IF YOU ARE LISTING SHORT SALES, DO YOU KNOW WHAT HAFA IS?
Q: I have a Short Sale Listing and my Seller has asked me about the Home Affordable Foreclosure
Alternatives (HAFA) government program they received in the mail from their Servicer Creditor/Lender).
This program is new to me, where do I go to find more information about this?
A: If you currently have or are listing a Short Sale, it is important for the Seller to know about this
government program. Have the Seller contact their Servicer as soon as possible to see if they meet the
basic eligibility and to start the process. Go to the Servicers web site for more information,
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MakingHomeAffordable.gov and http://www.realtor.org/government_affairs/short_sales_hafa to learn
more. This program has many conditions to it and rules that vary depending on who is backing the loan;
Freddie Mac, Fannie Mae or non-GSE. If the Seller is eligible, this program will streamline the short sale
process and provide many benefits to them. One of the main benefits of this program is, it requires the
Servicer to release the debt from future liability. Education is key to staying informed with short sales,
plan on taking a class on this HAFA program to be knowledgeable in your area of expertise at your local
real estate school.
IMPUTED KNOWLEDGE CAN BE DANGEROUS
The Scenario
During a property tour with the owner at a listing appointment you notice extensive evidence of termite
damage and the presence of subterranean termites. In your discussion with the prospective seller you
recommend a pre-listing termite treatment by a licensed pest control company. The home owner says he
will address the problem immediately and implement other pre-listing suggestions to prepare the property
for sale, and schedules a second listing appointment with you for two weeks later to list the property.
When you arrive for your appointment with the required listing documentation you find the property
owner working on the exterior of the home scraping and removing subterranean termite tubes. He
informs you that he has decided to handle the termite problem himself in order to save money and to
avoid the expense of chemically treating the premises, and proceeds to tell you that he has elected to hire
another agent to represent him in selling the property. A few days later you discover that the another
agent with your company has listed the property for sale.
The Risk
Imputed knowledge is the legal term for the presumption that what one person in a company knows,
everyone in the company knows. The failure to disclose the seller’s intentional actions to hide evidence
of the existence of termites and defraud a future buyer are of a material nature. The failure of the seller
and listing agent/broker to disclose any information that may materially and adversely affect the buyer’s
decision to purchase the property, including but not limited to the existence of current or past wooddestroying organisms or insects (such as termites), may result in the seller’s and the broker’s liability for
damages.
What to Do
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Immediately notify your designated broker and/or company branch manager or your knowledge of the
property listing agent can make sure the proper disclosure notice is made to any prospective buyer, and
arrangements can be made to properly treat the property.
IMPORTANCE OF 5 YEAR C.L.U.E. REPORT
The Scenario
A home buyer closes on their transaction and within 30 days after COE receives a notice from their
insurance company of a cancellation of their homeowner’s insurance policy. The insurance company said
they would continue coverage for an additional $1290 or the policy would be cancelled because of an
extensive water damage claim 4.5 years ago. The insurance company informs the new home owner that
the claim would have bee discovered with a 5 year C.L.U.E. history report if it had been ordered during th
escrow period.
The new owner contacts her agent and demanded to know why the agent would allow er to close the
transaction with a report from the seller’s insurance company (per line 135 of the contract) instead of a
full 5 year C.L.U.E. report, especially since the cost of the report is only $25.00.
The agent paid the additional dollars to keep the home insured and ordered an inspection to verify the
home had been repaired and was free of mold. The home had been remediated and eventually the
insurance company reduced the cost of coverage and refunded the additional money.
The Risk
Using an insurance report from a Seller who has lived in the home less than 5 years may not vie a
complete history of claims for the property. Insurance companies issue a temporary binder for the closing
on the home based on the client’s consumer report history, not based on the home. These companies have
60 days after close of escrow to review a C.L.U.E. on the property and underwrite the policy or they can
cancel their initial insurance policy if the home has had significant claims especially water damage
claims.
What to Do
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If you represent a buyer you may want to consider asking the seller to provide a full 5 year C.L.U.E.
report on page 7 of the contract. Remember to review the C.L.U.E. report with your buyer during the
inspection period and give them a copy to take to their insurance company.
Listing agents can order C.L.U.E. for their sellers with authorization and have the cost billed to escrow, so
there really isn’t any reason for a property to close without a 5 year report even if it is an Estate Sale or
bank owned property. A buyer’s insurance company is a third party and cannot order a C.L.U.E. to
review until the home has closed and belongs to their customer.
INNOCENT CONVERSATION OR BOYCOTTING?
Agents need to know just how simple it is to formulate a boycott during an informal discussion about
“business.” They need to be aware and not let their conversation drift into a discussion suggesting they
each do their small part to show competitors who offer low cooperative fees that it won’t work anymore.
They must avoid making statements such as “we just won’t show their properties – that will show them!”
Often, this discussion begins very innocently and people get lulled into going with the drift of the
conversation. Don’t let it happen to you. Boycotting is illegal!
IS YOU BUILDER LIENING ON YOU?
When listing a property that was built in just the last one to two years, be certain to ask your seller and
then verify that the seller does NOT have a special lien on the property from the new homebuilder.
Several of the area’s homebuilders, to discourage flipping of properties, added a special lien on new
homes for large amounts – some upwards of $50,000 – that the sellers would be required to pay in order
to sell the home anytime during the first 12 – 24 months.
Most of these builders WILL NOT release
these liens, so be sure to check this! If the timeline of the lien expires in 60 days, then simply make sure
that you disclose that the close of escrow is AFTER that date.
However, be aware that some of the liens do NOT automatically expire, release from the property, and go
“off the record.” You may find that the sellers request, in writing, for the lien release, and that there is no
time requirement for the homebuilder to respond. So, this would affect the sellers’ ability to give clear
title and close escrow. Find out the builder’s requirements prior to listing the property!
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IS YOUR BUILDER LIENING ON YOU? PART II – BUYER’S PERSPECTIVE
Many new home builders in a busy market will attempt to restrict the “investor” or “flipper”-type buyer
by including in their Purchase Contract a paragraph that prohibits the resale of the home for up to two
years after closing. In addition, builders will sometimes attach a lien of up to $50,000 on the home,
payable to the builder, if the buyer DOES sell the property during that restricted time frame. This could
definitely be a problem for your client if(s)he needs to sell due to a job transfer, illness, etc.
When the builder requires placement of a lien, and it is acceptable to your buyer, make the builder sign a
Lien Release to become effective immediately at the termination date. This action by your buyer client
will avoid having them jump through hoops to find someone at the builder’s company to sign off in a year
or so, assuming the builder is even in business at that time. BOTTOM LINE: READ the fine print of the
builders’ contract! ASK about these restrictions. And, most importantly, make sure you OBTIN the
properly prepared LIEN RELEASE up front to automatically take effect on the correct date.
IS YOUR VACANT LISTING COVERED?
The Scenario
If your property is vacant or not lived in for 30 days you must notify your insurance company in order to
change your coverage.
If you rent your property you have to notify both your insurance company and the taxing authority of the
county where the property is located.
Why?
Residential insurance policies normally do not cover empty or vacant properties unless specifically
provided for. The same can be said if you decide to rent the property. You must notify your insurance
company to change your coverage, and you must notify the county to change your tax base.
The Risk
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Lack of proper notification to the insurance companies and/or the county is considered fraud. Thus your
insurance company cand and will drop your insurance coverage like a hot potato.
The taxing body of the county where the property is located won’t be as kind. If found out you’ll be
looking at some heavy fines for not notifying them that your property is now a rental.
What to Do
Notify your clients accordingly! Have a serious conversation if you know they are in violation and what
the consequences are. Have them get in touch both with their insurance agent and the county to notify
them accordingly. Is it worth it to cheat? I don’t think so!
LOAD IT & LOCK IT
The Scenario
Your buyers are pre-approved and ready to proceed with a home purchase. Their LSR specifies they are
approved based on the currently available interest rate, up to a certain maximum purchase price. You
figure you are good to go. However, the buyers have decided to not lock in the interest rate in
anticipation of a lower rate coming soon and they are not sure how long it will take to find the right home.
The perfect property is found within two days. An offer is written, aggressively negotiated, and
ultimately accepted. The final purchase price is the absolute maximum they could qualify for – but this
place is absolutely perfect. Your buyers are happy and very excited. The due diligence begins.
The Risk
Two weeks later, after the inspection period has lapsed, the buyers remember to call their loan officer to
lock in their interest rate – something they simply forgot all about. Unfortunately, they learn that the
interest rate has risen by almost three-quarters of a percent and they no longer qualify for this purchase at
the higher interest rate. They are not going to be able to proceed to closing.
Remember that the Loan Status Report (LSR), which “is attached hereto and incorporated herein by
reference” in the Purchase Contract. And, it sates in bold: “Buyer agrees to establish the interest rate
and ‘points” by separate written agreement with the Lender during the Inspection Period or the
interest rate provision of the Loan Contingency shall be waived.”
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The sellers are notified of the mistake, and they are irate upon hearing the news. Their home has
effectively been off the market for two weeks and they are keeping the $5,000 earnest money as damages.
What to Do
Be certain to remind buyer clients to lock in their interest rate on financing at the correct time – and get
written confirmation from their lender. When the buyer does not lock their hoped for interest rate during
the inspection period, say for example at 6%, bus is able to obtain the loan by locking in at a rate up to the
maximum specified in the LSR, say for example 7%, the buyer will be obligated to proceed to close of
escrow or will be in breach of contract (after the expiration of a noticed cure period).
LOAN & INVESTMENT FRAUD
Be extremely wary if a mortgage broker asks you to rewrite a purchase agreement to mischaracterize the
nature of the purchase to obtain more favorable loan terms to your buyer. Consider it a red flag and an
invitation to commit fraud. Remember – the entire deal on the contract goes to the lender…on the
HUD1! No outside deals! If the mortgage broker insists that you do it make to make the deal fly, ask
them to put their instructions in writing on their letterhead with a copy to your Designated Broker and see
what happens. You guessed right – they won’t do it, so why should you?
MARS UPDATE FROM NAR
Attached is an email that Michelle Lind, AAR General Counsel, received from NAR attorney, Finley
Maxson. Michelle believes we should continue to advise members to fully comply with the rule:
http://www.aaronline.com/azr/2011/march/mars-rulerequirements-for-short-sale-brokers.aspx
“We have heard back from the FTC, and there is good news and bad news.
The good news is that the FTC continues to agree that the parts of the rule do not make sense in a real
estate brokerage context. The FTC has said that they are working on a solution that they will inform us of
The bad news is the FTC pulled out of our Midyear forum, has decided not to release modified disclosure
language, is not endorsing our Q&A, and is taking the position that for right now, real estate professionals
46
need to comply with the rule as written. We will release a modified version of the Q&A early next week
on realtor.org. We will continue to advise the members to comply with the rule as written for the
immediate future, but recommend that they monitor the status of our discussions with the FTC on
realtor.org.
I know many of your associations have been waiting to release your forms so that you could include the
modified disclosure language that we were told was coming. It does not look like this type of language
will be coming in the immediate future and so you probably do not need to wait any longer. We will
continue working with the FTC and will let you know as soon as we hear from them. We remain
optimistic that there will be a good outcome to this process, but it is taking longer than it should.
The Misconceptions of Showing homes with Tenants in Residence
You are taking a sale listing and the Seller tells you that there is a tenant in the home. What do you do?
One of the most common misconceptions is that it’s OK, all you have to do is give the tenant 48 hours
notice to enter. Well that can turn into a 7 day notice. Notice must be in writing and either hand-delivered
or sent by certified mail, which adds 5 days for mailing. (ARS 33-1343 and 33-1313) When a provision is
included in a lease that the tenant agrees to waive their rights to notice and allow a lockbox, that is
considered a prohibited provision and the tenant is entitled to actual damages of not less than TWO (2)
months’ rent (ARS 33-1315B).
The parties can agree to a lessor notice, but not as a condition of the lease. And it must show that the
waiver was voluntary and there is some “consideration” to the tenant. This can include an option to get
out of the lease early, or possibly a reduction in rent.
On lockboxes, again a difficult situation. There is no law that prohibits a lockbox, however, the law does
address the absolute requirement of proper notice to the tenant. Every time anyone accesses the property
through use of the lockbox (or any key) to access the property without proper agreed upon notice to the
tenant, the tenant is entitled to actual damages equal to ONE (1) months’ rent (ARS 33-1343 A & D, and
ARS 33-1376 B). So for example, 3 agents use the lockbox to take a “quick peak” without proper notice,
the tenant is owed actual damages of THREE (3) months’ rent, which the owner of the property is going
to owe to the tenant.
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Our recommendation is to NOT ever use a lockbox on a tenant occupied property. You simply have no
control over the access, and could put the Seller/Owner, as well as the Listing Agent and/or the Property
Manager in a position of substantial liability.
Seller/Landlord and Listing Agent also need to read and understand ARS 33-1376 B, which speaks to
“repeated demands for entry otherwise lawful but which have the effect of unreasonably harassing the
tenant.” Again, the tenant may recover actual damages of not less than ONE (1) months’ rent. Who
decides if the tenant is being unreasonably harassed? Answer: the courts will almost always say the
TENANT. This means even with a signed waiver, the tenant could still come back at the Seller/Landlord
and Listing Agent for harassment, and be entitled to the actual damages.
One recommendation would be to counsel the Seller/Landlord that it would be more advantageous to wait
until the tenants lease expires and give notice of non-renewal, then have the tenant vacate, leaving the
home vacant.
These provisions would still be in effect for multi-family properties as well, however sometimes there is a
vacant unit that an agent can show to prospective buyers. Or the Seller can request that a viewing of all
units can be arranged upon acceptance of a Purchase Contract, thus limiting the Looky-loos. And again
proper notice to the tenants must be adhered to.
MOVING COMPANY SCAM ALERT!
As a REALTOR®, how many times have you heard about how important the Arizona Department of
Weights & Measures (ADWM) may be to your clients? Not so much? Well, except perhaps for your
investor types, every other client may very well appreciate your familiarity with what the ADWM may be
able to do for them. Why? Because they all are moving from one property to another. Whether it will be
an interstate move from New England, or an intrastate move from Scottsdale, they are all coming to
Tucson and we should be here to help reduce their risks.
We all know, first hand, what a nightmare moving a household can be. How many times has someone
that has just declared, “I am NEVER doing that again?” Along with the physical work, the psychological
stress, and the expense, there are many different risk associated with moving a household. Not the least
among these risks may be the professional moving company – especially if the wrong moving company is
hired.
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There can be many facets to moving scams, but the typical scenario goes something like this. The
consumer contacts a moving company and obtains an estimate. Let’s say the estimated weight is 3,000
pounds and the cost to move from point A to point B is estimated to be $2,800. A 25% deposit is
required and paid. The move is made, and of course the truck hasn’t arrived on schedule. The driver
calls and says that they are on the scales in Phoenix and the actual weigh turned out to be 4,100 pounds
and the total cost will be $3,950 – and they are going to need a certified check for the entire balance due
before they unload the truck. That’s $1,150 that wasn’t in the budget (and may not be in the checking
account). How close to the boiling point do we want to get here?
The consumer is already behind on schedule and stressed to the max, and has a new job to go to, and kids
to take to a new school, and everything else bearing down on them. They are angry and frustrated but see
no alternative but to write the check and get this over with.
Not so fast! If their lovable real estate agent is paying attention to this event, we can help. A quick call to
the ADWM in Phoenix (6020 255-5211, or (800) 277-6675 can bring an investigator to the site along
with local law enforcement officers to greet the moving truck when they finally do arrive. There’s
nothing like giving a bunch of scam artists a little surprise of their own.
An excellent in-depth discussion on topics with absolutely brilliant advice is presented on the ADWM
webpage:
http://www.azdwm.gov/CONSUMERS/ConsumerTips/MovingInformation/tabid/262/Default.aspx
Also, the consumer fraud that may be occurring with bad moving companies is of interest to the Arizona
Attorney General. If direct dealings with the moving company are not going favorably and fraud is
suspected, then it may be time to contact the Attorney General:
http://www.azag.gov/consumer/index.html.
Other excellent resources on this topic include:
Arizona Department of Weights & Measures
http://www.azdwm.gov/HOME/tabid/53/Default.aspx
American Moving and Storage Association
http://www.moving.org/
Moving Company Guide
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http://www.moving-company-guide.com/
Moving Scam.com
http://www.movingscam.com/
Move Rescue
http://www.moverescue.com
MORTGAGE INSURANCE UNDERWRITING UN-WRITING
The Scenario
After months of overcoming numerous obstacles to get a pending sale closed, the cooperating listing and
selling agents finally arranged for the sller and buyer to sign closing documents. The next day the escrow
officer called both agents to inform them that she had not been able to confirm receipt of the wired funds
from the buyer’s lender. Selling agent immediately called loan originator to see why the buyer’s loan had
not funded, and was informed of a problem. The underwriter for the mortgage insurance company had
reviewed the appraisal and determined that from the appraiser’s notation the subdivision that the subject
property was located in had too many homes for sale and too many foreclosed properties, and had decided
not to approve the underwriting of the required mortgage insurance. The buyer’s financing had fallen
through.
The Risk
Without mortgage insurance, the lender will not fund the loan. The sale is in jeopardy. In this case the
seller had moved out of the premised and out of state, but without the sale funding and closing, would not
have the net proceeds available to close on new home and did not have money to move back to Arizona.
The buyer was homeless also with nowhere to go, having moved out of a rental home that was already
leased to new tenants.
What to Do
All parties agreed to a written extension closing date. Loan originator was instructed to immediately find
a new lender, even if terms of loan were not as attractive to the buyer. Both the listing and selling agents
should contact other loan sources to attempt to procure alternative financing options. Hopefully the
original lender will continue to work with buyer to find another mortgage insurance company to
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underwrite policy. Cooperation between all parties, include the extra cooperative efforts between the
listing and selling agents, will result in a successful closing of the pending sale.
NO FIFTY SHADES OF GREY HERE – BUSTING MYTHS ABOUT THE FAA
AND UNMANNED AIRCRAFT
Myth #1: The FAA doesn't control airspace below 400 feet
Fact—The FAA is responsible for the safety of U.S. airspace from the ground up. This misperception
may originate with the idea that manned aircraft generally must stay at least 500 feet above the ground.
Myth #2: Commercial UAS flights are OK if I'm over private property and stay below 400 feet.
Fact—The FAA published a Federal Register notice in 2007 that clarified the agency’s policy: You may
not fly a UAS for commercial purposes by claiming that you’re operating according to the Model Aircraft
guidelines (below 400 feet, 3 miles from an airport, away from populated areas.)
Commercial operations are only authorized on a case-by-case basis.
(See http://www.faa.gov/uas/legislative_programs/section_333/media/Trudeau_Douglas-11138.pdf.)
Myth #3: Commercial UAS operations are a “gray area” in FAA regulations.
Fact—There are no shades of gray in FAA regulations. Anyone who wants to fly an aircraft—manned or
unmanned—in U.S. airspace needs some level of FAA approval. Private sector (civil) users can obtain an
experimental airworthiness certificate to conduct research and development, training and flight
demonstrations. Commercial UAS operations are limited and require the operator to have certified
aircraft and pilots, as well as operating approval. Public entities (federal, state and local governments, and
public universities) may apply for a Certificate of Waiver or Authorization (COA).
The FAA reviews and approves UAS operations over densely-populated areas on a case-by-case basis.
Flying model aircraft solely for hobby or recreational reasons does not require FAA approval. However,
hobbyists are advised to operate their aircraft in accordance with the agency's model aircraft guidelines
(see Advisory Circular 91-57). In the FAA Modernization and Reform Act of 2012 (Public Law 112-95,
Sec 336), Congress exempted model aircraft from new rules or regulations provided the aircraft are
operated "in accordance with a community-based set of safety guidelines and within the programming of
a nationwide community-based organization."
The FAA and the Academy of Model Aeronautics recently signed a first-ever agreement that formalizes a
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working relationship and establishes a partnership for advancing safe model UAS operations. This
agreement also lays the ground work for enacting the model aircraft provisions of Public Law 112-95, Sec
336. Modelers operating under the provisions of P.L. 112-95, Sec 336 must comply with the safety
guidelines of a nationwide community-based organization.
Myth #4: There are too many commercial UAS operations for the FAA to stop.
Fact—The FAA has to prioritize its safety responsibilities, but the agency is monitoring UAS operations
closely. Many times, the FAA learns about suspected commercial UAS operations via a complaint from
the public or other businesses. The agency occasionally discovers such operations through the news
media or postings on internet sites. When the FAA discovers apparent unauthorized UAS operations, the
agency has a number of enforcement tools available to address these operations, including a verbal
warning, a warning letter, and an order to stop the operation.
Myth #5: Commercial UAS operations will be OK after September 30, 2015.
Fact—In the 2012 FAA reauthorization legislation, Congress told the FAA to come up with a plan for
“safe integration” of UAS by September 30, 2015. Safe integration will be incremental. The agency is
still developing regulations, policies and standards that will cover a wide variety of UAS users, and
expects to publish a proposed rule for small UAS – under about 55 pounds – later this year. That
proposed rule will likely include provisions for commercial operations.
Myth #6: The FAA is lagging behind other countries in approving commercial drones.
Fact – This comparison is flawed. The United States has the busiest, most complex airspace in the world,
including many general aviation aircraft that we must consider when planning UAS integration, because
those same airplanes and small UAS may occupy the same airspace.
Myth #7: The FAA predicts as many as 30,000 drones by 2030.
Fact—That figure is outdated. It was an estimate in the FAA’s 2011 Aerospace Forecast. Since then, the
agency has refined its prediction to focus on the area of greatest expected growth. The FAA currently
estimates as many as 7,500 small commercial UAS may be in use by 2018, assuming the necessary
regulations are in place. The number may be updated when the agency publishes the proposed rule on
small UAS later this year.
Developing all the rules and standards we need is a very complex task, and we want to make sure we get
it right the first time. We want to strike the right balance of requirements for UAS to help foster growth
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in an emerging industry with a wide range of potential uses, but also keep all airspace users and people on
the ground safe.
NO LSR…NO LOAN TERMS!
Accepting a residential resale purchase contract without an LSR could put your sellers in jeopardy. The
loan contingency references the terms in the LSR, and if no LSR is presented then the seller has
potentially left the door wide open. Make sure that when you do receive an LSR that it is the most recent
version dated 11/05 which states that the purchaser must establish rates and discount points in writing
with the lender during the inspection period or they waive the interest rate contingency.
NO MORE LSR – REST IN PEACE
Q: Since the Loan Status Report (LSR) has been replaced, what form do we use now?
A: The newly revised AAR Residential Purchase Contract ends the life (RIP) of the LSR. The LSR was
removed from the contract and replaced by the new AAR Prequalification Form, click for sample. This
new form has: more information, must be filled out by a lender and it should be included in the offer.
Once the contract is accepted, don’t forget the buyer has to give the seller the new revised AAR Loan
Status Update (LSU), click for sample within 5 days after contract acceptance. Educate yourself and
your clients about these new forms at www.aaronline.com.
ONLINE MAPPING MEASUREMENTS – WATCH OUT!
The Scenario
You have taken a listing on a nice residential property and are preparing to enter all of the information
into the Multiple Listing Service (MLS). However, there doesn’t seem to be any information available
about the exact lot dimensions and size.
The Risk
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All sources of information about square footage for houses and lots should be treated as suspect – whether
it be from the County Assessor’s records, the builder, an appraiser, or anywhere. If dimension, square
footage, acreage or any other size criteria are significantly important and “material” to a buyer, then it is
vital that you disclose the source of the data you provide with any caveats that may be prudent.
What To Do
There are number of sources available when you need a measurement for a listing. From within MLS,
you can use Courthouse Retrieval or MLS Parcel Mapping. Both will give you lot measurements and
allow you to measure parcel dimensions or distances.
When you receive a measurement from an online map, it is not an exact measurement – it is only
approximate. The measurement is derived from the mapping program working from the scale of the map
and the length of the segments.
You may use the measurement in your listing, but in case you are asked, the measurement is approximate.
If a buyer requires an exact measurement youcan either look at the Platt map or order a survey of the
property.
You should also be careful when listing the source for the measurements. While the underlying data to
create the map is derived from county records, the measurement is not. Be careful about listing the
measurement source as Assessor. You’ll be on safer ground by indicated “Other” as the source.
OWNER/AGENT DISLCOSURE
The Scenario
You have decided to sell your own real estate – whether it is your primary residence, a vacation home, or
investment property. Regardless of whether you are going to be the listing agent, co-agent, or just simply
the seller with another agent actually taking and submitting the listing. Or, you are related to the seller of
the property and you are going to be the listing agent or co-agent. And, for whatever reason, you don’t
think about disclosing to the public that you are a licensed real estate agent.
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The Risk
Not making a full disclosure of your personal interest in a real estate transaction runs afoul of the Tucson
Association of REALTORS® Multiple Listing Service’s Rules and Regulations and the Arizona
Administrative Code.
What To Do
Make the disclosure. It is really very easy and harmless. Simply put the words “owner/agent” in the
Property Description section of the listing. Placing the disclosure in the Agent Remarks section or
elsewhere does not satisfy the notice requirement.
The Tucson Association of REALTORS® Multiple Listing Service Rules and Regulations include the
following provision on this topic for its members (referred to as Participants) in Section 6.1 – Participant
as Principal:
If a Participant or any licensee affiliated with a Participant has any interest in the property, the listing
of which is to be disseminated through the Service, that person shall disclose that interest in the
Property Description of the “Profile Sheet” filed with the Service.
Arizona Administrative Code, Title 4, Chapter 28 – State Real Estate Department, Article 5 –
Advertising, Section 502 – Advertising by a Licensee (ACC R4-28-502B) requires:
B. any sales person or broker advertising the salesperson’s or broker’s own property for sale, lease, or
exchange shall disclose the salesperson’s or broker’s status as a salesperson or broker, an as the
property owner by placing the words “owner/agent” in the advertisement.
Additionally, Arizona Administrative Code, Title 4, Chapter 28 – State Real Estate Department, Article
11 – Professional Conduct, Section 1101 – Duties to Client (AAC R4-28-1101E) requires:
E. A real estate salesperson or broker shall not act directly or indirectly in a transaction without
informing the other parties in the transaction, in writing and before the parties enter any binding
agreement, or a present or prospective interest or conflict in the transaction, including that the:
1. Sales person or broker has a license and is acting as a principal;
2. Purchaser or seller is a member of the salesperson’s, broker’s, or designated broker’s immediate
family;
3. Purchaser or seller is the salesperson’s or broker’s employing broker, or owns or is employed by
the salesperson’s or broker’s employing broker; or
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4. Salesperson or broker, or member of the salesperson’s or broker’s immediate family, has a
financial interest in the transaction other than the salesperson’s or broker’s receipt of
compensation for the real estate services.
PATHWAYS TO PROFESSIONALISM
While the Code of Ethics and Standards of Practice of the National Association establishes objective,
enforceable ethical standards governing the professional conduct of REALTORS®, it does not address
issues of courtesy or etiquette. Based on input from many sources, the Professional Conduct Working
Group of the Professional Standards Committee developed a list of professional courtesies for use by
REALTORS® on a voluntary basis. The list is not all-inclusive, and may be supplemented by local
custom and practice. Click on the following link for the list: http://www.realtor.org/code-ofethics/pathways-to-professionalism
PERSONAL PROPERTY TAX ON RENTAL PROPERTY
The obligation and burden of personal property tax on appliances and furnishings used in residential
rental property in Arizona is perhaps not widely known or understood among most real estate agents. If
you are involved in selling or buying – representing those that are, this information should be of great
interest to you. Don’t wait until the county Sheriff comes knocking on your door to seize and sell
sufficient personal property to pay the past due taxes, the 16% per annum interest, and cost of the sale.
The Scenario
You represented a buyer in a transaction in which they purchased a townhome on a golf course for
investment purposes. You got lucky and found a great deal on a “turn-key” property in mint condition,
fully furnished and ready to rent out. The listing advertised that all appliances and all personal property –
right down to the slat & pepper shakers would convey with an acceptable offer. To be certain that
promise would be enforceable, you made sure that you put that statement in the contract and added an
attachment with a complete inventory of everything that would convey. Because it was a cash deal, there
was no lender to object to making the transfer of personal property part of the real estate transaction.
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Close of escrow takes place and the new owners have found tenants. Just another chapter in the story of
your life with a happy ending for everyone - right?
The Risk
Unless everyone was paying close attention, you may not have really understood one of the forms that the
escrow officer completed for the buyers’ signature. This may be especially true if your buyers were out
of town at their normal residence when they did the signing. Because the contract specified the transfer
of personal property, the escrow officer is supposed to complete an Affidavit of Property Value as part of
the closing documents. This completed form is delivered by courier to the County Recorder’s office at the
Close of Escrow and the Recorder’s office then passes the Affidavit of Property Value form over to the
County Assessor’s Office where they log in the property for purposed of assessing the Arizona State
Personal Property Tax.
The buyer of residential property that will be used for rental purposes could be liable for paying personal
property tax on virtually everything that is not a fixture or real estate, e.g. furniture, free standing
appliances, window treatments, lamps, etc., etc. – if the total value amounts to at least 5% of the
property’s sale price.
Those buyers are probably going to be more than surprised when they receive their first notice of tax
assessment when they were never advise about the possibility. And, they are probably going to be
anxious to “discuss’ it with you.
What To Do
Be aware of the rules. Always advise clients about the potential for personal property tax liability on
rental property furnishings. Take a look at the following resources:
The Pima County Assessor’s Office, Personal Property Division information link:
http://www.asr.pima.gov/links/perinfo.aspx
The Arizona Department of Revenue, Property Tax Division, PROPERTY USE CODE MANUAL:
http://wwwrevenue.state.az.us/Forms/Property/usecode.pdf
Also, don’t forget that the real property (the real estate) that is going to be rented out needs to be
registered accordingly with the Assessor, as it affects the way the real property taxes are assessed too:
http://www.asr/pima.gov/pdf/82901.pdf
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The Pima County Sheriff’s Department’s website discusses their role in Delinquent Taxes & Civil
Process: http://pimasheriff.org/DE.htm
PROTECT YOUR BUYER WITH REO’S – AKA LENDER OWNED,
FORECLOSED, BANK OWNED
The Scenario
You the Agent, and your Buyer, spend a full day looking at available properties in the area. The one
property that Buyer likes is an REO property. Everyone gets excited because the home is a great price for
that area and it is available now, no need to wait for Seller to move out. The Buyer tells you they want
the home and instructs you to write up the offer. Looking at the MLS print out, the Agent notices some
additional verbiage in the Agent remarks section. It says, “NO SPDS, NO CLUE, AS-IS, Special Lender
Addendum, must use our Title Company.” This gets our attention and we call the Listing Agent to
clarify. The Listing Agent tells us what to include in the offer or the Seller will not accept it. They also
explain that if the offer is accepted, we will be verbally notified and will not receive a signed contract
until we sign their special addendum. The Buyer decides to proceed becaue they really like the home.
The Risk
About four or five days go by and you receive the phone call from the Listing Agent, telling you your
offer has been verbally accepted. This is an exciting time for your Buyer; they got the home they wanted.
You are still waiting for a copy of the fully executed contract from the Seller. Do you wait for this? Or
do you start inspections now? You proceed with inspections and open Escrow (which happens to be in
Phoenix without the signed contract. You push forward to make the COE date knowing the Lender has
penalties in their addendum if your Buyer does not close on time. The buyer’s Lender is concerned
because they cannot get started on the loan until they have a contract. Sever says have gone by since the
verbal acceptance and we finally receive the fully executed contract from the Seller. We forward the
copy to all parties involved.
What To Do
Representing the Buyer is very challenging when the Seller is a REO property. They do not use our AAR
forms, they have verbal agreements, and they will use an Escrow company that is out of town. It is
important to have a conversation with your Buyer (before showing the property) about these types of
transactions. Listed below are some of the things you as an Agent need to discuss with your Buyer or the
Listing Agent.
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1.
NO SPDS or CLUE (Tip: the Listing Agent can get a CLUE report)
2.
Utilities – are they on? If not, who is turning them on?
3.
Did you thoroughly read the Lenders Special Addendum? Does it remove the contingencies we
have in the AAR contract?
4.
Inspections should not be started until you have a fully executed contract.
5.
Lead Base Paint, Affidavit of Disclosure has to be used if applicable.
6.
Are there repairs to be done? How will this affect the Buyers loan?
7.
Who is providing the Title Insurance?
As a professional REALTOR®, you should always strive to gain knowledge in your area of expertise. If
you get involved with this type of transaction or have questions, please call your Broker or Sales
Manager.
PURCHASE CONTRACT WITH FINANCING CONTINGENCY REQUIRES LOAN
STATUS REPORT (LSR)
As a Buyer’s Broker, unless your purchase agreement is an all cash transaction make sure you always
attach the Loan Status Report (LSR) to your offer. As the Seller’s Broker, if it is missing, present the
offer, but advise the seller against accepting the offer without it. The buyer’s obligation to complete the
contract is contingent upon the buyer obtaining loan approval for the loan described in the LSR. If the
LSR is missing, no loan terms are included in the contract, which creates an ambiguity in the terms of the
loan contingency. Besides being mandated by the contract, the information in the LSR allows the seller
to evaluate the buyer’s offer. It provides vital, detailed information about the buyer’s loan and whether
the buyer is relying on the sale or lease of a property to qualify for the loan.
RADON – THE INVISIBLE RISK
Odorless, colorless, tasteless – completely invisible, radon gas can be very harmful even at very low
concentrations when exposures (dose) are extended for significant amounts of time. Therefore, the
presence of radon gas in residence can potentially be hazardous to the occupants. Many factors affect the
presence and concentration of radon gas in a home – or any structure for that matter, and there are also
many variables that affect does to the residents.
The Scenario
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Radon is a naturally occurring, radioactive decay product that comes from natural deposits of uranium in
the ground. When it is out in the open air, it dissipates readily and is of no concern. However, this inert
gas can migrate into buildings in two primary ways; through cracks in the ground surface directly into
openings in the foundation and structures and, from well water that may contain dissolved radon that is
released upon running water in a sin, show or tub.
If radon gas concentrations are allows to build up in a resident – especially in circumstances found in
modern housing with ever tightening construction materials and techniques in the name of energy
conservation, toxic levels can be reached and health affecting doses received by the occupants.
The Risk
Radon gas has been recognized by Tucson’s own Dr. Richard H. Carmona when he served as the United
States Surgeon General and warned the American public, in January 2005, about the risks of breathing
indoor radon by issuing a national health advisory. The advisory is meant to urge Americans to prevent
this silent radioactive gas from seeping into their homes and building to dangerous levels.
“Indoor radon is the second-leading cause of lung cancer in the United States and breathing it over
prolonged periods can present a significant health risk to families all over the country,” Dr. Carmona said.
“It’s important to know that this threat is completely preventable. Radon can be detected with a simple
test and fixed through well-established venting techniques.”
According to U.S. Environmental Protection Agency (EPA) estimates, one in every 15 homes nationwide
have a high radon level at or above the recommended radon action level of 4picoCuries (pCi/L) per liter
of air. Radon gas in the indoor air of America’s homes poses a serious health risk. More than 20,000
Americans die of radon-related lung cancer every year. Millions of homes have an elevated radon level.
If you also smoke, your risk of lung cancer is much higher.
What to Do
Be certain to emphasize the AAR Buyer Advisory caution about radon:
Radon gas and carbon monoxide: Radon gas and carbon monoxide poisoning are two of the more
common and potentially serious indoor air quality (“IAQ”) concerns. Both of these concerns can be
addressed by the home inspector, usually for an additional fee. For information on radon levels in the
state go to www.arra.state.az.us/radon.htm
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Provide all of your buyer clients with a copy of the EPA pamphlet: Home Buyer’s and Seller’s Guide to
Radon (EPA 402-K-00-008, July 2000) – which is now also available in Spanish at
http://www.epa.gov/radon/pubs/hmbyguidsp.html
Are you aware of the presents of nay of the following on the Property, past or present? (Check all that
apply):
 Asbestos
 Radon gas
 Lead-based paint
 Underground storage tanks  Fuel/chemical storage
Make sure your buyers check this response in their review of the SPDS.
Assist your clients in locating professional information and advice, and reputable testing services and
products. If remediation of high levels of radon is going to be necessary, assist in locating qualified
contractors to mitigate the problem.
READ BEFORE SIGNING….THE PUBLIC REPORT
The Public Report is one of the very important documents involved when you represent your client in the
purchase of a new construction home. As you start through the myriad of papers for the purchase, the site
salesperson will hand your client this report. At that time, they generally ask the buyer sign and
acknowledge showing the document has been provided and the fine print will also say and it is
understood. More specifically the state reads:
For your protection, do not sign this receipt until you have received a copy of the report and have had the
opportunity to read it. By signing this receipt, the buyer has accepted the public report and
acknowledges the information it contains.
In addition to general facts, there is an amazing amount of information about the area around the home
and any items they are required to disclose. (Gas pipe lines, noise, fissures, aromas and the list goes on.)
You can see why it is imperative that both you and your client have studied the report prior to signing a
purchase agreement or an acknowledgement for having received the Public Report and understanding the
content.
For you and your client’s convenience, you can pre-view the Public Report on the following websitne and
have an advanced opportunity to do your homework:
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http://services.azre.gov/publicdatabase/SearchDevelopments.aspx
The Arizona Department of Real Estate (ADRE) maintains this public database of all Public Reports that
have been filed for subdivisions in Arizona. However, Public Reports issued before 1/1/1997 are not
available online and Public Reports over 20 years are not available.
RISK REDUCATION WITH PROFESSIONAL DESIGNATIONS
As you well know, REALTORS® are required to complete 24 hours of continuing education every two
years to maintain their license. Why not make the most of those ours? Instead of taking the same classes
over and over again every two years, use the training that culminates in a professional designation to
satisfy the required license training and earn your ABR, CRS, e-PRO, GRI or one of dozens of other
designations or certifications that are available at the same time.
And, for that matter what would be wrong with taking more than the minimum 24 hours of training that
are required every two years. Suppose you took one class per month – that would be 3 hours per month
or 36 hours per year. Is one morning or afternoon per month too much time to devote to building your
professional knowledge? Maybe take two full days of training every calendar quarter – that would be 48
hours per year.
Another twist on taking best advantage of training is to consider taking qualifying classes in another city
in Arizona. Make a mini-vacation of it and take a day or two off while there. Recharge your batteries
along with your brain cells. The bonus is that you may meet an agent based in that location that you
could exchange referrals with. It is always to have personal knowledge or experience with someone you
send your referrals to – and vice versa.
Her is another bonus – the training that is presented for the designation programs usually far exceeds the
caliber of training otherwise available for simple license renewal. These programs are often taught by
nationally recognized instructors that are on the cutting edge of real estate practice.
Simply put, the more you know and the more frequently you spend time studying this profession, the
better chance you have of reducing the mistakes you make and the resultant liability. And, you are better
enabled to serve your clients’ best interests.
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SAY IT FAIRLY QUIZ
Take this brief quiz and test your understanding of how the Fair Housing Act applies to advertising.
1.
You must include an Equal Opportunity logo in ads larger than 3 inches by 3 inches that promote
residential property for sale. TRUE or FALSE?
2.
The description of a house used on the local MLS is also subject to fair housing guidelines?
TRUE or FALSE?
3.
Indicating in an ad that a property has handicapped accessibility is a violation of the Fair
Housing Act? TRUE or FALSE?
4.
Brokers are liable for discrimination in ads placed by sales associates, even if they had no
knowledge of the ad before publication. TRUE or FALSE?
5.
It is acceptable to use only white models in your advertising provided that your market area is at
least 85% white and that you do not include any discriminatory language in the copy of your ads.
TRUE or FALSE?
1.
FALSE
2.
TRUE
3.
FALSE
4.
TURE
5.
FALSE
SELLER HELD OPEN HOUSEIN USING COMPANY SIGNS…WHAT’S IN YOUR
POLICY?
The Scenario
A listing agent is busy and only has tIme to hold an occasional open house. The sellers want to help and
ask their agent for the use of the agents’ company open house signs so they can hold their own open
house from time to time. The agent grants the sellers request and thinks wow this is great…now I can
spend my time doing other productive activities.
The Risk
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During an open house which was held by the seller only, a prospective buyer walks into the home. While
she “oohs” and “aahs,” with animated gestures about the Elizabethan-period mirror on the bedroom
ceiling, the owner’s dog grabs her heel tripping her and causing her to fall and hit her head on the corner
of the dresser. It’s easy to determine what happens next from this unfortunate event – medical rescue and
recovery expenses associated with physical injury, pain and suffering; procurement of legal counsel on
behalf of the injured party and last but not least a lawsuit naming the owner and the Broker.
What to Do
Take the time today to review your broker policies addressing this and similar issues. Do you have a
policy on this subject? If so, what’s in your policy? If not, decide if you need such a policy. Carefully
assess if it is in your best interests and that of our company to mandate company open house singes not be
given out to unlicensed owners. If appropriate, consider language that provides a policy setting forth
strict guidelines for the owner to follow, complete with a sign-in form releasing the Broker and agent
from liability. Even weigh the impact of having the seller/owner of your listed property sign a statement
that says they aware well aware of the risks and assume full responsibility.
SEPTIC OR ALTERNATIVE WASTE WATER SYSTEMS – NEW REGULATIONS
Septic inspections have been occurring prior to the close of escrow, and have been addressed in our resale
contracts for some time in Pima County. Recently added requirements have been placed upon buyers by
ADEQ to submit a notice to either Pima County or ADEQ. Effective July 1st, the new ADEQ rule R18-9A316 requires a report of inspection of a septic or alternative system by a certified inspector to be
delivered from the seller to the buyer. The buyer must submit a completed notice of transfer and fee to
ADEQ or Pima County with 15 days of property transfer.
SHORT SALE “AGREEMENT NOTICE”
The Scenario
You are the Short Sale Listing Agent working diligently for weeks to get the Seller’s creditor(s) to
approve the purchase contract the Buyer and Seller have agreed upon. Then you finally get it, the
approval letter from the first lien holder. This is the golden ticket you have been waiting for all this time.
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Even though the second lien holder has not sent their approval letter, you quickly send a copy to the
Buyer’s Agent so they can open escrow and start inspections per the Short Sale Addendum.
The Risk
Since you gave notice to the Buyer that the Seller and Seller’s creditor(s) have entered into an agreement,
“Agreement Notice” the Buyer is moving forward with the purchase as agreed upon in the Short Sale
addendum. This is a risk for all parties without the approval from all of the Seller’s creditor(s). who is
going to pay for the Buyers inspections or appraisal if any of the other lien holders do not approve of the
sale?
What to Do
Read and understand the Short Sale addendum if you are going to be involved with Short Sales. It clearly
states on line 10 that the “contract is contingent upon and agreement between the Seller and Seller’s
creditor(s) acceptable to both.” If the Listing Agent jumps the gun and provides the “Agreement Notice”
to the Buyer prematurely, they could be held financially liable to reimburse the buyer for the expenses.
As always, consult your Broker if you have questions.
SHORT SALE CAUTION
The Scenario
Excited Agent gets call to come and list a home for sale. Discovers that the property owner is upside
down in the home, and determines the sale will be a short sale. Prepared agent pulls out the “Short Sale
Addendum” and proceeds to complete the listing paperwork, including this new Addendum. Agent
returns to the office and promptly enters new listing into MLS.
The Risk
The new Short Sale Addendum form states at the very top: “If you desire legal, tax, or other professional
advice, consult your attorney, tax advisor, insurance agent, or professional consultant.” Then, in
boldface, the form goes on to state: “…the Seller is advised to consult independent legal counsel
regarding the advisability of entering into a short sale agreement…” and also: ..Seller is advised to
obtain professional tax advice immediately regarding the tax implications and advisability of
entering into a short sale agreement.”
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When did the Agent give the client the opportunity to actually go and consult? No time was given! In
most cases, the Agent fills out the Short Sale Addendum and proceeds full steam ahead to enter the listing
into MLS while attempting to find a buyer – business as usual. What if it is not in the best interests of the
client to do a Short Sale? What if it is better for the Seller to do a Deed in Lieu of Foreclosure? What
will happen when the short sale is over, escrow closed, and them, at tax time, the client receives a 1099
for the amount of the forgiven debt – which is now shown as regular income and is taxable?
For example: A short sale of $40,000.00 will show up on a 1099 from as $40,000.00 additional ordinary
income. At a 28% tax bracket the tax bill owed by the Seller to IRSS could be $11,200.00. How many
clients can afford to pay that? And, IRS changes ONLY 25% interest!
If the Agent fails to disclose this very real possibility, and/or never gives the client the opportunity to
consult with their attorney or tax advisor, who will the client turn to/against when hit with this surprise?
What To Do
Complete all the listing paperwork as usual, including the Short Sale Addendum form. Consider filling
out a Delayed Input Form allowing enough time for your client to actually make appointments, to consult
with their attorney and/or tax advisor. Then, if the client still believes the short sale is the best choice,
and instructs you in writing to proceed, enter the listing in MLS.
Make sure to give your clients the necessary time to actually seek the legal and tax advie we tell them to
seek! And above all, always, yes always check with your Designated Broker to see if they approve and
consent to this suggested practice and to what you are doing.
SHORT SALE TOOLS
The short sale process and disclosures have changed a lot in the last 12 months. We have some modified
forms: AAR Short Sale Listing Addendum and Short Sale Advisory. We have a new government program
called, Home Affordable Foreclosure Alternatives (HAFA) and we have some web sites to help you or
the financially troubled homeowner. If you are involved with short sales, it is important to know all that
you can about this complex transaction before representing a client. Clink the links below to increase your
knowledge.
Arizona Foreclosure Information Workbook:
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A tool to educate troubled homeowners.
Making Home Affordable:
Government programs (HARP, HAMP, HAFA) available to financially troubled homeowners and “Loan
Look Up” button to see who backs the loan, Fannie Mae, Freddie Mac or non-GSE.
NAR Home Affordable Foreclosure Alternatives (HAFA) Information:
HUD Approved Counseling Agencies:
Agencies located in Arizona
Short Sale Advisory:
This advisory changes, go here for the newest version.
Short Sale Addendums (sample):
http://www.aaronline.com/documents/SSARPC.pdf and
http://www.aaronline.com/documents/SSAListing.pdf
AAR Short Sale game:
Short sale game and numerous links to short sale information.
SHORT SALES
Q: Short sales are a stressful complex transaction to manage as a Listing Agent. Emotions run high as you
deal with slow creditor process, stressed‐out homeowners, complicated timelines and impatient buyers.
You need to stay diligent and focused on getting the short sale approved before the home is foreclosed on
or before the Buyer gets tired of waiting and backs out. As the Listing Agent, you are tasked with a lot
more than a non‐short sale transaction. How do you remain ethical?
A: When in doubt, review the NATIONAL ASSOCIATION OF REALTORS® Code of Ethics and
Short Sale Advisory to refresh your memory. Remember the homeowner is your client, not the creditor,
and you must always protect their interests. Discuss your client’s options at each juncture and let them
make the decisions, not you. Be honest by disclosing pertinent information about the property such as,
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trustee sale date, multiple contracts and material facts. Communicate on a regular basis with all parties as
it will reduce everyone’s frustration if they are aware of what is transpiring. Work within your area of
expertise. If you have not educated yourself on short sales, refer the transaction to an Agent that has.
Always see your Broker’s guidance.
SHORT SALES AND EARNEST MONEY COLLECTION
The AAR Resale Purchase Contract specifies in Lines 373-374, “If applicable, Earnest Money has been
received…. and upon acceptance of this offer will be deposited with…. Escrow Company.”
The Short Sale Addendum to the Resale Purchase Contract specifies in Lines 26-27, “Buyer shall
promptly open escrow and deposit Earnest Money as described in the Contract upon receipt of
Agreement Notice.”
The issue? A real estate licensee may not accept Earnest Money cash or check and hold it without
promptly depositing it into an Escrow Account, according to the Department of Real Estate.
Thus in a Short Sale, unless otherwise agreed by Seller and Buyer, the real estate licensee may not take
possession of an Earnest Money check or cash and simply hold it for days, weeks or months waiting for
the Seller’s lender(s) to approve the Short Sale and the Seller to provide the Agreement Notice to the
Buyer.
The Solution? Pursuant to the Short Sale Addendum, the real estate licensee would not take control of
the Earnest Money until and unless the Buyer receives the Seller’s Short Sale Agreement Notice. Upon
receipt of the Agreement Notice, the clock starts ticking for the Buyer and then the Buyer would
promptly, “Open Escrow and deposit Earnest Money as described in the Contract,” per Lines 373-374
above.
The parties may agree to deposit Earnest Money before the Seller provides the Buyer with a Short Sale
Agreement Notice, but beware of the Seller’s terms! Some Sellers like to make the Buyer’s Earnest
Money non-refundable for a period of time. Always check with your broker before advising your Buyer
to accept this potentially risky provision
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SIGN, SIGN, EVERYBODY SIGN
The Scenario
The husband and wife have been debating selling off a piece of land that they have held for a number of
years to build their dram home on after retirement. However, like many people, they find they do not
have the financial resources they had hoped for and the husband decides to sell this piece of property just
to make ends meet. No real agreement on any action has been reached between the married couple.
Despite this, the husband decides to hire a REALTOR® ad signs a listing agreement, promising the agent
that the wife will sign when she returns from caring for her sister back east who just had surgery.
The Risk
Within two days the agent presents a full price, cash offer to the husband who signs and accepts the
purchase agreement. He is excited about the successful sale for more than he thought was possible. His
excitement diminishes however when he relays the news to his wife over the telephone. Her response:
“You did WHAT?! I’m not signing! You moron! My only sibling is dying and is leaving me her entire
estate – enough money for us to build our dream home on that perfect piece of land.”
What To Do
It is simple: everybody needs to obtain expert legal advice – including the agent. Listing and purchase
agreements may be enforceable eve if only one spouse signs them.
For additional information on this subject, the reader is directed to pages 98-99 of the Arizona Real
Estate – a Professional’s Guide to Law and Practice written by K. Michell Lind, Esq., General Counsel
for the Arizona Association of REALTORS®.
SIX OR MORE REQUIRES PUBLIC REPORT!
The Scenario
You represent the seller and are in escrow. During the due diligence period, the buyer discovers
polybutelene piping and requests that the seller replace it. The seller refuses and the buyer decides to
proceed to closing. Two years later, a pip bursts and causes over $20,000.00 in damages.
The Risk
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The owner goes to a Real Estate Attorney to see if he can get relief. In conversation, he mentions that the
seller owns five other homes in the subdivision – the attorney smiles. Because the seller owned six
homes in the same subdivision, he was obligated to vie a Public Report to the buyer prior to close of
escrow. Because he did not, the buyer was a able to rescind the sale, and you and your Broker are now
being sued by the seller for not informing him of his obligations!
What to Do
When taking a listing, ask the seller if he/she owns any other properties, and check the tax records to
confirm. If the seller owns six or more in the same subdivision, the seller must get a Public Report from
the Arizona Department of Real Estate and deliver it to the buyer to review prior to close of escrow. The
seller cannon use the original Developer’s Public Report.
SMOKE ALARMS, FLASE ALARMS, MAINTENANCE AND DISCLOSURE
ISSUES
Many conditions that cause the smoke alarms to beep or chirp may also cause them to go into alarm when
they sense smoke or something in the sensing chamber.
1.
Age may be a factor. You should replace your alarm if it is 8 – 10 years old. The date code can
be found on the back of the alarm.
When selling or purchasing a resale property, property inspections often do not include smoke alarms
and/or carbon monoxide detectors. Disclosures should be made as to the age of the alarm system; date of
last batter installations, possible expiration date of the alarms, current condition of wiring and past
problems with wiring to alarms if known, and date of last thorough testing of system. New construction
alarm systems should provide information and disclosures regarding life expectancy of system and
maintenance requirements.
2.
The alarm may be installed in a location prone to nuisance alarms. Such areas are:

Near kitchens where they may be exposed to smoke from cooking.

Near bathr4ooms or areas where they may be exposed to steam.

Areas that are very dusty, such as attics or garages.

Areas that are in direct airflow such as near a heating vent or return.
Check the location of the smoke alarm; try re-installing it a few feet away.
Nuisance alarms can also be caused by external contaminants:
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3.
There may be dust or insects in the sensing chamber. Even in clean environments dust will
collect in the sensing chamber. This will cause the alarm to be overly sensitive and cause it to go into
alarm. Insects can have the same effect and the movement of the insects in and out of the chamber will
cause the alarm to sound. If the unit seems to go into alarm mostly at night, it is probably due to insects.
To clean the alarm:
Remove it from the wall or ceiling and hold the unit on its side. There is a gap between the front cover
and the back plat. Use a vacuum cleaner with a crevice tool or a can of compressed air and clean all
around the gap area. Pay most attention to the sensor. The sensor looks like a small tin can with slots in
it. This needs to be thoroughly cleaned since dust or insects may be caught in the sensor.
4.
Cleaning solvents (particularly ammonia), latex paints, and high dust conditions associated with
construction can cause the unit to go into alarm. Eliminate the condition and clean the alarm.
5.
Reset the unit. Disconnect the alarm from the electrical power (if applicable) and remove the
battery. Hold in the test button for approximately 15 – 20 seconds. This will reset your alarm. Re-install
the unit after this procedure.
If these suggestions do not solve problems or address issues, immediately contact the manufacturer’s
customer service or technical services department.
SOMEONE STOLE MY IDENTITY! WHAT NOW?
If you know or suspect that your social security number, driver’s license or credit cards have either been
stolen or compromised, take the following action immediately.
1.
Place a fraud alert on your credit reports by calling one of the following services. Calling one
will notify all three, and the initial alert is active for 90 days, with extended 7-year alerts available.
Equifax – 800-525-6285; Experian - 888-397-3742; Trans Union – 800-680-7289
2.
Close all accounts that have been tampered with or opened fraudulently.
3.
File a police report.
4.
Report the theft to the FTC (Federal Trace Commission)
5.
Hire a professional service to monitor your credit 24/7 such as Identity Theft Shield, for a modest
annual fee. Call 888-494-8519.
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6.
Make sure you get a detailed copy of your credit report for immediate review.
STEAL MY IDENTY? NOT WAY! THINK AGAIN
Skilled identify thieves use a variety of methods to seal your identity, including:
1.
Dumpster diving: going through trash to find your information
2.
Skimming: stealing your credit card numbers by using a special storage device when processing
your card
3.
Phishing: pretending to be a financial institution and sending spam or pop-up messages to get
you to reveal your personal information
4.
Changing Your Address: diverting your mail to another location by using a “change of address”
form
5.
“Old-fashioned” Stealing: stealing your wallet, purse, mail, pre-approved credit card offers, new
checks, etc.
Stealing personnel records from employers or stealing computers and servers. Don’t think it can’t happen
to you! Take simple and easy precautions, like shredding all financial and personal information, to avoid
being a victim of identity theft.
STOP LOSING YOUR SIGNS!
Here’s a practical tip that will save you and your agents time, aggravation and money. For the proper
placement of Yard, Open House and Directional Signs please follow these suggested guidelines:
1.
You are allowed ONE freestanding yard sign per property on the street frontage. (in front of the
property unless HOA rules are different)
2.
Open House signs are allowed on a temporary basis as long as they do not disturb the view of
traffic and are not placed in the public right of way.
3.
Directional signs are permitted as long as they are not in the public right of way or on public
property. Public right of way is defines as follows: a right of passage by the public over the surface of
land without impediment.
As a rule of thumb no sign shall be permitted which is placed on any curb, sidewalk, post, pole, hydrant,
bridge, tree, or other surface located on public property or over or across any street or public
thoroughfare.
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
Between the street and the street sign are not allowed.

Directional signs are to be placed at least 12 feet from the pavement or edge of the dirt road if no
curbs or sidewalks exist.

Signs are to be on the inside of the sidewalk which is private property.

All signs placed on private property shall get permission from property owners.
All directional signs must display Broker/Company name or logo, Agent Name and phone number.
Make sure your company has a blanket permit in the City of Tucson to cover your signs.
Please note that this information on signs is in compliance with the City of Tucson sign Code. For more
information on signs picked up by the City of Tucson, you may contact the Department of Neighborhood
Resources at (520) 791-5601 or (520) 791-5550. Pick up signs at 201 N. Stone Ave.
Directional signs are prohibited in Oro Valley. For information regarding picked up signs in Oro Valley,
call (520) 229-4877.
For information on picked up signs in Pima County you can search the yard on Wednesday’s between
8:00 a.m. – 3:00 p.m. at 1301 S. Mission Rd., near Bldg. #1. (Do not call)
For information on picked up signs in Marana, contact Development Services at (520) 382-2600.
TEST YOUR “BINSR” IQ!
All of the following statements about the Buyer Inspection Notice and Seller’s Response Form (BINSR)
are true except:
A.
by executing the form, the buyer represents that the buyer has completed all desired inspections.
B.
By executing the form, the buyer acknowledges that the buyer has verified all information
deemed important.
C.
If the buyer disapproves of items, the buyer may request that the seller reduce the purchase price
in lieu of repairs.
D.
If the buyer disapproves of items, the buyer may cancel the contract.
Answer: C – The contract provides that the buyer may either elect to immediately cancel the contract or
provide the seller an opportunity to correct the items disapproved. If the buyer wants a reduction in
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purchase price in lieu of repairs, the buyer must negotiate a reduction and reduce the modification to
writing prior to delivering the BINSR.
TOO COOL
The Scenario:
It is January 23, and at 1:00 p.m. the house inspector is already at the property when you pull in the
driveway with your buyer to conduct the scheduled home inspection. Your regular inspection company
could not accommodate your schedule, so you are using a different company that cam highly
recommended to you.
There was a hard freeze overnight with the temperature dropping to 25o F – quite cool for Tucson. Not to
worry though – the afternoon temperature is predicted to be back to 79o F by 3:00 p.m.
As usual, the home inspector has already begun looking at things on the outside of the property and has
notices that the air conditioning unit is on the north side of the building shaded from sunlight the entire
day.
The Risk
On completing the inspection, the inspector is reviewing the findings with you and your buyer. To your
surprise, the inspector notes that the air conditioning system was not inspected because of the risk of
damage due to the cold weather. Naturally, the buyer knows that they are going to need a properly
operating air conditioner in a few short months and is upset to learn that its operation will not be
checked.
One peculiar difference among home inspectors seems to be their position on evaluating the Heating
Ventilating and Cooling (HVAC) system. This somewhat controversial issue that has surrounded home
inspections is over the advisability of operating the air conditioning unit in cool weather. In Tucson, cool
weather means below 65 – 70o F. Many home inspectors advise against, or refuse doing this evaluation
unless warmer temperatures prevail – and they each seem to have their own “critical temperature.” Other
home inspectors don’t seem to think it is a problem and go ahead and run the AC unit regardless of
outside temperature.
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What to Do:
So, it will be important to discuss this subject with the chosen home inspector to ascertain what their
practice will be – and who will be responsible for any damage that may result from operating an air
conditioner in cooler weather. And, just as important, a discussion of this subject needs to take place
with the buyer and seller clients in advance.
TO SURVEY OR NOT TO SURVEY?
The Scenario:
The home was built by the seller himself – 5 years ago. The county inspector gave the home owner all of
the appropriate permits and approvals. There is a surveyor’s stake in the ground that is alleged by the
seller to be the property line – and based on the available records, it looks like it is the appropriate
distance from the home.
During the home inspection, a neighbor comes by and says that 60 feet on the west side of the home is
dedicated to the County. After much arguing on the part of the buyer’s agent, the buyer reluctantly
decides to have a survey performed since the measurements are not matching up with what the seller is
saying.
This Risk:
The buyer has paid for the survey and learns that indeed somebody has moved the stakes. The County
owns much of the land and will charge $5,000 to begin abandonment proceedings – which may take
several months. Who will pay for all of these unexpected expenses? What about the loan application
costs, and the interest rate lock and the appraisal?
Too many buyers make assumptions about property boundaries based on circumstantial evidence or
seller representations. The seller or anyone else may have moved the surveyor stakes or other
“boundary” or “corner” markers. Don’t be so naïve to think that people don’t do these things – it
happens all the time.
What to Do:
Buyer agents should never make persona judgments, or make statements, or agree with others’
statements that could lead a potential buyer of property to assume anything about property boundaries.
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Whenever there is any doubt, a licensed surveyor should be employed. As real estate agents, we simply
have not expertise on this subject.
Whenever it may be appropriate, buyers should consider the advisability of having a professional survey
performed. It can be a negotiated item in the contract as to who, the buyer or the seller, will order and
who will pay for the survey by a licensed surveyor to determine or verify the property boundaries.
UNDERSTANDING THE POOL BARRIER LAWS
Because of the number of drownings and near-drownings in Arizona, most of which involve
small children, the State of Arizona and most counties and cities within the state have enacted
swimming pool barrier laws. Click here to access an AAR brochure developed to assist you in
obtaining the pool barrier information you need.
UNINTENTIONAL FIXTURE
The Scenario:
Though it is attached to a mounting bracket on the wall the large, expensive, flat-screen TV has been
identified as “personal property” and has been specifically excluded, in writing, from times that convey
with the sale of the house. The escrow proceeds normally – all parties have signed several days in
advance of COE and closing draws near without event – except that on the final walkthrough inspection,
the buyer notices that the expensive mounting brackets used for the flat-screen TV have been removed by
the seller leaving gaping holes in the wall.
The buyer insists that they be put back and the wall restored to its original condition. Though in the large
scheme of things, this may seem like a relatively small matter – it is material to the buyer and he has
instructed his lender not to fund until this dispute is resolved.
The Risk:
Not taking the time to thoroughly understand and document exactly what is considered a fixture and wha
is considered person property can cause misunderstanding, disagreement, and dispute. Which of the two
parties will concede? Maybe neither party will. Will the transaction close? Should the buyer go ahead
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and close and then pursue legal action against the seller? Should they buyer cancel the contract and
demand his earnest money be refunded? Are there other remedies?
What To Do:
It is extremely important to be as clear, specific, precise, and unambiguous when writing in additional
terms and conditions in a Purchase Contract. Any items that have potential for a difference of opinion
regarding whether they are a fixture or personal property need to be identified and delineated.
When disputes arise, it is best to remind clients of the provisions of the contract and, if appropriate,
recommend that they seek appropriate counsel – legal or otherwise to help protect their best interest.
UNKNOWN PROPERTY TAXES
The Scenario:
Buyer purchases newer home that has Assessor’s office showing taxes as $600.00. Title Company will
only prorate taxes based on what the Assessor’s office shows, which is the $600.00.
The Risk:
The problem is that the $600.00 is for the DIRT only, as the assessor has NOT yet realized that there is a
house on this lot. Buyer collects from Seller the tax pro-ration based on the $600.00, an then later in the
year – long after close of escrow – received the NEW tax bill. Of course, now the Assessor has
discovered that there is a house on the property, and the Buyer is billed for $3200.00. Seller has moved
out of state and refused to respond to any please to pay his fair share of the taxes, the buyer is stuck with
the new, considerably larger tax bill. Buyer WILL most probably look to his agent to pay for this,
claiming that this possibility was NOT disclosed to him.
What To Do:
Buyer’s Agents should look carefully at the taxes shown on record and determine if these are reasonable
for a lot with a house on it, or if the taxes appear extremely low, note that the Assessor has not caught up
to reality yet. Buyer’s Agents should point out and disclose this item, and in the purchase offer, require
the Seller to leave in escrow, or credit to Buyers, a mutually-agreed upon amount that is closer to what
the average homes in the area are paying for taxes. Disclose the current tax bill and possible tax bill to
your Buyers, or be prepared to pay!
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UTILITIES AND INSPECTIONS
Q: During the last visit to the property, we noticed that the utilities had not been turned on by the listing
agent and we are ready to submit an offer, and fear that the utilities will not be on for our inspections.
How do I ensure that the listing agent has all utilities turned on to avoid going over inspection timelines
due to this utilities issue?
A: One possible solution is to include the following in the Additional Terms and Conditions, Section 8 of
the Contract: “During the last visit to the property which took place on (insert date), it was noted that
utilizes were not active, for this reason inspection period will commence on the day that the buyer and/or
its broker receives written notice from the listing agent and/or seller that all utilities have been turned on
and the property is ready for inspections.”
VACANT HOME ISSUES
As real estate practitioners, we are often called upon to go above and beyond our normal level of service
and standard of practice in assisting our clients. And, we often do so in the spirit of providing
exceptional customer service. However, doing so can be a source of real problems when it comes to
what we should be responsible for and what we should politely refuse to do – especially with vacant
home listings. At what level of service so we advise the property owner to hire a caretaker, handyman,
service personnel, or a licensed professional?
The Scenario:
You have taken a residential listing that is or has become vacant. The owners say that everything is in
good shape and no routine maintenance is going to be necessary. The market is slow, so you are not
routinely able to show the property nor is anyone else showing it.
The Risk:
So, do things go wrong with houses that are just sitting there all alone? You bet they do. The only
question becomes: Who is responsible for doing what about it? The risks associated with doing
something vs. not doing something yourself may be significant. Should the list8ing agent periodically
check on the condition of the property? Is monthly often enough? How about weekly? Should the
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property be checked after every rainstorm during the monsoon season? Should it just be a drive-by, looksee or a careful walkthrough inspection?
What should our observation / inspection include? Will it depend on the age and existing condition of the
property? How about its location? Does it matter how far away from our office or home the listed
property is?
Just a few of the possible problems and issues may include: water leaks, power outage issues, irrigation
system operation failure, burned out light bulbs, smoke detectors blaring because of a dead battery,
security systems on/off / alarming, HVAC problems, storm damage, erosion, weeds, blown over trees,
insect / pest infestations, dead animals, broken windows, pool / spa / waterfall maintenance issues, lawn
maintenance, etc., etc. What about the need to run water in all of the sinks and flushing the toilets to
make sure there is water in the plumbing traps to prevent sewer gases from entering the home? How
about mail, package, and newspaper delivery issues? And, access for routine maintenance by others –
pools, pest control, repairs? And signing for the acceptance of those services rendered?
Is the real estate profession to be held accountable and liable for all of these and more?
What To Do:
Have a thorough and frank discussion with your seller clients about all of these potential issues and reach
an agreement about how all of these possibilities are to be handled. It may also be prudent to remind the
homeowner that their hazard insurance should reflect the vacant status and have them contact their
insurance agent regarding proper coverage.
And, as always, make sure your Broker approves of your consultations, agreements and activities.
VACANT LAND LANGUAGE LOOPHOLE
The Scenario:
There are naturally many differences in our two primary Arizona Association of REALTORS® Purchase
Contracts – one for Residential Resale Real Estate, and the other is for Vacant Land/Lot. Representing a
seller of vacant land has many unique challenges and is considered by many to be a specialty area of
practice. And though a majority of land purchases may be cash transactions, some deals do involve
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financing. And related to financing, one small example of the difference in language that perhaps some
are not familiar with is found in Section 2c of the Vacant Land/Lot Purchase Contract. In part, that
section says:
If the sale is contingent upon Buyer obtaining a satisfactory financing commitment, Buyer shall have
thirty days of
days after the Contract acceptance to obtain financing commitment
satisfactory to Buyer in Buyer’s sole discretion, for a loan to purchase the Property or Buyer may
cancel this Contract and receive a refund of the Earnest Money.
The Risk
There is no commitment to any specific loan terms whatsoever (as might be found in a Loan Status
Report) in that provision.
Compare that language to the words found in Section 2a of our Residential Resale Estate Purchase
Contract:
Buyer’s obligation to complete this sale is contingent upon Buyer obtaining loan approval for the
loan described in the AAR Loan Status Report without conditions no later than COE Date.
That’s a very different requirement. Yes, it potentially means that the Buyer might not obtain the loan
approval all the way until Close of Escrow – but that possibility is limited by the terms and conditions
described and agreed to in the Loan Status Report. So, assuming a “good faith” effort on the part of the
Buyer, the discretion or decision making about loan approval lies with the lender – not the Buyer.
So, the point is, there is a slightly different risk to land and lot sellers of being tied into a contract that is
contingent on financing where the standard language strongly favors the Buyer – giving them the
opportunity to cancel at their sole discretion based on financing terms for the entire 30 day contingency
period (or whatever other time period may have been agreed to on line 37).
What to Do:
As a seller’s representative, perhaps this issue should be discussed and addressed with the seller – giving
consideration to countering such an offer with language that tightens up the financing contingency more
in line with what has become standard in our Residential Resale Real Estate Purchase contract and
incorporating the Loan Status Report into the vacant Land/Lot Contract.
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WHAT DO YOU DO WITH THE EARNEST MONEY CHECK ON A SHORT
SALE?
Q: I am preparing the offer for my Buyers on a Short Sale listing. Since it is a Short Sale, I will
incorporate the Short Sale Addendum to the Residential Resale Real Estate Purchase Contract. Our offer
does include earners money, but what do I do with the check? The Short Sale Addendum says, “Buyer
shall promptly open Escrow and deposit Earnest Money as described the Contract upon receipt of
Agreement Notice.” This “Agreement Notice” comes from the Seller when they have come to a short
sale agreement with their creditors, this could take “weeks or months” according to the addendum. I do
not want to be holding a check for that long and neither does my Broker, what do I do?
A:
First I would check with your Broker for guidance and company policies that addresses this issue.
Since the Short Sale Addendum does prevail over the purchase contract, I would not have your Buyer
write the Earnest Money check for Escrow until receipt of the “Agreement Notice” from the Seller. This
way, you or your Broker does not have to be accountable for the check for “weeks or months.”
WHAT’S IN YOUR AD?
Advertising violations by real estate practitioners appear to run rampant across the state an even in our
own backyard here in southern Arizona. Everything from business cards to newspaper, billboard and
television ads, to websites – advertising by real estate agents takes many forms - and every form of
advertising must meet certain guidelines and restrictions.
Perhaps one of the more prevalent shortcomings in agent advertising these days is on the internet – on
licensees’ websites and web pages. Standard of Practice 12-5 of the NAR Code of Ethics states:
“REALTORS® shall not advertise nor permit any person employed by or affiliated with them to
advertise listed property in any medium (e.g., electronically, print, radio, television, etc.) without
disclosing the name of that REALTOR® firm in a reasonable and readily apparent manner. (Adopted
11/86, Amended 1/07)”
And more specific website advertising, Standard of Practice 12- 9 states:
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“REALTOR® firm websites shall disclose the firms’ name and state(s) of licensure in a reasonable
and readily apparent manner. Websites of REALTORS® and non-member licensees affiliates with a
REALTOR® firm shall disclose the firm’s name and that REALTOR®’s or non-member licensee’s
state(s) of licensure in a reasonable and readily apparent manner. (Adopted 1/07)”
The Arizona Department of Real Estate (ADRE) has taken a position in writing on this subject and
specifically on internet advertising:
“The employing broker’s name must be on each page of an associate broker or salesperson’s website.
Websites or emails that target Arizona residents with the offering of a property interest or real estate
service also constitute advertising and is a regulated activity. A.R.S. §32-2163(D) and A.A.C. R4-28502(L). The employing broker’s name must be visible on the first page of the web page, without the
necessity of scrolling down, regardless of the screen size of the computer. Web pages should identify
the broker on each page because it is possible to link to a single page and, if that is done, the broker’s
name needs to be visible. In contrast, if the employing broker produces a magazine that includes only
the broker’s listings, the broker can be identified on just the front cover, not every page, because a
consumer picks up the whole magazine, not just one page. “
Another violation that occurs less frequently is the improper use of the term REALTOR® - especially
when used as part of an agent’s web address or URL (uniform Resource Locator). Anything that
incorporates a modification of the term REALTOR® in any way, is a federal trademark violation. Things
like: www.bestrealtor.com, www.greatestrealtorontheplanet.net, are not permitted – no variation is
permissible.
And, the NAR Membership Marks Manual, which contains the use guidelines for the REALTOR®
trademark, may be viewed in its entirety on the NAR website at:
www.realtor.org/letterlw.nsf/pages/trademarkmanual.
Real estate agents and their brokers share in the responsibility for proper and accurate advertising. It is in
the best interest of the public that we serve and it is also in our own best interest. Take the time to
review you advertising for compliance – and make any changes necessary. Why wait for a complaint
to be filed? This kind of issue can damage an otherwise good reputation and create ill will among our
peers. It can also be an expensive proposition to correct when you are finally discovered. And, aside
from the need to maintain regulatory compliance we also need to be wary of tort liability as well.
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WHAT’S YOUR ANSWER WHEN THE JUDGE ASKS……
“Don’t you owe it to your client to review the Wood Infestation Report with them? Shouldn’t you obtain
a full and accurate report? How would you advise the buyer if the inspector indicated on the report that
some areas are “inaccessible” or, because there are boxes in the attic, they cannot inspect it at all? Would
you not alert the client to the fact that they have less than a complete report?”
Is it typical for a buyer’s agent to read the report, make a note of the inaccessible areas and discuss these
with their client? If not, why not?
If a home inspector cannot inspect the gas furnace because the gas is not turned on, what actions do you
take as the buyer’s agent to assure that the furnace can be properly inspected? If the dishwasher cannot
be tested because the water is turned off, how do you handle that? Surely you would be getting in touch
with the listing agent and making sure these utilities were turned on so the inspection can be completed.
The Wood Infestation Report is the result of one of the inspections the buyer has deemed important to
complete for their due diligence. Let’s make sure they receive the information they need from ALL
inspections they have decided to obtain, so they will be able to make informed decisions about requests
they may make of a seller to correct important items to the buyer or to decide this is not a property they
wish to purchase.
WHEN “NONE” MEANS “SOMETHING!”
Lines #179 & 180 of the Purchase Contract
The Scenario
The REALTOR® is reviewing our 9 page contact with his prospective buyers. Their infant is fussy and
toddler bored. “Just hit the highpoints” the husband insists. The price and closing dates are carefully
arrived at and every box is checked, page initialed and the offer is signed. Seemingly innocuous parts are
breezed over. Nothing is written on the blank lines that follow lines #179 and 180 that read: “Buyer
warrants that buyer is not relying on any verbal representations concerning the Premises except as
’
disclosed as follows:
The Risk
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Shortly after closing, the Buyers discover the property boundaries “aren’t where the Seller or Agent said
they were when they saw the home and asked that they be pointed out.” Section 5c of the contract is cited
in the Seller’s defense. “You didn’t disclose any verbal representations that you were relying on!” The
Buyer responds that “we didn’t even go over that section!”
What to Do
Section 5c is intended to prompt a discussion between the Buyer and their agent. “ Do you have to sell a
house? Is your down payment reliant upon an estate settling? Are you relying on any verbal
representations made by the Seller or anyone else?” This is the time to question and hesitate. If this
Buyer had said “well the Seller/or agent showed me the property boundaries” it would be the time for an
agent to say “let’s write that in and confirm it during the inspection period.” If nothing is written there is
no evidence that the discussion occurred. Have the discussion, take the time to confirm verbal
representations before presenting the offer or describe what representations they Buyer is relying on.
Write “none” on those empty lines if you asked the Buyer and they said “None.” This is one time when
“nothing” means something.
WHEN OVER COMMUNICATING IS A GOOD THING!
The Scenario
You receive a purchase contract; the buyer is getting a loan. Under the financing section, the buyer has
marked the box for the seller to pay one discount point and also a 1% origination fee. Then, in section 8,
additional terms and conditions, the buyer has written, “seller to pay $3,000.00 of buyer’s closing costs.”
The Risk
The seller and the seller’s agent understood the contract to mean that the seller was paying a Total of
$3,000.00 towards the buyer’s closing costs. The buyer intended for the seller to pay $3,000.00 in
Addition to the closing fees marked to be paid by seller on page 2. It was only when the escrow officer
wen to prepare the HUD-1 that the ambiguity was recognized. In this case, the seller, seller’s agent,
buyer and buyer’s agent split the disputed $3,600.00.
What To Do
Clarify, clarify, clarify! If you are writing additional terms, over communicate your point so as to avoid
any possibility of misinterpretation. Look carefully on page 2 to see if any of the buyer’ financing costs
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are marked, paid by seller. If you get a typed contract, it is hard to see those little boxes so look carefully!
In this scenario, the seller should have responded with a counter offer with clear language stating their
willingness to pay a Total of $3K and no more.
WHY SHOULD I CARE ABOUT DATA SECURITY AND PRIVACY?
Brokers and agents collect personal information for a variety of reasons. Oftentimes, this personal
information is collected because the agent is trying to be helpful to his client. But, in reality, the agent
may be helping himself and his broker to some legal risk. Click here (insert link) to obtain the “Data
Security and Privacy Toolkit” prepared by the NAR Legal Department. This Toolkit educates brokerages
and associations about the need for data security and assists them in complying with their legal
responsibilities.
WHY WOULD YOU DO THIS?
Facetime and Skyping, are both wonderful tools but they are not the best choice for a pre closing
walkthrough. We are hearing about agents using these tools with clients who are unable to physically
attend a pre closing walkthrough. In theory it sounds like a great idea but the reality is a bit different.
Skype and Facetime (or any camera) can be used in such a way that the Buyer does not see all of the
property. Areas could be accidently or purposefully omitted and the Buyer could not be getting a clear
and complete picture of repairs or conditions within the property. Rather than using these tools when a
Buyer cannot be present for their walk through, suggest they have a relative, friend or their home
inspector attend.
WORKING WITH INVESTORS? WATCH WHAT YOU PROMISE!
Utmost care must be given when selling or representing residential property (single family, condominium,
townhouse, manufactured home, duplexes, triplexes, etc.) as an investment. In general, good practice
dictates that residential agents involved in the sale of a investment property avoid promising a return on
the investment or future appreciation!
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In our role as an agent for an investment client we are limited to provide information on how the property
is currently performing and/or has performed as an investment in the past. Our discussions with
prospective clients should focus on current/past expenses, current/past income and past appreciation.
As residential real estate licensees the scope of our employment does not permit us to project future
investment performance. Pursuing this line of behavior may be likened to practicing, as stock brokers to,
a securities exchange which requires a securities license. Remember, when working with investment
properties, watch what you promise and at all costs do not work outside your area of expertise or
licensing parameters.
WHEN WORKING WITH PROSPECTIVE TENANTS ARE YOU USING THE
READE FORM?
The Scenario
A tenant calls an agent to view a home for rent. The agent shows the prospective tenant a rental property
listed by the agent’s brokerage, and answers many questions about that property and the surrounding
neighborhood, as well as making friendly conversation with the prospective tenant. The tenant decides to
put an application on the property, which is approved. The agent prepares the lease and related
disclosures, reviews the terms and conditions with the tenant, and assists in placing proper
The Risk
If the agent’s explanation of the terms and conditions of the contract are interpreted by the prospective
tenant to mean that the agent is helping the tenant, and therefore representing him/her, the agent is
exposed to potential for undisclosed dual agency. If the tenant claims they believed the agent was looking
out for his/her best interests, dual agency may exist whether a formal agreement exists or not.
What to Do
Luckily, the AAR Real Estate Agency Disclosure and Election (“READE”) form is applicable not only to
Buyers and Sellers, but also Landlords and Tenants. In Arizona, agency must be disclosed to a customer
at the first available opportunity. While this disclosure of agency is not required to be in writing, the
READE form is the best defense against a claim of undisclosed dual agency. At a minimum, the
prospective tenant should be presented with the READE form prior to signing the lease. As a standard of
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practice, the READE form should be included in all listing, sale, property management and lease files to
protect licensees and brokers against failure to disclose their agency relationship to the client or customer.
YOU BE THE JUDGE…RACIAL STEERING?
Facts
Over a one-year period, sales associates for Matchmaker Real Estate showed black testers in Chicago
homes that were below their price range in racially-mixed areas and showed white testers homes that were
above their price range in white neighborhoods. The broker had a written fair housing policy and
required his sales associates to attend fair housing training. BUT, he did not monitor their actions by
keeping documentation relating to prospects’ desired locations, locations actually shown or price range.
Findings
The trial court found Matchmaker, its owner and four sales associates guilty of steering prospective
homebuyers according to their race. But because the broker had actively supported the fair housing laws,
the appellate court overturned the trial court’s punitive damage against him and the company. However,
the compensatory award was upheld.
YOU VERIFIED THE “FLOOD PLAN” – BUT DID YOU REALLY?
The Scenario
You are the Listing Agent using the TAR Property Verification form. One of the verifications is
regarding “Flood Plain.” The reason you are verifying this is because on the Property Profile form there
are two questions regarding flood plain: 1) “Flood Insurance Required?” and 2) “Environmental
Disclosures” – a disclosure of whether or not the property is in a fold plain.
You call, fax or email your request to the appropriate governmental agency for “Flood Plain Information”
or go to the appropriate governmental agency where the property is located and ask for the information.
Dutifully, the government work provides you with the fold plain status as indicated by FEMA (Federal
Emergency Management Agency). BUT, have answers to both these important questions been obtained?
Maybe or maybe not. Let’s review.
“Flood Insurance Required?” This is an important question because it lets a potential Buyer know if the
subject property is or may be at a high risk to flooding according to an opinion rendered by the Army
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Core of Engineers. Further, it alerts the buyer if flood insurance will be required by their lender. (note:
lender required insurance does not cover contents but an option for his coverage is available.) There are
variables that may allow the removal of a specific property to be taken out of a certain flood zone, but this
is highly unusual and too complex to discuss in this tip. Check with your Broker for more information.
“Environmental Disclosures” (a disclosure indicating if a property is or is not in a flood plain.) this
question is much more encompassing than the first question and is not limited to just the FEMA zone of
the subject parcel. It is important to remember that each individual municipality has their own guidelines
regarding flood plains which are not controlled by FEMA. Local municipalities may impose restrictions
that could potentially limit the use of the subject property. In order to avoid exposure to risk a good
business practice to implement is to ask this question: “Are there any other local flood plain issues
regarding this specific property?” Some municipalities do address this issue on their form – others don’t.
Some will automatically tell you if you are asking the question in person, others, by policy, may not. Ask
the question and record their response.
For example, currently Pima County allows you to fax a request for information using their form. In turn
they will provide you information from FEMA. Then, as a disclosure, they may add a stamp that states:
“Property may be subject to local Floodplain Regulations. Bring this sheet to the Floodplain
Management Section if you need additional information. No phone calls please, local flood status cannot
be given by phone.” This is the red flag signaling you need to get more information.
The Risk
When the Environmental Disclosures question is answered; or when a potential Buyer asks the question,
“Is it in the Flood Plain?” you may be answering the question incorrectly, exposing you and your
company to potential legal consequences, as well as a potential violation of the NAR Code of Ethics.
What To Do
When you are verifying flood plain information make it a practice to ask the personnel representing the
respective municipality two questions: First, what is FEMA’s Flood Plain FRIM Zone? Second, are you
aware of any federal or local flood plain issues a Buyer of this property should know about before they
proceed with a potential purchase? Get the information in writing and provide the written information to
the potential buyer. Be the source of the source. This important information should also be disclosed in
the SPDS.
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