Colorado Contracts and Regulations
CP-1, CP-2
The first two chapters of this Course covered 1.) License law and 2.) Commission rule. We will now review the third collection of policies known as Commission Position (CP) Statements. Chapter 3 of the CREM contains the position statements in full. They are abbreviated here with enough detail for you to understand their meaning.
By the end of this unit, you will be able to:
· Explain how the CO Laws and the Position statements differ
· Describe the Broker responsibilities according to the CO Position Statements
· Recognize and express the Position Statement concerning Interest Bearing Accounts and refund of earnest money
Note that while position statements indicate the desires of the real estate commission as to how certain policies are carried out; they do not carry the force of law.
CP-1: Homebuilder’s Exemption from Licensing: Salespersons working for new homebuilders are not required to be licensed. New home sales staff, however, must be regularly salaried. This means that money paid them is not a draw against future commissions, is paid on a regular cycle, must exceed minimum wage and must have normal payroll taxes withheld.
CP-2: Referral Fees and Advertising Services: A broker may not pay commissions or referral fees to unlicensed persons for activities requiring a license. The Commission interprets this as anything involving negotiating. Negotiating is further defined as the act of bringing two parties together for the purpose of consummating a real estate transaction.
Referral fees may be paid if:
1. An actual introduction of business has been made;
2. A contractual referral fee relationship exists; or
3. A contractual cooperative brokerage relationship exists.
(Instructor’s Note: Federal RESPA law treats referral fees more stringently than this Statement. Consult your employing broker and seek competent legal counsel.)
Payment for general promotion of your real estate business is not prohibited.
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CP-1, CP-2
The first two chapters of this Course covered 1.) License law and 2.) Commission rule. We will now review the third collection of policies known as Commission Position (CP) Statements. Chapter 3 of the CREM contains the position statements in full. They are abbreviated here with enough detail for you to understand their meaning.
By the end of this unit, you will be able to:
· Explain how the CO Laws and the Position statements differ
· Describe the Broker responsibilities according to the CO Position Statements
· Recognize and express the Position Statement concerning Interest Bearing Accounts and refund of earnest money
Note that while position statements indicate the desires of the real estate commission as to how certain policies are carried out; they do not carry the force of law.
CP-1: Homebuilder’s Exemption from Licensing: Salespersons working for new homebuilders are not required to be licensed. New home sales staff, however, must be regularly salaried. This means that money paid them is not a draw against future commissions, is paid on a regular cycle, must exceed minimum wage and must have normal payroll taxes withheld.
CP-2: Referral Fees and Advertising Services: A broker may not pay commissions or referral fees to unlicensed persons for activities requiring a license. The Commission interprets this as anything involving negotiating. Negotiating is further defined as the act of bringing two parties together for the purpose of consummating a real estate transaction.
Referral fees may be paid if:
1. An actual introduction of business has been made;
2. A contractual referral fee relationship exists; or
3. A contractual cooperative brokerage relationship exists.
(Instructor’s Note: Federal RESPA law treats referral fees more stringently than this Statement. Consult your employing broker and seek competent legal counsel.)
Payment for general promotion of your real estate business is not prohibited.
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CP-6, CP-7
CP-6: Release of Earnest Money: A broker is not required to return disputed earnest money, but may await court instruction resulting from lawsuit between the parties, OR may turn the disputed funds over to a court for distribution. When disputed, it is wise to obtain both parties signatures on a commission-approved release form.
When a transaction fails with no dispute, the broker must return earnest money to the appropriate party immediately. No signature of release or receipt is required.
In the rare case when a broker is unable to locate a party due earnest money, a broker may be required to deposit the money as unclaimed property with the State Treasurer under the Great Colorado Payback program. If not claimed after a certain period, the money is advertised and thereafter escheats to the state.
CP-7: Closing Costs: Nothing in this position statement adds to the context of Commission Rule E-37.
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CP-8, CP-9, CP-10
CP-8: Assignment of Contracts and Escrowed Funds: When a real estate company is sold, merged or goes out of business, all interested parties must be notified and permission obtained to transfer any listing/employment agreements or assign any escrowed funds. Escrowed money transferred to a new broker makes the new broker liable for its safeguarding and accounting even without new agreements being signed. Earnest money may not be released to any party, except the closing entity, just prior to closing.
CP-9: Recordkeeping by Brokers: The loan payoff statement should be retained by the listing broker; the new loan statement should be retained by the broker working with the buyer. The final sales agreement and settlement statement delivered at closing for that party's tax reporting, or future use, shall bear duplicate signatures as authorized. Remainder of text is verbatim from Rule E-5.
CP-10: Compensation Agreements between Employing and Employed Brokers: The Commission will not get involved in compensation disputes between employing brokers and their licensees. Both parties should have an (oral or) written employment contract covering compensation; disputes must be settled internally or through the courts.
(Instructor's note: It is prudent to include compensation from referrals and costs associated with purchase and sale of broker-owned properties before entering an employment contract.)
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CP-11, CP-12
CP-11: Assignments of Broker's Rights to a Commission: An employed broker must place any funds from any source with the employing broker, and may not accept a commission or any valuable consideration from anyone other than the employing broker. An employing broker may assign a commission to any person after title has transferred (closing).
CP-12: Broker's Payment or Rebating a Portion of an Earned Commission: Although brokers are forbidden from paying fees to unlicensed persons, brokers may generally add a sum of money to, or rebate a portion of, the earned commission from the brokerage services offered in the contract to their own clients without violating the license law.
Listing brokers who intend to offer a rebate of earned commission to the buyer must first obtain the seller's authorization because:
a. Such a rebate may adversely affect the buyer's financial qualifying and thus harm the broker's fiduciary to the seller; and
b. If the expected payment is not made, the buyer may include the seller in any lawsuit to recover the promised rebate.
Gratuitous true gifts (not offered as inducements to purchase) of nominal value are okay and do not interfere with a listing broker's fiduciary to the seller.
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CP-13, CP-14
CP-13: Single-Party Listings: Listing a property for sale to a specified single purchaser is unfair to the seller, possibly putting an unaware seller, who also signs a normal exclusive listing, in jeopardy of owing two commissions. Therefore, when seeking a single-party listing, the broker should include one, two or all of these provisions:
1. This listing contract shall apply only to the sale of the property to (______).
2. The termination date shall not be extended by the "holdover period of this listing contract.
3. If a sale is made to any other party than the single party named above by the seller or the seller's broker, this listing contract is void.
CP-14: Sale of Modular Homes by Licensees: A licensee may sell a modular home and not be subject to the license law restrictions on delivering all money to, or receiving commissions, only by the employing broker. Likewise, none of the recordkeeping or money-handling provisions of Rules E-1 or E-5 apply. But if the sale includes land, or is tied to a pre-arranged parcel of land, then license law and Commission rule apply and all money must be processed through the employing broker with appropriate recordkeeping.
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CP-15, CP-16
CP-15: Sale of Items Other than Real Estate: If items or services are sold under a property management agreement, or a contract for sale of the real property, a broker must disclose to both buyer and seller (or landlord and tenant) that the licensee is being compensated by a vendor or contractor. All money must be processed through the employing broker.
If the sale is under a separate contract without reference to real property, the vendor or contractor may pay an employed licensee without going through the employing broker. However, if a listing broker makes the sale to a buyer during a listing agreement with the seller, the employed licensee must disclose to both the seller and buyer the vendor or contractor is paying that to him or her.
The employment contract between the employing and employed brokers will take priority as to any restrictions or prohibitions against such activity.
CP-16: Access to Properties Offered for Sale: The listing broker is primarily responsible for safeguarding access instructions to property listed for sale. Broker working with sellers must also safeguard access information and not distribute it to appraisers, inspectors or buyers without the listing broker's authorization.
(Instructor's note: This means discussing any seller access preferences during the listing presentation and insuring they are followed.)
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CP-18, CP-19
CP-18: Payments to Wholly Owned Employee’s Corporation. An employed broker must be licensed in his or her own personal name, and may not use a corporate name in the practice of real estate or to circumvent Commission rules on broker supervision. However, brokers may choose to establish a corporate veil for IRS or state tax purposes and the Commission will then allow commission checks to be paid to the name of the associate broker’s corporate entity.
CP-19: Short-Term Occupancy Agreements. Resort or hotel-type agreements are not leases and are exempt from the definition of real estate brokerage. However, a licensed broker conducting such activity must still escrow and account for any held money belonging to others.
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CP-20
CP-20: Unlicensed Personal Assistants. Unlicensed persons may not perform activity requiring a license. This means they may not independently draft legal documents (contracts), offer opinions, advice or interpretation. They may, however, prepare contracts and forms as directed by the licensee, and distribute information on listed properties prepared by the licensee.
Unlicensed assistants may:
1. Perform clerical duties including gathering listing information.
2. Provide access to properties, as long as no negotiating, selling, offering or contracting occurs.
3. Distribute pre-printed objective information at an open house as long as no negotiating, selling, offering or contracting occurs.
4. Distribute pre-printed objective information on listed properties prepared by licensees.
5. Deliver paperwork to other brokers.
6. Deliver paperwork to sellers/buyers after review by licensee.
7. Deliver lender-prepared paperwork to obtain signatures.
8. Independently prepare CMA's for sellers/buyers, as long as their name is included thereon as preparer and the CMA is actually presented by the licensee.
Written office policy should detail the duties, responsibilities and limitations of personal assistants.
Assistants should be paid in some manner other than sharing in sales commissions. When compensation is based on success of the closing, unlicensed assistants may face increased pressure to cross over into activities requiring a license.
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CP-21
CP-21 Office Policy Manuals should contain procedures for at least:
· Typical real estate transactions (contract review, earnest money handling, back-up contracts, closings).
· Non-qualifying assumptions and owner financing.
· Guaranteed buyouts.
· Investor purchases (and brokerage relationships less than "arms-length (CP-31).
· Brokerage relationships offered to the public.
(Instructor's note: This is the only policy required by statute C.R.S. 12-10-403 for every brokerage, including both single- and multiple-person firms.)
· Broker designation in firms of more than one person when the broker elects to take advantage of Rule E-38 to avoid writing a letter of appointment for every side of every transaction.
· Maintenance and protection of confidential information (Rule E-39).
· Licensee purchase and sale of property.
· Monitoring of license renewals and transfers.
· Delegation of authority (When employing broker is absent, acts as a designated broker in a transaction, or in certain cases of administrative or supervisory practice.
( Instructor's note: Remember a broker may delegate authority, but not responsibility.)
Property Management
(Instructor's note: A firm intending to engage in property management is well advised to develop an entire separate office policy manual for such activity. The level of detail is far too broad to be addressed in a policy topic. Chapter 20 of the CREM offers additional guidance/options for property management.)
· Property listing/release/termination procedures.
· Training (Including dissemination of information and office meetings).
· Personal Assistants.
· Fair Housing.
· Listing syndication
· Broker price opinions
(This policy should not simply restate Federal and state law, nor list protected classes for which associates are already responsible, but should have YOUR personal affirmation of this subject, including policy on broker behavior and reporting/dealing with fair housing issues should they arise.)
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CP-22, CP-23
CP-22: Handling of Confidential Information in Real Estate Brokerage. This CP statement addresses the requirement for written policies to safeguard files, phone conversations, sales meetings, etc. Remember that the designated broker is the only guardian of the client's confidential information unless assistance is needed in accordance with Commission Rule E-45 as authorized by paragraph 4c of the Commission-approved listing/employment agreements.
CP-23: Use of Licensee Buyout Addendum: This addendum is required only when a licensee contracts to purchase a property:
1. Concurrent with listing the property for sale.
2. As an inducement to, or to facilitate the owner's purchase of, another property.
3. But continues to market the property under an existing listing agreement.
If a licensee intends to purchase for his or her own account, he or she must:
1. Sever the brokerage relationship.
2. Renounce any right to a commission.
3. Advise the owner to seek other real estate or legal representation. ( Instructor's note: This position statement pre-dates designated brokerage. This severance applies only to the licensee purchaser's personal brokerage relationships, and not to properties listed by other brokers in the firm.)
Resale to a buyer with whom the licensee had negotiated during the listing violates the license law absent written disclosure and seller acknowledgment.
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CP-22, CP-23
CP-22: Handling of Confidential Information in Real Estate Brokerage. This CP statement addresses the requirement for written policies to safeguard files, phone conversations, sales meetings, etc. Remember that the designated broker is the only guardian of the client's confidential information unless assistance is needed in accordance with Commission Rule E-45 as authorized by paragraph 4c of the Commission-approved listing/employment agreements.
CP-23: Use of Licensee Buyout Addendum: This addendum is required only when a licensee contracts to purchase a property:
1. Concurrent with listing the property for sale.
2. As an inducement to, or to facilitate the owner's purchase of, another property.
3. But continues to market the property under an existing listing agreement.
If a licensee intends to purchase for his or her own account, he or she must:
1. Sever the brokerage relationship.
2. Renounce any right to a commission.
3. Advise the owner to seek other real estate or legal representation. ( Instructor's note: This position statement pre-dates designated brokerage. This severance applies only to the licensee purchaser's personal brokerage relationships, and not to properties listed by other brokers in the firm.)
Resale to a buyer with whom the licensee had negotiated during the listing violates the license law absent written disclosure and seller acknowledgment.
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CP-24, CP-25, CP-26
CP-24: Preparation of CMA’s/Evaluations Used for Loan Purposes. A broker may use a CMA in court testimony or for tax considerations. Brokers may also prepare value estimates under contract to federally regulated lending institutions provided they are competent to the assignment, reach a value estimate below the federal mandated amount requiring an appraisal, and include the “I am not an appraiser” disclaimer in Section 7 of the license law.
CP-25: Recording Listing Contracts. A licensee may not file a mechanic’s lien, lis pendens, record a listing contract, or otherwise attempt to cloud title on a property to enforce a perceived earned commission. The only appropriate courses of action are: mediation, arbitration, or civil action.
CP-26: Auctioning. Real estate auctions must be conducted under the license law with a licensed broker listing, advertising, showing and preparing contracts on the property, although the actual “crier” (auctioneer) of the auction may be unlicensed.
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CP-27, CP-28, CP-29
CP-27: Performance of Residential Leasing and Property Management Functions. Specifies the minimum inclusions of a written management agreement.
(Instructor's note: There is no commission-approved management agreement form. The commission requires both an "Exclusive Right-to-Lease Listing Contract" and a Management Agreement - preferably reviewed by broker's legal counsel.)
CP28: Showing Properties: Brokers must advise clients, and include in listing/employment contracts on the methods, advantages and limitations of controlling access to the property. Different kind of lockboxes, seller desires for advance appointment showings or listing broker presence may reduce the number of property showings. A broker must never unilaterally refuse a showing absent seller's explicit written authorization.
CP-29: Megan's Law: A licensee should inform potential buyers to contact local law enforcement officials for information if the presence of registered sex offenders is of concern to the buyer.
(Instructor's note: Certainly the broker may assist in locating the appropriate law enforcement agency or on-line source, but must refrain from any determination as to whether certain neighborhood residents are, in fact, sex offenders.)
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CP-30, CP-31
CP-30: Seller Assisted Down Payments (Joint with Board of Real Estate Appraisers). Brokers have a responsibility to safeguard the representation of accurate sold data. Such data is often later used for appraisals on other properties and may result in inflated values if sales concessions are not accurately reported. Accordingly, brokers should:
1. Note all seller concessions or costs in the Buy/Sell contract, Settlement Statement and Real Property Transfer Declaration.
2. Accurately and completely reflect seller contributions, inducements and seller-assisted down payments in the MLS – including updating after closing as required.
3. Advise sellers/buyers to seek competent tax counsel on the effect of such contributions and inducement.
4. Cooperate with appraisers seeking information on real costs of prior sales.
CP-31: Acting as an Agent or Transaction Broker in Particular Transactions. Agents advocate. Transaction-Brokers assist as neutral consultants. No judge will ever determine that a licensee was a neutral third-party advisor when selling Mom’s house, or buying/selling on one’s account. Therefore, regardless of the firm’s brokerage relationship policy, representing oneself, a relative or close personal friend, or a repeat client/investor should not be done as an agent.
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CP-32, CP-33, CP-34, CP-35, CP-36
CP-32: Brokerage Disclosures. Where a buyer (tenant) declines to enter an agency employment agreement, a broker should enter the appropriate contract as a transaction-broker. The broker and client MUST enter an employment agreement with the “Buyer Agency” or “Tenant Agency” box checked at the top of the form BEFORE advocating for the client.
CP-33: Application of Good Funds Laws. In Colorado, title actually transfers from seller to buyer at closing. Therefore all funds going into the closing must be what are known as “Good Funds.” This means the funds must be readily available for withdrawal, and includes completed wire transfers, certified, cashiers or teller’s checks. The title company doing the closing must have such Good Funds in hand before disbursing any moneys at closing.
CP-34: Settlement Service Provider Selection, Closing Instructions and Earnest Money Deposits: This position covers how settlement service providers are selected, when closing instructions must be completed by a real estate broker (“broker”) and how earnest money is to be handled.
CP-35: Position on Brokers as Principals: The Commission regularly receives complaints stating that a licensed broker acting as a principal in a transaction failed to do one of the following: failed to disclose adverse material fact; failed to disclose brokerage relationships; failed to ensure that contract document and/or settlement statements reflect terms of the transaction; has filed a document that unlawfully clouds title to the property; fails to disclose broker’s licensed status; mismanages funds belonging to others ; and/or falsifies information used for purposes of obtaining financing. The Commission reminds licensees that the Commission may investigate and discipline a licensee acting in the capacity of a principal in the transaction. (See S eibel v. Colorado Real Estate Commission, 34 Colo. App. 415, 530 P.2d 1290)
CP-36: CP-36 Commission Position on Minimum Service Requirements: The Commission has received numerous inquiries regarding the minimum services that brokers must provide to buyers or sellers of real property. §12-10-403, C.R.S. requires that any broker performing the activities requiring a real estate broker’s license as set forth in §12-10-202, C.R.S., act in the capacity of either a transaction broker or a single agent in the transaction. The minimum duties required to be performed by a real estate broker acting in the capacity of a single agent are set forth in:
· §12-1-404 and 12-10-405, C.R.S. §12-10-404, C.R.S. Single agent engaged by seller or landlord states, in part:
(1) A broker engaged by a seller or landlord to act as a seller’s agent or a landlord’s agent is a limited agent with the following duties and obligation:
(a) To perform the terms of the written agreement made with the seller or landlord;
(b) To exercise reasonable skill and care for the seller or landlord;
(c) To promote the interests of the seller or landlord with the utmost good faith, loyalty, and fidelity, including, but not limited to:
(I) Seeking a price and terms which are acceptable to the seller or landlord; except that the broker shall not be obligated to seek additional offers to purchase the property while the property is subject to a contract for sale or to seek additional offers to lease the property while the property is subject to a lease or letter of intent to lease:
(II) Presenting all offers to and from the seller or landlord in a timely manner regardless of whether the property is subject to a contract for sale or a lease or letter of intent to lease;
(III) Disclosing to the seller or landlord adverse material facts actually known by the broker;
(IV) Counseling the seller or landlord as to any material benefits or risks of a transaction which are actually known by the broker;
(V) Advising the seller or landlord to obtain expert advice as to material matters about which the broker knows but the specifics of which are beyond the expertise of such broker;
(VI) Accounting in a timely manner for all money and property received; and
(VII) Informing the seller or landlord that such seller or landlord shall not be vicariously liable for the acts of such seller’s or landlord’s agent that are not approved, directed or ratified by such seller or landlord.
(d) To comply with all requirements of this article and any rules promulgated pursuant to this article; and
(e) To comply with any applicable federal, state, or local laws, rules, regulations, or ordinances including fair housing and civil rights statutes or regulations.
· 12-10-405, C.R.S. Single agent engaged by buyer or tenant states, in part:
(1) A broker engaged by a buyer or tenant to act as a buyer’s or tenant’s agent shall be a limited agent with the following duties and obligations:
(a) To perform the terms of the written agreement made with the buyer or tenant;
(b) To exercise reasonable skill and care for the buyer or tenant;
(c) To promote the interests of the buyer or tenant with the utmost good faith, loyalty, and fidelity, including but not limited to:
(I) Seeking a price and terms which are acceptable to the buyer or tenant; except that the broker shall not be obligated to seek other properties while the buyer is a party to a contract to purchase property or while the tenant is a party to a lease or letter of intent to lease;
(II) Presenting all offers to and from the buyer or tenant in a timely manner regardless of whether the buyer is already a party to a contract to purchase property or the tenant is already a party to a contract or a letter of intent to lease;
(III) Disclosing to the buyer or tenant adverse material facts actually known by the broker;
(IV) Counseling the buyer or tenant as to any material benefits or risks of a transaction which are actually known by the broker;
(V) Advising the buyer or tenant to obtain expert advice as to material matters about which the broker knows but the specifics of which are beyond the expertise of such broker;
(VI) Accounting in a timely manner for all money and property received; and
(VII) Informing the buyer or tenant that such buyer or tenant shall not be vicariously liable for the acts of such buyer’s or tenant’s agent that are not approved, directed, or ratified by such buyer or tenant;
(d) To comply with all requirements of this article and any rules promulgated pursuant to this article; and (e) To comply with any applicable federal, state, or local laws, rules, regulations, or ordinances including fair housing and civil rights statutes or regulations.
The minimum duties required to be performed by a real estate broker acting in the capacity of a transaction broker are set forth in §12-10-407, C.R.S. which states, in part:
(1) A broker engaged as a transaction-broker is not an agent for either party;
(2) A transaction-broker shall have the following obligations and responsibilities:
(a) To perform the terms of any written or oral agreement made with any party to the transaction;
(b) To exercise reasonable skill and care as a transaction-broker, including, but not limited to:
(I) Presenting all offers and counteroffers in a timely manner regardless of whether the property is subject to a contract for sale or lease or letter of intent;
(II) Advising the parties regarding the transaction and suggesting that such parties obtain expert advice as to material matters about which the transaction-broker knows but the specifics of which are beyond the expertise of such broker;
(III) Accounting in a timely manner for all money and property received;
(IV) Keeping parties fully informed regarding the transaction;
(V) Assisting the parties in complying with the terms and conditions of any contract including closing the transaction;
(VI) Disclosing to prospective buyers or tenants any adverse material facts actually known by the broker including but not limited to adverse material facts pertaining to the title, the physical condition of the property, any defects in the property, and any environmental hazards affecting the property required by law to be disclosed;
(VII) Disclosing to any prospective seller or landlord all adverse material facts actually known by the broker including but not limited to adverse material facts pertaining to the buyer’s or tenant’s financial ability to perform the terms of the transaction and the buyer’s intent to occupy the property as a principal residence; and
(VIII) Informing the parties that as a seller and buyer or as landlord and tenant they shall not be vicariously liable for any acts of the transaction-broker;
(c) To comply with all requirements of this article and any rules promulgated pursuant to this article; and
(d) To comply with any applicable federal, state, or local laws, rules, regulations, or ordinances including fair housing and civil rights statutes or regulations. §12-10-403, C.R.S. allows real estate brokers to perform duties in addition to those established in §§12-10-404, 12-10-405 and 12-10-407, C.R.S. The additional duties may include, but are not limited to, holding open houses, property showings, providing a lockbox, use of multiple listing services or other information exchanges, etc.
Additional services that brokers agree to provide their clients must be documented in writing. A broker is not allowed to solely perform “additional” services which require a real estate broker’s license, i.e. offering the real property of another for sale through advertisements, without providing the minimum duties required by single agency or transaction brokerage. The Commission does not regulate the fees or commissions charged by brokers for minimum or additional services provided. Fees and commissions are negotiable between the broker and the principal.
Please be advised that since 2011 the Colorado Real Estate Commission issued several new position statements. The new position statements are as follows:
· Position Statement CP37 - Survey and Lease Objections
· Position Statement CP38 - AFBA Disclosures and Conflicts of Interest
· Position Statement CP39 - Lease Options, Lease Purchase Agreements & Installment Land Contracts
· Position Statement CP40 - Teams
· Position Statement CP41 – Competency
· Position Statement CP42 – Apartment Building or Complex Management
· Position Statement CP43 – Property Inspection Resolutions
· Position Statement CP44 – Coming Soon Listings
· Position Statement CP45 – Defined Terms
· Position Statement CP46 - Broker Disclosure of Adverse Material Facts
A list of all the Real Estate Commissions' positions statements can be found at: https://www.colorado.gov/pacific/dora/division-real-estate-rule-making-and-position-statements
Summary
This concludes Chapter 3. Below is a brief summary which you can review before taking your quiz.
Homebuilder’s Exemption from Licensing: Salespersons working for new homebuilders are not required to be licensed.
Referral Fees and Advertising Services: A broker may not pay commissions or referral fees to unlicensed persons for activities requiring a license.
Sign Crossing Rule: a broker may not contact a seller or buyer who is party to a current exclusive listing or employment agreement.
Interest Bearing Trust Accounts: Except in the case of mobile home park management, any interest paid on trust accounts does not belong to the broker.
Advance Rentals and Security Deposits: Advance rent must be held in escrow until applied to the owner's credit.
Release of Earnest Money: A broker is not required to return disputed earnest money, but may await court instruction resulting from lawsuit between the parties or may turn the disputed funds over to a court for distribution.
Assignment of Contracts and Escrowed Funds: When a real estate company is sold, merged or goes out of business, all interested parties must be notified and permission obtained to transfer any listing/employment agreements or assign any escrowed funds.
Recordkeeping by Brokers: The loan payoff statement should be retained by the listing broker; the new loan statement should be retained by the broker working with the buyer.
Compensation Agreements between Employing and Employed Brokers: The Commission will not get involved in compensation disputes between employing brokers and their licensees.
Assignments of Broker's Rights to a Commission: An employed broker must place any funds from any source with the employing broker, and may not accept a commission or any valuable consideration from anyone other than the employing broker.
Broker's Payment or Rebating a Portion of an Earned Commission: brokers may generally add a sum of money to the earned commission from the brokerage services.
Single-Party Listings: Listing a property for sale to a specified single purchaser is unfair to the seller, possibly putting an unaware seller, who also signs a normal exclusive listing, in jeopardy of owing two commissions.
Sale of Modular Homes by Licensees: A licensee may sell a modular home and not be subject to the license law restrictions on delivering all money to, or receiving commissions, only by the employing broker.
Sale of Items Other than Real Estate: If items or services are sold under a property management agreement a broker must disclose to both buyer and seller that the licensee is being compensated by a vendor or contractor.
Access to Properties Offered for Sale: The listing broker is primarily responsible for safeguarding access instructions to property listed for sale.
Payments to Wholly Owned Employee’s Corporation. An employed broker must be licensed in his own personal name, and may not use a corporate name in the practice of real estate.
Short-Term Occupancy Agreements: Resort or hotel-type agreements are not leases and are exempt from the definition of real estate brokerage. A licensed broker conducting such activity must still escrow and account for any held money belonging to others.
Unlicensed Personal Assistants: Unlicensed persons may not perform activity requiring a license.
· Written office policy should detail the duties, responsibilities and limitations of personal assistants.
· Assistants should be paid in some manner other than sharing in sales commissions.
Office Policy Manuals should contain procedures for at least:
· Typical real estate transactions
· Non-qualifying assumptions and owner financing.
· Guaranteed buyouts.
· Investor purchases.
Handling of Confidential Information in Real Estate Brokerage: requirement for written policies to safeguard files.
Use of Licensee Buyout Addendum is required only when a licensee contracts to purchase a property:
· Concurrent with listing the property for sale.
· As an inducement to, or to facilitate the owner's purchase of, another property.
· But continues to market the property under an existing listing agreement.
A broker may use a CMA in court testimony or for tax considerations.
Recording Listing Contracts: The only appropriate courses of action are: mediation, arbitration, or civil action.
Showing Properties: Brokers must advise clients, and include in listing/employment contracts on the methods, advantages and limitations of controlling access to the property.
Megan's Law: A licensee should inform potential buyers to contact local law enforcement officials for information if the presence of registered sex offenders is of concern to the buyer.
Seller Assisted Down Payments: Brokers have a responsibility to safeguard the representation of accurate sold data. Such data is often later used for appraisals on other properties and may result in inflated values if sales concessions are not accurately reported.
Agents advocate. Transaction-Brokers assist as neutral consultants.
Where a buyer (tenant) declines to enter an agency employment agreement, a broker should enter the appropriate contract as a transaction-broker.
Application of Good Funds Laws: The title company doing the closing must have such Good Funds in hand before disbursing any moneys at closing.
The Commission has received numerous inquiries regarding the minimum services that brokers must provide to buyers or sellers of real property.
Click here if you would like to open this summary as a pdf, which you can then print or save to your device: Chapter 3 Summary
Congratulations - you have completed Chapter Three! Pass the following quiz with a score of 80% or better to continue onto Chapter Four. Good Luck!