Legal Hotline FAQ’s – June 2013

Kansas legal hotlineLegal Hotline Attorney Vern Jarboe answers frequently asked questions from Kansas REALTORS® about their transactions. REBR Legal Hotline is available in the REBR IMS Store! Only $150 will keep you and your entire firm in touch with Vern Jarboe, the REBR Legal Hotline Attorney all year long! To search Legal Hotline Archives, click on the “Search Our Site” box and type in “Legal Hotlines” to get all of the past Hotline articles.

Agency – Employee Purchase of Listing

Question:  You have a situation where an employee of your company wishes to purchase one of your listings.  The listing was taken as a designated seller’s agent.

Answer: There are probably two decent options.  On the one hand, the employee could retain one of your other licensees as a designated buyer agent and then buy the property through designated buyer agency, designated seller agency on the listing side and you acting as a transaction broker.  Assuming the seller is agreeable you also could all work as transaction brokers.  That would, of course, require an amendment to the listing agreement and done only with consent of the seller.

Duties to Other Real Estate Agents

Question:  You have a situation where a licensee indicated that offers would be accepted until a particular date.  The licensee then advised the property had already been sold to another buyer without waiting until that date.

Answer: On the hotline we are not able to get embroiled in debates between two Realtors® each of whom might have access to the hotline and give us different facts concerning a particular situation.  We will give you general reference to the code of ethics and portions which you might review.  You might review the preamble where it deals with duties obligating a realtor to comply with the “golden rule.”  You also should look at sections dealing with duties to clients as it may be that the seller dictated the transaction come down the way it did.

Disclosure – Psychological Impact Issues

Question:  You have a situation where there may be some buyers uninterested in buying a property due to the impact of a historic death at the property.

Answer: This is often referred to as stigmatized or psychologically impacted property.  There is no Kansas law (statute, rule or regulation) on this issue.  It seems disclosure is the best idea because there is a certainty that at least some buyers will care and all buyers will find out.  You have a different problem if you make that recommendation to the consumer and they declined.  At that point you may want to decline the listing just from a business risk standpoint.

Disclosure – Boundary Line Problem

Question:  You have a situation where it appears a fence installed on the first house in a new subdivision may not be on the boundary line and in fact encroached next door.

Answer: The owner of the home, buyer from the developer, may have an argument that they could go back on the seller due to a misrepresentation of the boundary line, express or implied, due to the existence of the fence.  However, the use of attorneys for something that is in effect a few hundred dollars expense is probably unwise.

Contract – Foreclosure Issues

Question:  You have a situation where you are concerned about the pendency of a foreclosure.

Answer: Many people feel that the foreclosure begins when they first start receiving mail.  However, disclosure really begins when a court action is initiated.  By looking at the Journal Entry of Judgment you can determine the length of the redemption period.  So long as you are within the redemption period then the current owner is in a position to either refinance the property and pay off the amount of the bid at the sheriff’s sale or otherwise redeem the property from whoever buys it at the sheriff’s sale.  The cost of redemption is the price paid at the sale plus costs and accumulated interest.

Agency in the Context of Partial Ownership of Seller

Question:  You have a situation where a real estate broker is a part owner of a home building company.  You asked what agency would be most appropriate.

Answer: Where a real estate agent owns part of a home building company then seller agency or designated seller agency would be most appropriate.  It would not be probable that the agent who owns an interest in the home building company could work as a buyer’s agent or designated buyer’s agent.  It would even appear incorrect for the licensee to act as a transaction broker because that would imply neutrality which it seems hard for the part owner of the seller to give.  Certainly, disclosure of the part ownership is required in the contract.

Contract – Erroneous Legal Description

Question:  In a transaction which is several years old, the owner of a neighboring tract thought they bought a piece of property which apparently was not included in their deed.  When a subsequent sale occurred, the buyer from the same seller acquired the property that the first buyer thought they acquired.  When the second buyer acquired their property they needed a loan so the mortgage is recorded against the entire tract.  The second buyer is willing to cooperate with the first buyer to straighten out the incorrect legal description, but the first buyer is making demands about the second buyer getting a release on the mortgage.

Answer: I think it unlikely, from a practical standpoint, that a lender will cooperate.  If you are dealing with a local lender as opposed to a national lender, then you might be able to, with the voice of reason, get it worked out.  Otherwise, this is unlikely to occur and truly neither the first buyer nor second buyer has any leverage.  It appears that this erroneous description has only existed for approximately 10 years and therefore it would not give the first buyer the opportunity to file a lawsuit based upon adverse possession.  They are far more likely to get this resolved through a cooperative negotiation than they are through litigation.  Both parties may need referred for independent legal advice and then you have to measure the cost versus the benefit.

Agency – Managing Broker’s Agency Relationships

Question:  You have a situation where as the managing broker you sometimes take listings.

Answer: If you take listings as a seller’s agent or transaction broker, then your relationship with the buyer must be the same as your relationship with the seller.  In other words, if you sell your own listing to a buyer, then you would need to be a seller’s agent as to the buyer.

License Law – Net Listing

Question:  You have a situation where in effect the seller has offered you a net listing.

Answer:  Definitionally, a net listing is one where the commission is the difference between a sales price of the property and the actual net from closing.  In other words, the seller is at a disadvantage because presumably the REALTOR® has a better handle on what the property will bring than the seller.  While seemingly attractive to some sellers, this has long been prohibited by license law.

Contract – Signature Issues

Question:  You have a contract form wherein after an initial offer the seller would typically counter on an addendum form.  The question is whether or not the parties should both sign the original contract, initial all of the pages, or whether they only need to sign anD initial THE final addendum which refers back to the original contract.

Answer: From a legal perspective, it does not matter.  As long as we can tell what the terms of the agreement are, then whether the various pages of the contract are initialed or signed is not relevant.  If the addendum properly references the underlying contract, and we can identify which pages are part of the deal, then there will be a binding and enforceable agreement.  Some lenders will not be satisfied with this resolution.

License Law – Responsibility for Branch Office

Question:  You asked about the responsibility of a broker for the activities in a branch office.

Answer: Generally, the employing broker is responsible for all of the activities within the home office or the branch office.  Misconduct by a salesperson in the branch office can create liability for the broker and responsibility under the license law for the broker just as much as a mistake made within the home office.

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