LEGAL RISKS 2022

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The material and discussion provided is for informational

purposes only and is not intended and should not be considered as legal advice.

By: Grant P. Harpold

FAILINGS OF A BUYER’S AGENT

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CONTRACT BLUNDERS

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FAIR HOUSING OR NOT

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SCRUTINY OF YOUR CONDUCT

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Failings of a Buyer’s Agent

1. Not Realizing Your Role in the Transaction and to Your CLIENT
1. Market Knowledge
2. Transaction Knowledge
3. Information (HAR 303)
4. Negotiation Skills
5. Contractor Access
6. Imagination
7. Advice

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Failings of a Buyer’s Agent

2. MIA: Incomplete SDN

• Conflicting SDN
• Steering Away/Display
• Low or No Commission
• Your Interest First
• Unclear on Process
• Your role
• Their role

6. Wire Fraud

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Contract Blunders

• Know Form
• Contract By Email
• Survey Selection

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YOU Gotta Know the Language

• Within 3 days after the Effective Date, Buyer must deliver to escrow agent earnest money and the Option Fee.
• The earnest money and Option Fee shall be made payable to escrow agent and may be paid separately or combined in a single payment.
• If the last day to deliver the earnest money, Option Fee, or the additional earnest money falls on a Saturday, Sunday, or legal holiday, the time to deliver the earnest money, Option Fee, or the additional earnest money, as applicable, is extended until the end of the next day that is not a Saturday, Sunday, or legal holiday.

YOU Gotta Know the Language

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• The amount(s) escrow agent receives under this paragraph shall be applied first to the Option Fee, then to the earnest money, and then to the additional earnest money.
• Seller grants Buyer the unrestricted right to terminate this contract by giving notice of termination to Seller within _____ days after the Effective Date of this contract (Option Period).
• Notices under this paragraph must be given by 5:00 p.m. (local time where the Property is located) by the date specified.
• If Buyer fails to deliver the earnest money within the time required, Seller may terminate this contract or exercise Seller’s remedies under Paragraph 15, or both, by providing notice to Buyer before Buyer delivers the earnest money.

YOU Gotta Know the Language

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• If no dollar amount is stated as the Option Fee or if Buyer fails to deliver the Option Fee within the time required, Buyer shall not have the unrestricted right to terminate this contract under this paragraph 5.
• Time is of the essence for this paragraph and strict compliance with the time for performance is required.

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EMAILS CREATE CONTRACT

• Dittman case (unimproved land near La Porte terminal)
• Listed with broker
• Written and executed contract on listed property
• Buyer interested in adjoining unlisted property
• Seller not interested in selling but broker said Seller might offer a right of first refusal
• Buyer asked for option contract

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WHY ENFORCEABLE CONTRACT?

• 3 emails created valid option contract
• Elements in emails:
• Offered 2-year option to purchase (term)
• Price of $2.75 per square foot (price)
• 3.78 acre tract (description)
• Had to close on primary property (consideration)
• Broker had authority – knowledge and consent of Seller
• Copied on emails
• Option is not right of first refusal
• Applies to amendment and addendum

Survey – Eliminate Risk

• Get New Survey
• Box (2) or (3)
• Old Survey is Risky
• Risk shift with your involvement
• “Existing survey”
• Timely Objection
• Pick number of days

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Section 6, P. 2.

Fair Housing or Not

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Be Fair

Basically, if your language can be perceived as implying a preference for a particular type of person, it’s off limits.

The Fair Housing Act states that real estate agents may not provide information that could even be perceived as discriminating against a particular race, color, religion, sex, national origin, disability, sexual orientation and general identity or familial status (kids, no kids, married, single etc.). Basically, everyone should have a fair chance at any home.

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LUV of LIABILITY

Before the next time you are faced with a buyer love letter, consider these best practices to protect yourselves and your clients from fair housing liability:

• Educate your clients about the fair housing laws and the pitfalls of buyer love letters.
• Inform your clients that you will not deliver buyer love letters and advise others that no buyer love letters will be accepted as part of the MLS listing.
• Remind your clients that their decision to accept or reject an offer should be based on objective criteria only.
• If your client insists on drafting a buyer love letter, do not help your client draft or deliver it.
• Avoid reading any love letter drafted or received by your client.
• Document all offers received and the seller’s objective reason for accepting an offer.

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HELP or HINDRANCE

NAR: Don’t Deliver; Don’t Read

OREGON: Banned

SYSTEMATIC RACISM: 74% White

49% Latino

45% Black

LOW INVENTORY

FOCUS ON PROPERTY

EXPLAIN/DOCUMENT

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Case File

A couple wants to make an offer on a FSBO I just showed them. When I contacted the seller, she asked what race my clients were. How should I respond? What if the seller simply refuses to deal with my clients?

Tell the seller that you cannot give her that information under the fair housing laws and that the question is illegal. In a fair housing lawsuit with these facts, the court found that the real estate agent had “facilitated and participated” in discrimination simply by answering a seller’s question about race, even though she immediately informed the seller that her question was discriminatory. In that case, the court imposed a civil penalty on the real estate agent to send a message that questions about race and color should remain unanswered.

If the seller refuses to deal with your clients because of their race, let your clients know that they can file a complaint of illegal discrimination under fair housing laws.

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Two women were listed on the offer I presented to my client, who then asked me if the women are lesbians. How should I respond?

How about, “I have no idea, and I really can’t respond to such inquiries under fair housing laws!”

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Scrutiny of Your Conduct

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TREC Form Use

• Cannot:
• Draft language affecting obligations
• Add language covered by another form or addendum
• Pay lawyer for client
• Add details or strike text unless directed in writing from client
• Fill in Blanks – OK!

TREC REPORTINGS

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• Respondent was acting as tenant's agent. Respondent acted negligently or incompetently by faxing tenant's application and credit report to the landlord's agent, and after receiving information that the tenant's credit report contained false information, Respondent failed to warn the landlord's agent that the credit report he sent may contain false or inaccurate information. Also, Respondent acted negligently or incompetently by providing the key from the lockbox to tenant and advising tenant she could move in early before the lease start date and without the landlord's authorization.
• Respondent was the listing agent representing the seller of a property. Respondent acted negligently or incompetently by failing to obtain a signed amendment to the terms of the listing agreement to allow the payment of an advance fee 
• Respondent failed to maintain on a current basis required written policies and procedures to ensure that each sponsored sales agent is advised of the scope of the sales agent’s authorized activities subject to the Act and is competent to conduct such activities.

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TREC REPORTINGS

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• Respondent was acting as buyer's agent in the purchase of a property. The earnest money contract required buyer to send notice of termination of contract before closing if the property did not satisfy the lender's approval requirements. The loan was not approved and the buyer was unable to close. Respondent acted negligently or incompetently by failing to send a notice of termination to seller in a timely manner. Buyer forfeited his earnest money.
• Before closing on a new home, Respondent took liberties by moving in personal items and new appliances without a temporary lease as well as transferring utilities to his own name.
• Respondent used an assumed name to conduct property management activities without authorization from her broker. The assumed name was not registered with the Commission as an assumed name of the sponsoring broker.

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TREC REPORTINGS

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• Respondent promised a rebate to his client to be paid after closing on the property. Respondent did not notify his broker, or obtain the broker's written consent, before entering the agreement or before closing. After closing, Respondent failed to fulfill his promise to rebate his fees to his client.
• Respondent promised to rebate a portion of her commission to her client, which influenced him into purchasing a property. Respondent acted negligently when she failed to disclose the promised rebate to the buyer's lender and the settlement agent. Respondent's failure to disclose resulted in her client not receiving the promised rebate.
• Respondent's sponsored sales agent while acting as Respondent's authorized associate violated the Real Estate License Act by negligently failing to provide to the buyers with a copy of the repair estimate.

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TREC REPORTINGS

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• Respondent acted negligently or incompetently by failing to send buyer’s notice of termination to seller before the expiration of the option period.
• Respondent failed to post the required Consumer Protection Notice and failed to maintain, on a current basis, written policies and procedures to ensure each sponsored real estate sales agent complies with the advertising rules.
• Respondent performed brokerage services on behalf of her son, the seller of a property. Respondent received compensation for her services directly from the buyer. Respondent did not inform her broker of her involvement in this transaction, and she did not receive permission from her broker to directly receive a commission or other compensation directly from the buyer.

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