RISK MANAGEMENT. That Delicate Balance Steve McTyeire, MBA, Broker Avery Yarbrough School of Real Estate. Alabama Real Estate Commission Rules for Classroom CE credit. Sign in, including license number You must here now to receive credit later 100% attendance is required
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That Delicate Balance
Steve McTyeire, MBA, Broker
Avery Yarbrough School of Real Estate
Rules for Classroom CE credit
4th Edition Text Written by Jim Lawrence of LAH
For The Alabama Real Estate Commission &
Alabama Center for Real Estate, The University of Alabama
Two primary Goals
The roof leaks on your listing, and you know it.
Do you voluntary disclose it to
C. Buyer Client in Dual Agency
The roof leaks on your listing and you know it.
If ask a direct question about the roof from one of the below,
which must you tell.
C. Client in Dual Agency
D. Buyer’s Agent
Are Property Disclosure forms a good idea for
If the house is haunted, do you disclose?
Is earnest money required for a valid contract?
Is it illegal to fail to leave a copy of the listing agreement with the seller?
Can you pay the seller $100 to list with your company?
Does this $100 payment to the seller need to be disclosed to the buyer?
When must earnest money be deposited?
When must RECAD be presented?
The mayor wants a new site for City Hall.
Do you need to RECAD?
Can Agency be implied?
You are a licensee and decide to sell your own private residence on FSBO.com
Do you need to disclose your status as an agent?
Who can you Advise?
Is it alright to say your broker sets the commission rates you charge based on services offered?
How about, My broker charges what everyone else charges?
As a property manager, can you discriminate against a drug abuser?
How about, if he is in treatment?
Can a lender pay for open house expenses if they don’t attend?
A Avoid Know Rules
C Control Office Policy
T Transfer Disclose
R Retain Insurance
Elements of Fraud
A false representation of an important fact
Relied upon by the buyer or seller
Who is damaged by reliance
NO – Don’t do it
Federal Fair Housing Law
Prohibits disclosure as a protected class - Handicap
Even if ask a direct question
Not material to transaction any more than disclosing race
You are the listing agent on a property. The seller is your client. The seller tells you that the air conditioning system does not work. It is not a health and safety issue. A buyer sees the home for the third time. The buyer’s agent tells you that the buyer is very interested in making an offer. Concerning the air conditioning, you should
A. Tell the buyer’s agent that the system is broken.
B. Not tell the buyer’s agent the system is broken
C. Require the seller to complete a seller’s disclosure form.
D. Tell the seller to disclose nothing if asked.
You are the listing agent on a property. The seller is your client. The seller tells you that the back deck, which is 30 feet off the ground, has a lot of rotten wood underneath and is in great danger of collapsing. A buyer sees the property for the third time. The buyer’s agent tells you that the buyer is interested in making an offer. Neither the buyer nor the buyer’s agent has questioned the structural integrity of the back deck. Concerning the deck, you should
A. Tell the buyer’s agent that the deck is dangerous
B. Not tell the buyer’s agent that the deck is dangerous
C. Require the seller to complete a seller’s disclosure form to see if the buyer’s agent catches the defect.
D. Require the seller to replace the deck
You are the listing agent. The seller is your client. The seller tells you that the new paneling in the basement was put there by him to cover some mold behind the paneling. The seller also tells you that the mold has been tested by a professional and declared, in the seller’s words as “a little unhealthy.” The seller tells you to keep the covered defect confidential, as he needs top dollar for the house. He also tells you that he will pull the listing should you not agree to the cover-up. Concerning the mold, you should
A. Not disclose the presence of the mold, since the seller is your client and you owe the fiduciary duties of confidentiality, and obedience.
B. Not disclose the presence of the mold, since you need the listing and a potential sale and since the mold is only “a little unhealthy”
C. Secretly tell the buyer’s agent about the mold.
D. Discuss the importance of disclosure with the seller and terminate the listing should the seller not agree.
You are the listing agent. The seller is your client. There is a slight roof leak over one corner of the third bedroom. It is not a health or safety factor. The seller tells you about the leak, but ask you to keep it confidential. A buyer sees the property for the third time. The buyer’s agent says to you: “I noticed a slight discoloring in the ceiling tile in a corner of the third bedroom. Does the roof leak right there?” Concerning the leak, you should
A. Not disclose the roof leak, because it is not a health or safety factor.
B. Disclose the roof leak only with the seller’s permission.
C. Disclose the fact that the roof leaks.
D. Try to shift the agent’s focus to the positive traits of the property without answering the specific question about the roof.
You are the listing agent. The seller is your client. Even thought the house is in generally good condition, there is a slight roof leak over one corner of the third bedroom. It is not a health or safety factor. The seller tells you about the leak, but ask you to keep it confidential. A buyer sees the property for the third time. The buyer’s agent ask you this question: “Is the house in generally good condition?” You should
A. Respond, Yes the house is in generally good condition.
B. Respond, “No, the roof leaks over one corner of the third bedroom.
C. Refuse to answer the question and ask the seller for permission to disclose the roof leak.
D. Tell the buyer’s agent that Alabama is a “caveat emptor” state and it is the buyer’s obligation to discover any and all defects concerning the property.
You are a buyer’s agent. The buyer’s are your clients. They are from out-of-town and not familiar with any home inspectors in the area. They have put a property under contract with the right to inspect. They ask you, their agent, for a recommendation for a home inspector. You should
A. Give them a copy of the Yellow Pages.
B. Give them a limited list of inspectors who are guaranteed by you and your company.
C. Give them a limited list of inspectors who you have worked with in the past.
D. Recommend your one favorite home inspector who you have been using for years.
A house is placed on the market for sale. It is listed with a licensee and marketed through the MLS. It is being sold by the owner’s family. The owner murdered his wife in the master bedroom and then took his own life in the same location. Which of the following is not true?
A. Since this is a health and safety issue, the listing agent must disclose the event to all interested parties.
B. The listing agent is not required to disclose the event.
C. To avoid a difficult situation at or following closing, the listing agent should discuss timely and tactful disclosure to an interested party with the seller’s family.
D. A buyer’s agent has the obligation to disclose this event to the buyers even if the agent is unaware of the situation.
Alabama License Law
Which of the following acts is illegal?
A. Disclosing to a buyer that the listing agent is the wife of the seller/builder
B. Placing a “For Sale” sign on the property with permission
C. Releasing the earnest money to the buyer at the buyer’s request
D. Paying the buyer an incentive to close the sale
Which of the following acts is illegal?
A. Paying an insurance agent a referral fee for a successful lead.
B. Giving a seller a copy of the listing agreement a day after its execution
C. Informing the seller that listing agent intends to buy the listed property for himself/herself.
D. A company setting up a “rental deposits” escrow separate from an “earnest money” escrow account.
You are the buyer’s agent. It is Friday. Your out-of-town buyer clients have just had their offer accepted on a piece of property. The earnest money check is made out to your company. The buyers ask you to hold the check until Wednesday of next week so that they can get back home and transfer funds from their savings account to their checking account to cover the check.
Which of the following is true?
A. This is an illegal act, since the earnest money check must be made out to and deposited by the listing agency.
B. Since the buyer is your client and you have the fiduciary duty of obedience , you agree to hold the check until Wednesday.
C. You tell the buyer that you can only hold the check with written disclosure to and agreement from the seller.
D. The check can not be held, it must be deposited immediately.
You are the buyer’s agent. Your buyer client has written an offer on a piece of property that has been accepted by the seller. The seller is being represented by another real estate broker. The earnest money check was written to your company and has been deposited into your company’s escrow account. Your buyer client calls you, very distraught and agitated , and tells you that she has changed her mind about the purchase of the house and wants her earnest money returned to her immediately. You should
A. Initiate a mutual release form, signed by your buyer client and requesting return of the earnest money, and deliver the form to the listing agent.
B. Follow your buyer client’s lawful instructions and return the earnest money immediately.
C. Tell her that “a deal is a deal” and instruct her to proceed with the contract and closing.
D. Give her legal advice as to what legal options that both she and the seller might have in a cancelled contract situation.
You are a licensee. You have just met a young couple form out-of-state. You determine they need representation. They express an interest in needing an agent. When you introduce the RECAD form to them, they tell you that their parents told them not to sign anything, so they refuse to sign the RECAD form.
Which of the following is true?
A. You can not represent them because they refused to sign the RECAD form.
B. You can represent them with a signed buyer agency agreement.
C. You would be an undisclosed agent if you showed them any houses
D. Alabama License Law requires you and them to sign RECAD
You are on a listing presentation. You are in competition for the listing. Even though you warned the seller not to disclose any confidential information to you. The seller tells you they are really motivated to sell fast because of a new job starting soon in another state. You later discover that the seller has listed with a competitor. Later, you agree to represent a couple as buyer clients. They sign a buyer’s agency agreement with you. You discern that the property listed with the other company might be right for your buyer clients. You show the home, and your buyers like it well enough to write an offer. You should
A. Tell your buyers of the sellers motivation so that the buyers can take advantage of that fact.
B. Not tell your buyers because you are a dual agent.
C. Not tell your buyers about the seller’s motivation because the information would be information a reasonable person would want to keep confidential.
D. Get the seller’s permission to disclose their motivation to your buyers
You represented the seller in the sale of their large, single family home in a sparsely populated area of town. You also represented the buyer. You are a limited consensual dual agent. The property is under contract, but not yet closed. By chance, you discover that an adjoining property consisting of several acres has been rezoned for high density multi-family housing. This would probably have a negative impact on the value of the home under contract. Neither your buyer or seller knows this yet. You should
A. Disclose this fact to your buyer client immediately.
B. Keep this information confidential to protect your seller client.
C. Say nothing to anyone, as you need the money from the closing.
D. Discuss disclosure with your seller client to prevent a future problem
In situation #14, you chose to discuss disclosure with your seller client to possibly avoid any future problems. Your seller responded to your request for disclosure by saying, “I don’t want you to disclose anything! I need for this sale to close in a most desperate way!” You should
A. Follow your seller client’s lawful instructions.
B. Forfeit your commission and walk away from the sale.
C. Have your seller sign a document prohibiting you from disclosing this information to the purchaser.
D. Tell your buyer client anyway to avoid a possible lawsuit.
You are a commercial real estate agent. You are to meet with a purchaser who is seeking a piece of commercial property. He contacts you to show him a warehouse downtown that is for sale. Which of the following is true?
A. You do not have to RECAD him because you are a commercial agent.
B. You do not have to RECAD him because he is buying a commercial property.
C. You do not have to RECAD him because he is probably incorporated.
D. You have to RECAD him.
Which of the following are asking for trouble?
A. Negotiating the terms of a contract for your client with the other party’s agent over the telephone without immediate written follow-up.
B. Negotiating the terms of a contract for your client with the other party’s agent because you think you know your client’s desires and intentions.
C. Initialing a sales contract change or counter for your client because your client is out-of-town and probably cannot be reached.
D. All of the above
You are the listing agent in a multiple-offer situation. One of the offers is from your own buyer client. Therefore, you are a limited consensual dual agent. The best way to minimize risk is to:
A. Present only your buyer’s offer so that you can receive both sides of the commission.
B. Present all offers to your seller client but emphasize the benefits of your buyer client’s offer.
C. Ask each buyer’s agent to present their buyer client’s offer to your seller with you attending the presentations.
D. Staying totally neutral by placing all the offers in an envelope and advising your sellers to study them all and then pick one without any help from you.
You are the listing agent. You have shown your listing to one of your buyer clients. Therefore, You are a limited consensual dual agent. Your buyer client has written an offer that has been countered by your seller client. The counter is back in your buyer’s hands and they are “thinking about it.” An agent with another company who has shown your listing several times to the same buyer calls and tells you that their buyer is writing an offer. You should
A. Inform both your buyer client and the other buyer’s agent that a competing offer situation may exist.
B. Call your buyer client immediately and tell them to respond quickly or they might lose the house.
C. Call your seller and tell them that they should take your client’s initial offer.
D. Tell the other agent that the property is already under contract and they are too late.
You are the listing agent. You have received several offers on your seller client’s property. You should
A. Counter them all at list price with no contingencies and deliver the counter offers back to the buyer’s agents.
B. Reject all with instructions to the buyer’s agents to come back with their buyer’s best offers.
C. Accept the best offer.
D. Counter the best offer in the primary position and counter the others in a backup position.
F Familial Status
E E & O Will not cover violation
O Opportunities should be Equal
N National Origin