Kichen isn’t out “on the street” like he used to be. Nowadays, he spends the majority of his day assisting agents and reviewing files. However, this 30+ year real estate veteran and instructor knows a thing or two about what can happen when you don’t have a BBEEA. “I tell my students that I wouldn’t put a buyer in my car if they refused to sign the agreement,” said Kichen. “[The BBEEA] takes the uncertainty out of who you work for, procuring cause and how you get paid.” Kichen also believes that as salespeople, the BBEEA shows clients you’re serious about meeting their needs and you’re serious about your business.

Cara McGuire, CDPE, ePRO, GRI, SFR and REALTOR® with RE/MAX Professionals echoes Kichen’s enthusiasm for the BBEEA stating, “I’ve used it consistently for the past four years, since the downturn.” When McGuire first started using the BBEEA, it was to ensure that her clients knew she was on “their team”. McGuire started utilizing the BBEEA as a conversation starter with her clients, laying all her cards out on the table, setting expectations and showing off her ability to negotiate at the get-go. “I’ve only had one client question me about it,” said McGuire. “He said, ‘No other agent has ever asked me to sign this, why should I?’ But, after I explained my reasons, he had no issue signing it.”

Lauren Overton, a first-time home buyer and director of operations at Allison-Shelton Real Estate Services, AMO®, signed a BBEEA with her REALTOR® and says that she’d absolutely do it again. “I would never be opposed to this – but I could see where some buyers would be,” said Overton. She added that she could see how some home buyers would be “hesitant to sign right away in fear that the agent might not find something right away and they’d be stuck with them. But if it’s not working out, I think the agent should be ok with rescinding the agreement and let the buyer go elsewhere.”

While many brokerages in Arizona don’t require the BBEEA, Kichen believes that if one did, a domino-effect would take place. “That’s what happened on the East Coast. One broker started to require it and now many do. It just takes one.”

The BBEEA and the Code of Ethics
By Carole Ridley, AAR Professional Standards Administrator

Quite a few complaint calls and complaint filings cite a member’s alleged lack of adequate explanation with regards to the Buyer-Broker Exclusive Employment Agreement. The most common issue purported is that the BBEEA was signed at the same time as a lot of other papers and the agreement’s purpose was not adequately explained.

Allegations of this nature frequently result in a claim by the complainant that they have not been treated fairly, they have been misled, and they were not provided with a copy of the fully executed agreement until it is presented with a request for compensation. These allegations can support a violation of the Code of Ethics, Articles 1, 2, and 9.

Take a few extra minutes to explain the purpose of the BBEEA with the buyers so that buyers are not blindsided when they receive notice to compensate the REALTOR® per the terms of the BBEEA, and so that REALTORS® are not blindsided when they receive an ethics complaint. Let the buyer ask questions and then provide examples of how the agreement obligates you to perform in their best interests.

By way of its bulletin, IIAB of Arizona emphasized to its members that directly obtaining and conveying a CLUE Report may result in the loss of the insurance producer’s license.  A CLUE Report is considered a “consumer report” under federal[1] and state law. Arizona defines the term “consumer report” as “any written, oral or other communication of information that bears on a natural person’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living and that is used or expected to be used in connection with an insurance transaction.” See A.R.S. § 20-2102(4).  In addition to the Federal Credit Reporting Act, Arizona regulates how “consumer reports” and the personal information contained therein must be handled and protected. See A.R.S. § 20-2113. IIAB of Arizona therefore cautions its members that “an insurance producer that provides a CLUE Report to ANYONE is subject to regulatory action such as revocation of their license, civil penalties, and civil action by the consumer.” 

As a result of the restrictions placed upon insurance producers, IIAB of Arizona has provided specific instructions to its members when responding to a CLUE Report request made by a policyholder or the policyholder’s REALTOR^®.  Specifically, IIAB has instructed its members to respond to any such request by stating, “Federal law mandates that the policyholder has a right to obtain information contained on a CLUE Report, but that process must be accomplished by the policyholder directly with LexisNexis.”  It is therefore expected that sellers and REALTORS^® will be directed to https://personalreports.lexisnexis.com when seeking to obtain a CLUE Report. This is consistent with the information contained in the Buyer Advisory which advises property owners of their right to “purchase a C.L.U.E. report online at https://personalreports.lexisnexis.com/index.jsp or by calling 866-527-2600.”

Much like REALTORS^®, insurance producers are eager to assist their clients, but must do so within the confines of the law. It is therefore important for REALTORS^® to ensure that their clients are obtaining insurance/claims information in the proper manner.

Addressing “disparate impact” or unintended discriminatory effects claims, the final rule enacted by HUD provides guidance as to how a housing provider that engages in a facially neutral (unbiased) practice can nonetheless violate fair housing laws. The rule, therefore, better enables plaintiffs and governmental agencies to challenge housing or lending practices that have a disparate impact – even under circumstances in which the practice is facially non-discriminatory and not motivated by bias or prejudice. According to the rule, impact of this nature results when a neutral practice actually or predictably:
(1) results in a disparate impact on a group of persons on the basis of race, color, religion, sex, handicap, familial status, or national origin; or
(2) has the effect of creating, perpetrating, or increasing segregated housing patterns on the basis of race, color, religion, sex, handicap, familial status or national origin.

In its final rule, which can be found here, HUD created a three-step burden-shifting system to determine liability under the FHA. First, HUD or the private plaintiff must establish that the housing practice caused or predictably will cause a discriminatory effect on a protected class. Once a disparate impact of this nature is proven, the burden shifts to the defendant to show that the practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest. Any such justification must be supported by actual evidence and not be hypothetical or speculative. HUD defines a “substantial” interest as “a core interest of the organization that has a direct relationship to the function of that organization.” Finally, if such an interest is established by the defendant, HUD or the private plaintiff must prove that those same interests cannot be served by another practice that has a less discriminatory effect. If the complaining party is ultimately able to establish a practice that achieves the same interests in a less prejudicial manner, a defendant may be guilty of fair housing violations even though there is no evidence of discriminatory intent.

EXAMPLE: A lending institution maintains a policy by which it does not extend loans for single family residences for less than $60,000. The policy has been in place for eight years and does not take race, color, religion, sex, handicap, familial status or national origin into account. While the policy is therefore neutral on its face, it has been found that the policy disproportionately excludes minority applicants from consideration because of the home values in certain areas in which the minority applicants predominantly live. After discovering this disparate impact, the new rule will require the lender to prove that its lending policy is justified by a substantial business necessity. Factors relevant to the lender’s justification may include cost and profitability. If the lender is able to establish a substantial, legitimate, nondiscriminatory interest in its policy, a fair housing violation may still be found if the complaining party is able to establish that an alternative lending practice could serve the same purpose with a less discriminatory effect.

The final rule became effective on March 18. It applies to a broad range of housing activity including, but not limited to, the approval of loan applications, the provision of information regarding the availability of loans and housing options, the servicing of loans, and the approval and provision of homeowners insurance. So when a practice results in the denial of a housing related service (i.e. refusal to rent an apartment or approve a mortgage loan) or unfavorable terms and conditions under which that service is available to members of protected classes, it will violate the FHA unless the practice serves a substantial, legitimate, and nondiscriminatory interest that cannot be similarly served by a less discriminatory practice.

With the new rule in place, it is expected that private individuals, HUD and other fair housing enforcement agencies will be able to more effectively realize the objectives of the FHA by eliminating housing discrimination and creating strong, sustainable, inclusive communities and quality affordable homes for all. To the extent that this rule helps clarify objective, and non-discriminatory policies and practices, it should prove widely beneficial.

About the Author:

Scott Drucker, a licensed Arizona attorney, is general counsel for the Arizona Association of REALTORS^® serving as the primary legal advisor to the association. This article is of a general nature and reflects only the opinion of the author at the time it was drafted.  It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.

April 2013 marks the 45th anniversary of the 1968 landmark Fair Housing Act. Each year, REALTORS® recognize the significance of this event and reconfirm our commitment to upholding fair housing laws as well as our commitment to offering equal professional service to all in their search for real property.

If you have not read the Fair Housing Declaration in a while, I encourage you to do so.

Every real estate licensee in Arizona is required to take a minimum of three hours of continuing education in Fair Housing each renewal period, so you are already well versed in Fair Housing issues. What can AAR impart to our members regarding their duty to offer equal services to all and thereby provide consumers with equal opportunity in housing? Article 10 states:

REALTORS® shall not deny equal professional services to any person for reasons of race, color, religion, sex, handicap, familial status, national origin, or sexual orientation. REALTORS® shall not be parties to any plan or agreement to discriminate against a person or persons on the basis of race, color, religion, sex, handicap, familial status, national origin, or sexual orientation (Amended 1/11).

You are therefore reminded that regardless of your client’s race, color, religion, sex, handicap, familial status, national origin or sexual orientation they are entitled to the same level of care and service that you take pride in offering.

In the March Code Talk column, members discussed the mechanics of listing agreements, ancillary forms for listings, MLS dissemination and advertising through the Internet as it pertains to the Code of Ethics. Standard operating procedure (SOP) 10-3 relates to listings, as well stating:  “REALTORS® shall not print, display or circulate any statement or advertisement with respect to selling or renting of a property that indicates any preference, limitations or discrimination based on race, color, religion, sex, handicap, familial status, national origin, or sexual orientation,” (Adopted 1/94, Renumbered 1/05 and 1/06, Amended 1/11). 

Mary Lee Greason, a Tucson REALTOR® and Fair Housing educator, offered some sage words of advice: “In advertising our listings, we need to remember the advice I heard years ago from an attorney [who] prosecuted Fair Housing violations, ‘Stick to the amenities of the property and not the people who might live there!’”

The Department of Housing and Urban Development recently shared two scenarios which may constitute housing discrimination:

• A gay man is evicted because his landlord believes he will infect other tenants with HIV/AIDS.  That situation may constitute illegal disability discrimination under the Fair Housing Act because the man is perceived to have a disability, HIV/AIDS.

• A property manager refuses to rent an apartment to a prospective tenant who is transgender.  If the housing denial is because of the prospective tenant’s non-conformity with gender stereotypes, it may constitute illegal discrimination on the basis of sex under the Fair Housing Act.

Finally, a reminder that Article 10 and SOP 10-4 extends discrimination to cover employment in real estate offices:  As used in Article 10, “real estate employment practices” relates to employees and independent contractors providing real estate-related services and the administrative and clerical staff directly supporting those individuals. (Adopted 1/00, Renumbered 1/05 and 1/06). 

I would like to leave you with the following from the National Association of REALTORS®:

As REALTORS®, our success isn’t measured by the bottom line. It’s measured by the trust of our clients and customers and the esteem in which we’re held by our colleagues and competitors. The National Association was founded with the goal of uniting the real estate profession through high standards to protect buyers and sellers. 100 years after its adoption, the Code of Ethics continues to be what sets us apart as REALTORS®.

About the author:

Jan Steward brings a wealth of experience to the Arizona Association of REALTORS® as the Risk Management Specialist. She is a former title company manager and escrow officer with paralegal training. As a REALTOR® and broker, Jan served the Northern Arizona Association of REALTORS® (NAAR) as board president, vice-president, director, MLS chair, delegate to NAR’s national convention and a member of the Professional Standards and Grievance Committees. Jan was honored as REALTOR® of the Year by NAAR. She also has served on AAR’s Professional Standards Committee and a variety of ad hoc committees.

For organizational purposes, each advisory is divided into sections. The Tenant Advisory consists of four sections:

1. Common documents a tenant should review;
2. Tenants rights and obligations;
3. Additional information; and
4. Additional resources.

Because many real estate licensees will seek to have the tenant acknowledge receipt of the Tenant Advisory, the last page consists of an acknowledgment that contains a signature block and prompt for the tenant’s initials.

The Lease Owner’s Advisory similarly consists of four sections:

1. Owner’s responsibilities and statutory requirements;
2. Common documents and disclosures;
3. Lease owner’s rights and obligations; and
4. Additional resources.

The final page of the Lease Owner’s Advisory contains a list of ten questions a lease owner should ask when considering having their property professionally managed.

Use of these two advisories should result in more informed tenants and lease owners by providing each with valuable resources and guidance. AAR will routinely update these documents on its website as laws change and new issues arise.

AAR would like to thank the following individuals who served as members of the workgroup that drafted the advisories: Trudy Moore (Chair), Martha Appel, Sue Flucke, Kim Horn, Jacquie Kellogg and Frank Russo.

In 2009 AAR published the article: Is Property Management Right for You? This month, we take a fresh look with the help of AAR President Sue Flucke, CDPE, CRB, GRI, rCRMS and veteran property manager Elise Otero, GRI, RMP.

When Elise Otero, owner of Otero Realty Group of Apache Junction, got her first taste of property management it was in the early 1980’s. She recalls, “REALTORS® that did property management [then] were not looked on favorably.” After moving from Globe to Apache Junction, she started acquiring homes “here and there.” By the mid-90’s she had 35 properties. In 2005, she opened her own company and now manages 160 properties. And she’s not alone. Arizona’s rental market has never been hotter; and the opportunities for success have never been greater. With more leases being written and a greater number of investors in the market, there’s a lot of “win-win” in property management. “However,” cautions AAR President, Director of Property Management and Associate Broker at Keller Williams Realty Professional Partners in Glendale and Goodyear Sue Flucke, “landlord/tenant issues are also the number one complaint at the Arizona Department of Real Estate. According to Commissioner Judy Lowe, her goal is to audit every property management company operating in Arizona within the next two years.” This could be a “lose-lose” if you are not adhering to state statutes and applicable standards of practice.

GETTING STARTED

Some agents start out as an “accidental property manager”. How? Maybe a client wants help leasing a property while waiting to build back up equity. Or an out-of-state or out-of-town client asks you to stop by and check on their vacant home, arrange for a landscaper or add chemicals to their pool. Oops! Suddenly you find you’ve accidentally stepped over the line into property management. Before you find yourself in hot water, there are some important things to consider.

TALK WITH YOUR BROKER

“A lot of brokers don’t want to do it because of the liability and the additional scrutiny by the Arizona Department of Real Estate (ADRE),” says Flucke, “They don’t have or want the trust account, and right now the audits by the ADRE are extensive. Several management companies have been shut down by ADRE due to mismanagement of their trust accounts.”

Even those who handle property management sometimes restrict which agents can work on which types of jobs. For instance, some brokers allow sales agents to market a property for lease, but limit the actual management of the property to those with expertise in the field.

Here are some things to consider:

• Trust Accounts. Brokers who handle property management must have a trust account and be prepared for regular and thorough auditing by the ADRE. In fact, Commissioner Lowe is promising more audits, more enforcement and fines by the department in this area.
• Insurance Needs. Brokers who oversee property managers must secure appropriate E&O insurance coverage. Some brokers also require agents to have bond insurance because they are handling money.
• Guidance and Support. Think twice about property management if your broker allows you to do property management, but does not offer specialized training or have written policies and procedures in place.
• For Brokers. Property management opens up many benefits as well as liabilities for a broker. If you’re considering expanding into property management, consider attending AAR’s Property Management Boot Camp. It will give you the basics of what you need to do as you begin.

INTERVIEW YOURSELF

“Everybody now wants to be a property manager,” said Otero. “It is an intense business and you must have the knowledge and integrity to deal with owners, renters and vendors.” Just because your license says you can do it doesn’t mean you should do it. The skill set and knowledge base are very different. Ask yourself:

• Do I have good instincts about people? You’ve got to be the type of person who relates well with all kinds of people. When you meet prospective tenants (or clients), consider the whole package not just what is written on their application. You will have to be connected with a tenant-screening service and agree to adhere to the Federal Fair Credit Reporting Act and the “Red Flags Rule.”
• Do I handle conflict well? When an angry tenant or owner comes to you will you be able to react calmly to diffuse their anger to solve the problem? If you don’t remain calm under pressure, this might not be for you.
• Can I balance the needs of my clients and tenants? The owner is your client, but it’s crucial that you also stay on good terms with the tenants. You need to understand both parties’ points of view. Otero says, “The biggest challenge on this side of the business is dealing with the owners. We have lots of great ones who allow us to do a really great job for them, but then there are a few that want to be involved in the rental…micromanaging staff…and don’t want to spend a dime on their investment property.”
• Do I like problem solving? Property managers are problem solvers for the property. It helps if you enjoy the process of researching a problem and then taking action to resolve it.

GET EDUCATED
Once you’ve received approval from your broker and have the personal skills to be a good property manager, it’s time to get educated so that you do not act outside your area of expertise. “For any REALTOR® looking to get into management, I would suggest they work for a management company and learn the ins and outs of the business.”

• Understand the Law. Landlord-tenant law is complicated and unfamiliar to most real estate agents. Be sure to study the Arizona Residential Landlord and Tenant Act. For example, new property managers often get into trouble with “wrongful eviction.” The term doesn’t necessarily mean that you kicked the tenant out, just that you took back possession of the property without due process. It’s also important that you understand the implications of the Federal and Arizona Fair Housing Acts. No one may refuse to rent on the basis of race, color, national origin, religion, sex, familial status or handicap. You should also review AAR’s Legal Hotline on landlord-tenant issues.
• Take Classes. “Any and all education you can acquire will only help you,” said Otero. She earned her GRI many years ago and also holds the Residential Property Manager (RPM) designation from National Association of Residential Property Managers (NARPM). Sign up for courses that focus on property management. The state’s real estate schools are a good resource. AAR also offers courses such as GRI 318: “Property Management for Property Managers,” rCRMS: “Leasing Essentials and Property Management Boot Camp.”
• Seek Out Mentors. “Talk to somebody who has been doing it for awhile,” suggests Flucke. In some parts of the state, property management is seasonal. You might ask an experienced property manager if you can help out part-time during the busiest season to gain some experience. Join the monthly meetings held by NARPM. “I have been a member of NARPM for many years,” said Otero. “I’d encourage anyone to join. We like each other and help each other.”
• Choose a Specialty. Within the residential property management arena, there are different areas of expertise: single-family, multi-family, vacation home, long term, etc. Decide where you want to focus your time.

DEVELOP A PLAN
Next, you’ll want to put in place a plan to minimize risk and maximize profit for your property management business.

• Establish Policies and Procedures. Ideally, you will build on what your broker has available. Well-developed policies and procedures take into account landlord-tenant law, fair housing standards and other factors. They establish standards that protect your business as it grows. For example, a good property manager does a thorough tenant screening—credit reports, criminal background checks, employment verification, identity verification and reference checks.  Another tip from Otero is to understand the accounting procedures, “the accounting is the core of any property management firm and without a strong base and understanding of accounting in general, they will not be successful.”
• Seek Legal Counsel. In property management, the lease and property management agreements are critical to your success. Hire an experienced, specialized attorney to review these important documents regularly. As a consequence, it is important that your lease agreement spell out the responsibilities of each party and available remedies when responsibilities are not met. View AAR’s lease agreement form. The property management agreement should establish clear standards, such as a maximum amount you can spend without authorization from the owner. If a hot water heater fails and replacing it will cost more than you can authorize, don’t take action until you’ve received the okay. View AAR’s property management form.
• Prepare for the Unexpected. Will you know what to do when the air conditioner goes out on a holiday weekend? Or the tenant calls that the hot water heater is leaking all over the garage – who do you call? Whether your client is obligated to fix it depends on how you represented it to the tenant. Plan ahead for problems and you’ll avoid unnecessary crises.

REAP THE REWARDS
Most property management companies are currently booming. Property management can provide a new source of income for real estate agents and brokers. And there are other reasons agents become property managers:

• Meet Client Needs. When an owner can’t sell their property for the price they want, you can offer your help finding a tenant to provide cash flow and keep the property occupied.
• Differentiate Yourself. A property management niche makes you attractive to new types of clients, such as investors and builders. “I tell agents that it’s a separate business that they can eventually sell when they are ready to retire,” says Flucke.
• Weather a Down Market. Property management can be a counter-cyclical revenue source. “We have very few vacancies right now—it’s a tight rental market,” reports Flucke. “The foreclosure and short-sale markets forced people that want to live in single-family homes into rental properties.” On the flipside, a struggling economy can lead to property management headaches, such as tenants who can’t make rent and owners who avoid needed repairs or are struggling to make mortgage payments.

SAY “NO THANKS”

• Perhaps you’ve weighed the risks and rewards of property management and decided it’s not for you. Here are a few items to keep in mind:
• Refer business to an experienced property manager. Help your clients by putting them in contact with a reputable company. Ask an attorney who specializes in landlord-tenant issues for a recommendation. Ask your broker. Or consult the NARPM website. “We belong as a company to NARPM, which handles residential rentals only. There are about 150 or so members in Maricopa County alone, representing over 60,000 properties,” Flucke explains.
• Do not give property management advice. Remember, you should not counsel your client on issues outside your area of expertise, such as whether they should make the property an LLC, how to manage the tax implications of becoming a landlord or what specifics to include in the leasing agreement. Always advise your client to consult with the appropriate professional—attorney, accountant, insurance agent or property manager.
• Avoid accidental property management. If you are a listing agent and you turn on the utilities and make sure that the pool is being serviced, you should have a written employment agreement in place giving you authority to act, spelling out what will be reimbursed and protecting you from liability. Just because you are not collecting rent or charging your client a fee will not relieve you of statutory requirements according to ADRE.

CONCLUSION
Property management can provide a steady source of income, even in a down economy. The commission checks come in each month and can build up over time. There are challenges in property management. But if you develop systems, know the rules and love solving problems, you can succeed with this specialty. “People ask all the time ‘why do I continue to do property management?’,” says Flucke. “If you do it right, there’s not a problem with it. It’s been over 20 years and I still love what I do. It is a wonderful career.”

The Real Estate Settlement Procedures Act of 1974 (RESPA) is a Federal law enacted to insure that buyers are provided with sufficient information about the nature and costs of financing and closing escrow on a home (defined in the law as the settlement process). RESPA is also intended to protect buyers from unnecessarily high close of escrow charges. RESPA requires that buyers receive disclosures at various times that spell out the costs associated with the close of escrow, lender and escrow practices and fees, such as the Good Faith Estimate. Section 8 and Section 9 of RESPA have the greatest impact on real estate brokers.

KICKBACKS AND REFERRAL FEES Section 8 (12 U.S.C. §2607; 24 C.F.R. §3500)

Section 8(a) Prohibits Kickbacks and Referral Fees Section 8(a) states: No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person. Thus, Section 8 prohibits a person from giving or accepting any “thing of value” for referrals of prohibits a person from giving or accepting any “thing of value” for referrals of settlement service business.

Section 8(b) Prohibits Unearned Fees Section 8 (b) prohibits a person from giving or accepting any part of a charge for services that are not performed. Section 8(b) states: No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.

 Section 8 Definitions (12 U.S.C. §2602)

A “settlement service” includes any service provided in connection with a real estate transaction, including title insurance, attorney services, surveys, credit reports, appraisals, pest and fungus inspections, and loan origination (the taking of loan applications, processing, underwriting and funding). If the service is provided at or before close of escrow, it is probably a settlement service. A “thing of value” is very broadly defined. A thing of value includes any payment, advance, funds, loan, service or other consideration. A “federally related mortgage” includes any loan (other than temporary financing such as a construction loan) that is secured by a first or subordinate lien on residential real property designed principally for the occupancy of one to four families. In other words, a federally related mortgage covers virtually all financing secured by a lien on residential property.

 Section 8(c) Exceptions

Not all fees, salaries, compensation or payments for settlement services violates Section 8. RESPA does not prohibit: payments to attorneys for services actually rendered, compensation by a title company to its duly appointed agent for services actually performed in the issuance of a policy of title insurance or by a lender to its duly appointed agent for services actually performed in the making of a loan payment of a bona fide salary, compensation or payment for goods or facilities actually furnished or for services actually performed payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers affiliated business arrangements so long as certain requirements are met. An affiliated business arrangement is an arrangement in which a person (or associate) who is in a position to refer business, incident to or a part of a real estate settlement service involving a federally related mortgage loan, has either an affiliate relationship with or an ownership interest of more than one percent in a settlement service provider and either directly or indirectly refers business to that provider or affirmatively influences the selection of that provider. See, 12 U.S.C. §2602.

To qualify for the affiliated business arrangement exemption, a disclosure must be made of the existence of the arrangement, and a written estimate of the charge or range of charges for the service is made at or before the time of the referral. Further, the buyer cannot be required to use the service. Additionally, the only thing of value that is received from the arrangement is a return on the ownership interest. HUD2 has investigated sham affiliated business arrangements. For example, a title company in Florida reportedly paid $3.2 million to settle allegations that it was entering into sham affiliated business arrangements in an attempt to funnel improper payments to builders, real estate agents and mortgage brokers.

TITLE INSURANCE — SECTION 9 (12 U.S.C. §2608; 24 C.F.R. SEC. 3500.16)

Section 9 of RESPA prohibits a seller from requiring the buyer to buy title insurance from a specific title insurance company. Section 9 of RESPA states: (a) No seller of property that will be purchased with the assistance of a federally related mortgage loan shall require directly or indirectly, as a condition to selling the property, that title insurance covering the property be purchased by the buyer from any particular title company. (b) Any seller who violates the provisions of subsection (a) of this section shall be liable to the buyer in an amount equal to three times all charges made for such title insurance. “Required use” means: A situation in which a person must use a particular provider of a settlement service in order to have access to some distinct service or property, and the person will pay for the settlement service of the particular provider or will pay a charge attributable, in whole or in part, to the settlement service.

 KEY POINTS TO REMEMBER

A broker cannot accept any fee, kickback or “thing of value” for referrals to a settlement service provider. A prohibited “thing of value” under RESPA is interpreted very broadly and may include joint advertising if one settlement service provider is paying more than a pro-rata share, or any other item that would defray the broker’s expenses. Generally, a broker cannot accept any portion of a settlement service charge other than for services rendered. Generally, a seller may not require as a condition of sale that the buyer purchase title insurance from any particular title company. Affiliated business arrangements are allowed under RESPA as long as certain requirements are met.

1. RESPA was amended in 1976 and 1983 (minor revisions); in 1992 (addressing affiliated business relationships and computer loan origination); in 1996 (further revisions, including addressing certain employer payments to bona fide employees) and 2009 (revisions including addressing servicing disclosure states and a new GFE effective January 2010).

2. Effective July 21, 2011, RESPA is administered and enforced by the Consumer Financial Protection Bureau.

3. The RESPA Home Warranty Clarification Act of 2011 (H.R. 2446), which is supported by NAR, may clarify that home warranties fall outside the scope of RESPA.

4. See correspondence from Rebecca J. Holtz, acting Director, Office of Consumer and Regulating Affairs, HUD RESPA/ILS Division dated August 2000 and related enclosures and correspondence available on the AAR website.

K. Michelle Lind. Arizona Real Estate. Hillcrest Media Group.

QUESTION L-2
Q: Why is the information from the Pre-Qualification Form repeated in the LSU?
A: The information from the Pre-Qualification Form is repeated in the LSU because a Pre-Qualification Form may not have been submitted with the offer or the information contained in the Pre-Qualification Form submitted with the offer may have been incomplete or may have changed.

QUESTION L-3
Q: Why is the “Closing Loan Documents Delivery Date” included in the LSU?
A: The buyer’s obligation to complete the sale is contingent upon the buyer obtaining loan approval for the loan described in the LSU without Prior to Document (“PTD”) conditions, and the buyer is obligated to sign all loan documents no later than three days prior to the close of escrow (“COE”) date. The “Closing Loan Documents Delivery Date” was included so that the lender and all parties will be alerted as to the date the loan documents must be at the escrow company so that the documents can be signed as required.

QUESTION L-4
Q: If the Contract provides that COE is Friday, when must loan documents be signed?
A: Pursuant to Section 8i (Calculating Time Periods) of the Contract, if COE is Friday, March 11, the loan documents must be signed by 11:59 p.m. on Monday, March 7. (Note: Pursuant to Contract Section 8h, all references to “days” are calendar days.)

QUESTION L-5
Q: What if the buyer fails to provide an LSU five days after Contract acceptance?
A: If the buyer fails to deliver the LSU as required, the seller may deliver a three-day cure notice to the buyer pursuant to Contract Section 7a. If the buyer does not deliver the LSU within three days after delivery of the cure notice, the failure becomes a breach of Contract, and the seller may proceed as set forth in Contract Section 7b.

QUESTION L-6
Q: What if the buyer provides an LSU five days after Contract acceptance, but lines 1-40 are not completed?
A: As set forth above, the seller may deliver a three-day cure notice to the buyer.

QUESTION L-7
Q: What happens if the Buyer’s Lender refuses to complete an LSU?
A: The buyer should complete and sign the LSU. The failure of the buyer’s lender to complete the LSU is not a potential breach and, therefore, is not subject to a cure period notice because the lender is not a party to the Contract.

QUESTION L-8
Q: What is the Seller’s recourse if the Seller “disapproves” of the buyer’s LSU?
A: The Contract does not provide the seller an opportunity to “disapprove” the LSU. If the LSU indicates changes in the loan program, financing terms or lender described in the Pre-Qualification Form submitted with the Contract and those changes adversely affect the buyer’s ability to obtain loan approval, increase seller’s closing costs or delay close of escrow, the seller may deliver a cure notice pursuant to Contract Section 7a for the failure to obtain the Seller’s written consent. If the buyer’s offer was accepted without a Pre-Qualification Form, the seller may only issue a cure notice if the seller can establish that the buyer is not diligently working to obtain the loan as required by Contract Section 2g or is not acting in good faith.

QUESTION L-9
Q: In a short sale, when is the LSU required?
A: Pursuant to the AAR Short Sale Addendum to the Contract, the date of the seller’s delivery of the Short Sale Agreement Notice to the Buyer is deemed to be the date of Contract acceptance for purposes of all applicable Contract time periods. Therefore, the buyer is required to deliver an LSU to the seller five days after delivery of the Short Sale Agreement Notice.

QUESTION L-10
Q: If the buyer changes lenders after submitting the LSU, is the buyer required to submit an updated LSU?
A: No. However, pursuant to Contract Section 2l, the buyer is obligated to immediately notify the seller of any changes in the loan program, financing terms or lender described in the LSU. The buyer is entitled to make any such changes without the prior written consent of the seller if the changes do not adversely affect the buyer’s ability to obtain loan approval without conditions, increase the seller’s closing costs or delay close of escrow.

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The AAR Residential Contract Revision Workgroup was led by Jim Sexton, chair, with the valuable assistance of workgroup members Amy Swaney (lender representative), John Lotardo (title/escrow representative), Kelly Hand, Martha Appel, Holly Mabery, John Foltz, Kerry Melcher, Jerome King, Paula Monthofer and AAR staff Christina Smalls and Jan Steward.

Let’s review the steps and timing of your listing presentation:

• establish and reestablish rapport (approximately 10-15 minutes) — small talk, get comfortable in living or family room
• establish control (approximately 5 minutes) — move to kitchen table, set the agenda, minimize distractions
• sell yourself and your company (approximately 10 minutes) — use your listing presentation system to sell BENEFITS
• deal with price and terms (approximately 15-30 minutes) — use your marketing plan, CMAs and net sheet
• trial closer and handle objections (approximately 5-30 minutes)
• final close for listing (approximately 1-2 minutes)
• precondition
• service the listing

Establish rapport

First and foremost, remember to be on time, but not too early. Since may of your presentations are in the evening, it’s important to establish a comfort zone for both you and the sellers. Make small talk and conduct this discussion in the living room or family room (stay away from the kitchen table until the proper time).

Establish control

After 10-15 minutes, it’s time to shift the meeting to the kitchen table. TAKE CHARGE HERE! Politely ask the sellers to sit in such a way to be sitting beside each other and yourself so you can present your visuals to them together. This is a great opportunity to set the agenda and let them know how you would like to conduct the meeting and get their approval to do so. This can help you avoid the premature discussion about price, proceeds, etc. Also, don’t be afraid to politely ask them for an hour of their undivided attention. REMEMBER: if they insist on talking price right away and you submit, you’ve given them control. Assure them that you will address the price and terms in a few minutes, but that you’d like a few minutes to tell them about yourself and your company. When they say “sure”, you’re in control.

Sell yourself and your company

Remember that this is very important to avoid having a premature discussion about the price and terms, which is the next step as the sellers will feel comfortable with you helping them with their decision only after they’re convinced that you and your firm are the ones to do the job for them.

In reality, this is probably the most important step, as you are specifically addressing the seller’s concerns. It is also important to have done a thorough job of having qualified the seller in the fact-finding phase. This fact-finding phase should have taken place in your initial conversation setting up the appointment. You should have a complete “Seller Profile” (from the initial conversation), which should include their motivation, urgency, family and personal needs, their next location, experience selling a home, their expectations and financial requirements. Your presentation should focus on their needs in these areas. You may want to consider preparing personal listing kits with the sellers’ name on the front for them to keep.

It is important to utilize your listing presentation kit which contains visuals, in this phase. Visual aids greatly enhance the sellers’ understanding of what you and your company have to offer. In your verbal presentations, I recommend using the following tie-down methods:

fact (i.e., xyz realty has over xxx offices and xxx sales associates in (name of town, state or country) bridge (i.e., what this means to you is…) benefit (state the benefits to them) tie down(ask the sellers what they think about what you stated) Pick five to eight features to discuss during this process (no more than eight). Deal with price and terms

A thorough understanding of your CMA is very important. Present it in laymen’s terms in discussing comparables and be specific how each comparable property in the “sold,” “available,” and “expired” categories compares to their property. Also be sure to discuss the competitive pricing at this time. During this phase, the sellers will see the validity and reality of the market price. The more you make this their decision, the better it is for you. If your CMA is thorough and complete, if you communicate it clearly, and if you discuss competitive pricing, the sellers should see the logic and benefit of a realistic price. This is also where your show the sellers a net sheet. Make it as conservative as possible using a “worst case” analysis. A pleasant surprise (at closing) will always work to your favor while an unpleasant surprise will work to your disfavor. This is where you want to tie back to your marketing plan for their property. Doing these steps will aid you significantly in your closing phase. Ask the sellers if they have any questions regarding anything you’ve gone over so far.

Trial close and handle objections

Now it is time to take charge and ask for the listing. (“Mr./Ms. Seller, may I have your approval on this authorization so we can get right to work marketing your property?”) In many cases there is a sigh or some kind of guttural utterance like “We need to think this over,” or “We need to sleep on this.” NEVER attach your seller on this and express empathy letting them know that you understand that this is a big decision for them. However, after you have done this, it might be effective for you to ask them if they have any questions on any part of your program or any concerns about the agreement. Ninety percent of handling a concern/objection is finding out what it is and confronting it. This technique is simply called “restate, agree and probe.” When you restate, be sure to paraphrase their response back to them (i.e., “We don’t want to sign on our property” — “I’m sure you have a good reason for not wanting to sign: would you mind sharing with me that reason?” “Our neighbors are nosy and people would probably drop by at inconvenient times” — “So, if I’m understanding you correctly, you have some concerns about your neighbors gossiping about you and that you might be disturbed at inconvenient times?”) All of this is really encompassed in handling objections. Once you have determined the underlying issue, the next step is to isolate the objections. Now that you have the sellers opening up about their concerns, you might as well seize the opportunity and have them lay their cards on the table. You might say: “Do you have any other concerns besides this one?” or “Is that the only concern that is keeping you from making a decision to list with me tonight?” If there are additional concerns, handle them one at a time. Answer their concerns by providing information that they need to address the concern. A very effective technique is to “reflect” on their reactions to the presentation of selling yourself and your firm earlier in the appointment. (i.e., “Earlier when we discussed our marketing plan, you seemed very impressed with the fact that we promote your property within your own neighborhood to build the awareness of your property.”) This might be a good time to offer some other marketing steps and their benefits that will help you are at this stage with them.

Validate

This encompasses your validation that you have answered the sellers objection and concerns (i.e., “Mr./Ms. Seller, do you see why for sale signs are so important to us and to you in the marketing of your home?”) If they give you a positive response, then it is time to go on and CLOSE FOR THE LISTING. If their response is less than positive, then you need to go back and start over handling each objection one at a time.

Precondition

Pre-conditioning should be done as soon as possible after you obtain the listing, and it is very important that the seller understands what is involved in the marketing process. Such areas as property condition, what to do if a buyer comes by, open houses, office tour, and other areas need to be discussed in detail. This step is very important in minimizing the chance of any misunderstandings of the seller.

Servicing the Listing

This step is simply doing what you promise. It is also worth noting that this means you must keep your seller informed of the progress by sending them a weekly report followed up with a phone call. Listings, competitively priced and marketable, will give you a strong competitive advantage in the marketplace. ]]> http://www.aaronline.com/2013/01/listing-presentation/feed/ 0 http://www.aaronline.com/2013/01/americans-with-disabilities-act-compliance-kit/ http://www.aaronline.com/2013/01/americans-with-disabilities-act-compliance-kit/#comments Wed, 02 Jan 2013 19:27:50 +0000 admin http://aaronline.com/?p=6643 This Question and Answer information packet supplements the ADA Compliance Kit distributed by the NATIONAL ASSOCIATION OF REALTORS® in January 1992 and covers the most frequently asked questions from REALTORS® in relation to the ADA. (Prepared by the Legal Affairs Department of the NATIONAL ASSOCIATION OF REALTORS®, November, 1992).

TITLE I – Employment

Question #1: Does Title I cover independent contractors and apply if a real estate office has 15 independent contractors rather than employees?

Answer: Title I covers employees, although the Office on the ADA has indicated that whether an individual is an employee or independent contractor will be carefully evaluated under federal law. For real estate brokers, that means that the broker/agent relationship will be scrutinized to determine whether an independent contractor relationship actually exists or whether agents are treated as employees.

Question #2: If a real estate company has a number of branch offices, are employees in each branch office counted separately or are the numbers totaled to reach the threshold number for Title I?

Answer: The numbers are totaled (example: three branch offices with 5 employees at each location total 15 employees). Since the threshold number of 15 has been exceeded, Title I applies.

TITLE III

Public Accommodations, Commercial Facilities and Private Entities that Offer Certain Educational Courses.

Question #3: Can a place of public accommodation be covered by both the ADA and the Fair Housing Act (FHA)?

Answer: Yes. The analysis for determining whether a facility is covered by the ADA is entirely separate and independent from the analysis used to determine coverage under the FHA. A facility can be a residential dwelling under the FHA and still fall in whole or in part under at least one of the 12 categories of places of public accommodation.

Question #4: How does the “readily achievable” standard relate to other standards in the ADA?

Answer: The ADA establishes different standards for existing facilities versus alterations to existing facilities and new construction. In existing facilities, where retrofitting may be expensive, the requirement to provide access is less stringent than it is in new construction and where alterations to existing facilities are being made, where accessibility can be incorporated in the initial stages of design and construction without a significant increase in cost.

Question #5: How does a public accommodation determine when barrier removal is readily achievable?

Answer: Determining if barrier removal is readily achievable is a case-by-case decision. Factors to consider include:

1) The nature and cost;
2) The overall financial resources of the entity involved; the number of persons employed at the site; the effect on expenses and resources; legitimate safety requirements necessary for safe operation, including crime prevention measures; or any other impact of the action on the operation of the business;
3) The administrative or fiscal relationship of the business in question to any parent corporation or entity;
4) If applicable, the overall financial resources of any parent corporation or entity; the overall size of the parent corporation or entity with respect to the number of its employees; the number, type, and location of its facilities; and
5) If applicable, the type of operation of any parent corporation or entity, including the composition, structure, and functions of the workforce of the parent corporation or entity.

Question #6: Are public accommodations required to retrofit existing buildings by adding elevators?

Answer: A public accommodation generally would not be required to remove a barrier to physical access posed by a flight of steps, if removal would require extensive ramping or an elevator. The readily achievable standard does not require barrier removal that requires extensive restructuring or burdensome expense. Thus, where it is not readily achievable to do, the ADA would not require a public accommodation to provide access to an area reachable only by a flight of stairs.

Question #7: Does the ADA require barrier removal in historical buildings?

Answer: Yes, if it is readily achievable. However, the ADA takes into account the national interest in preserving significant historic structures. Barrier removal would not be considered “readily achievable” if it would threaten or destroy the historic significance of a building or facility that is eligible for listing on the National Register of Historic Places under the National Historic Preservation Act (16 U.S.C. 470, et seq.), or is designated as historic under State or local law.

Question #8: Are portable ramps permitted?

Answer: Yes, but only when the installation of a permanent ramp is not readily achievable. In order to promote safety, a portable ramp should have railings and a firm, stable, nonslip surface. It should also be properly secured.

Question #9: If a public accommodation determines that its facilities have barriers that should be removed, but it is not readily achievable to undertake all of the modifications now, what should it do?

Answer: The Office on the ADA recommends that a public accommodation develop an implementation plan designed to achieve compliance with the ADA’s barrier removal requirements. Such a plan, if appropriately designed and diligently executed, could serve as evidence of a good faith effort to comply with the ADA’s barrier removal requirements.

Question #10: Must a real estate agent who uses his/her home (or a portion thereof) as an office, comply with Title III?

Answer: Yes. If a private residence (or a portion thereof) is used for business purposes and clients/customers frequent that location, Title III applies to those areas used for business purposes even if they’re also used for residential purposes. The entrance to the office must also be accessible such as the sidewalk, door, and entryway.

Question #11: Are model homes and open houses places of public accommodation?

Answer: Generally, no. Model homes and open houses do not fall under the 12 categories of places of public accommodation. If, however, the sales office for a residential housing development is located in a model home, the area used for the sales office would be considered a place of public accommodation. Although model homes are not covered, the Office on the ADA encourages developers to voluntarily provide at least a minimal level of access to model homes for potential homebuyers with disabilities. For example, a developer could provide physical access (via ramp or lift) to the primary level of one of several model homes and make photographs of other levels of the home as well as of other models available to the customer.

Question #12: Do both a landlord who leases space in a building to a tenant and the tenant who operates a place of public accommodation have responsibilities under the ADA?

Answer: Both the landlord and the tenant are public accommodations and have full responsibility for complying with all Title III requirements applicable to places of public accommodation. The landlord and tenant must allocate responsibility, in the lease, for complying with particular provisions of the regulation. However, any allocation made in a lease or other contract is only effective as between the parties, and both landlord and tenant remain fully liable for compliance with all provisions of the ADA relating to that place of public accommodation.

Question #13: What if a tenant remodels his store in a manner that would trigger the path of travel obligation, but the tenant has no authority to create an accessible path of travel because the common areas are under control of the landlord? Does this mean the landlord must now make an accessible path of travel for the remodeled store?

Answer: No. Alterations by a tenant do not trigger a path of travel obligation for the landlord. Nor is the tenant required to make changes in areas not under his control.

Question #14: How do we determine if committee members or registrants to our meetings and educational courses are disabled and have special needs?

Answer: Ask! Add a question to your committee appointment letters and all of your registration forms as follows:
Please check here if you have a disability which will require special services at a (meeting/course). Attach a written description of your needs.

And, include a notice in the registration packet (for on-site registrants) asking those with disabilities who require special accommodation to contact the Registration Desk.

Question #15:At our Convention, we’re sponsoring certain tours and recreational activities. Do they need to be accessible to the disabled?

Answer: Generally yes, if they can be made accessible. Since tour company services are open to the public, tour companies are considered public accommodations and may already have taken the steps necessary to comply with the ADA. If they haven’t, you may want to consider a different company that is in compliance. In respect to recreational activities, they should be made accessible to the disabled to the extent it’s readily achievable to do so.

Question #16: If we provide ground transportation to certain social functions during our Convention, do we need to provide special transportation for those in wheelchairs?

Answer: Yes.

Question #17: When auxiliary aids are to be provided, who decides what type of auxiliary aids are acceptable?

Answer: Public accommodations should consult with individuals with disabilities whenever possible to determine what type of auxiliary aid is needed to ensure effective access and communication. In many cases, more than one type of auxiliary aid or service may be acceptable. While consultation is strongly encouraged, the ultimate decision as to what measures to take to ensure compliance rests in the hands of the public accommodation, provided that the method chosen results in effective access and communication.

Question #18: Who is a qualified interpreter?

Answer: There are a number of sign language systems in use by persons who use sign language. (The most common systems of sign language are American Sign Language and signed English.) Individuals who use a particular system may not communicate effectively through an interpreter who uses another system. When an interpreter is required, the public accommodation should provide a qualified interpreter, that is, an interpreter who is able to sign to the individual who is deaf what is being said by the hearing person and who can voice to the hearing person what is being signed by the individual who is deaf. This communication must be conveyed effectively, accurately, and impartially, through the use of any necessary specialized vocabulary.

Question #19: Can a public accommodation use a staff member who signs “pretty well” as an interpreter for meetings with individuals who use sign language to communicate?

Answer: Signing and interpreting are not the same thing. Being able to sign does not mean that a person can process spoken communication into the proper signs, nor does it mean that he or she possesses the proper skills to observe someone signing and change their signed or finger spelled communication into spoken words. The interpreter must be able to interpret both receptively and expressively.

Question #20: If a sign language interpreter is required for effective communication, must only a certified interpreter be provided?

Answer: No. The key question in determining whether effective communication will result is whether the interpreter is “qualified,” not whether he or she has been actually certified by an official licensing body. A qualified interpreter is one “who is able to interpret effectively, accurately and impartially, both receptively and expressively, using any necessary specialized vocabulary.” An individual does not have to be certified in order to meet this standard. A certified interpreter may not meet this standard in all situations, e.g., where the interpreter is not familiar with the specialized vocabulary involved in the communication at issue.

Question #21: What obligations does an examiner have if its facilities are inaccessible?

Answer: Examinations must be administered in facilities that are accessible to individuals with disabilities or alternative accessible arrangements must be made. If the facility in which the examination is offered is not accessible, it may be administered to an individual with a disability in a different room or other location. For instance, the entity might provide the examination at an individual’s home with a proctor. The alternative location must, however, provide comparable conditions in which the test is administered to others.

Question #22: May an examiner require that an applicant provide documentation of the existence and nature of the disability as evidence that he or she is entitled to modifications or aids?

Answer: Yes, but requests for documentation must be reasonable and must be limited to the need for the modification or aid requested. Appropriate documentation might include a letter from a physician or other professional, or evidence of a prior diagnosis or accommodation, such as eligibility for a special education program. The applicant may be required to bear the cost of providing such documentation, but the entity administering the examination cannot charge the applicant for the cost of any modifications or auxiliary aids, such as interpreters, provided for the examination.

Question #23: If a public accommodation makes good faith efforts to comply with the ADA, will that be considered in determining the amount of a civil penalty if non-compliance is found to exist?

Answer: Yes. In considering what amount of civil penalty, if any, is appropriate, the court is required to give consideration to any good faith effort or attempt by the covered entity to comply with its obligations under the ADA. One of the factors to be considered in evaluating good faith is whether the entity could have reasonably anticipated the need for an appropriate type of auxiliary aid needed to accommodate the unique needs of a particular individual with a disability.