If anyone is interested, I am offering a free class tonight at the Phinney Neighborhood Center (Blue Building Room 6, 6532 Phinny Ave. N. in Seattle) from 7:30-8:30. I’ll be addressing legal issues relating to the purchase and sale of a home, as well as the advantages and disadvantages of buying or selling without an agent. I hope to see you there!
[photopress:LAME.jpg,full,alignright]Recently, Dustin, Anna, myself, and the fine folks at LTD Real Estate, had the pleasure of dealing with the NWMLS.
The gist of the discussion was our inabilty to host a NWMLS search tool due to NWMLS belief that Rain City Guide is alledgedly not an agent site. They are of the belief because multiple agents from multiple brokers participate on Rain City Guide. Because of this, having a “framed” IDX solution developed by me, using LTD’s feed on Rain City Guide would be considered a violation of NWMLS rule 189, because said rule states: “No member shall advertise, sell or otherwise provide to any other member’s subscriber or a non-member any product utilizing information or content derived, extracted or complied, in whole or in part, from or through NWMLS.”
Needless to say, this rule makes no sense, because any web site that offers any publicly accessable MLS search could be considered in violation of rule 189. At any rate, I’m sure Dustin will comment more on this in a future post.
Anyway, the more I learn about how the MLS operates, the more I want to start a “bottom feeder” site and screen scrape everything I need. Any way this experience has lead me to the following questions for the peanut gallery.
Anyway, after learning about their interpretation of Rule 189, our local MLS earned a spot on my Lame List.
There was an interesting article (requires a subscription) on Inman yesterday about the California Association of Realtors (www.car.org) pushing for higher licensing standards. CAR’s president noted that currently in California someone who cuts hair requires more training than real estate agents to obtain a license for their profession.
I applaud the fact that the industries own are finally calling for improved standards — though I’m not sure they are asking for a high-enough bar, but that’s just my opinion. Currently in Washington, the Department of Licensing requires you to be at least 18-years old, complete 60 clock-hours of training and pass the state exam with a score of 70% or better.
I personally would not want to be represented by that agent who scored 71%…I’ve already met enough of them across the table. It’s not all bad though…Let me also state that I HAVE BEEN impressed with the quality of agents hired by some of the more well known brokerages. They have displayed the professionalism I wish we had across the board in this industry.
So what do you think? Is 70% a reasonable bar for licensing? Should an AA or Bachelors degree be required? Is it the amount of clock hours that matter or the testing to demonstrate prociency in what you’ve learned.
I just noticed an interesting article published in the Inman News by RCG contributor, Russ Cofano, that provides an interesting perspective on the extent to which a listing broker can copyright a listing (requires a subscription after today).
In a recent news publication, attorney J.T. Westermeier, partner in the firm of DLA Piper Rudnick Gray Cary US LLP, said that copyright owners of property listings content are not subject to compulsory licensing and that brokers can refuse to allow their listings to be displayed publicly by third parties even if the third parties are competing brokers. In Westermeier’s view, NAR’s online listings display policy being challenged by the DOJ is consistent with the broker’s exclusive copyright rights.
Like many of the arguments that have supported the use of copyright laws to protect listing data, I believe that this argument is misguided. First, Westermeier correctly addressed only copyright rights associated with the photographs and the expressive comments to the listing. As we all should know by now, there can be no copyright to the property facts contained in a single listing. In the perfect world, I might agree that a broker could limit the use of copyrighted photographs and listing comments if indeed the broker owned all of those rights. That is when reality sets in and we realize that the multiple listing service/broker/agent interrelationship is anything but perfect.
Russ goes on to say under the current listing arrangement, most agents are independent contractors who have not given up the ownership of their text and photos associated with a listing. While some agents may have agreements with their brokers that gives up their copyright, this practice is not universal (and I assume that the practice is not even common).
If, within a single MLS, there was uniformity that led to the broker owning the copyright in the copyrightable elements of each listing, Mr. Westermeier’s argument might be a good one. The reality is that within most MLSs, and even within many brokerages, there is no such uniformity. Because of this lack of uniformity, the argument of broker copyright to support an MLS listing display policy that applies equally to the entire MLS membership just won’t work.
I recently had a conference call with an agent and his buyer who was purchasing new construction from a small builder. In the course of the conversation, we started talking about the builder’s warranty (which there was none) and the agent chimed in with the following: “Well, even without a written warranty, the buyer will still get the one year warranty that is required under state law.” Unfortunately, I had to correct Mr. Agent in front of his buyer by letting him know that the only warranty that a builder provides by law is the Implied Warranty of Habitability.
[photopress:oldhousecrunch.jpg,thumb,alignright]Good news was this warranty is an implied warranty in the contract and the statute of limitations on bringing a claim under the contract is 6 years, not one (subject to a bunch of other issues too complex for this post). Bad news was that the Implied Warranty of Habitability is very limited and basically means that the home can be lived in. In recent years, it has been extended to things like conformance with building codes. It does NOT, however, cover things that a new construction buyer usually deals with post-closing. Things like paint chipping, floors warping, siding going bad, window cracks, carpet coming up, etc., etc., etc. These defects are usually smaller items but can add up in total to a lot of money and even more frustration. The only warranty that would cover something like this is a written warranty from builder to buyer. If one does not exist, then no warranty and no recourse to Buyer. Buyers should also read the fine print as many builder warranties contain more holes than swiss cheese. Don’t rely on the fact is says “Warranty” on top of the page. In my experience, the good builders usually provide pretty decent warranties. The smaller builders are across the board. In this case the old adage applies — Get it in writing!
(This post is authored by Craig Blackmon, an attorney and real estate broker in Seattle whose practice focuses on residential real estate — see his web page or his blog for more information. Please note that this post is not legal advice. You should consult an attorney for specific legal counsel.)
Your purchase or sale is scheduled to close on the Closing Date. What happens if, for some reason (perhaps a delay with the lender), the transaction does not close on the Closing Date? What are the rights and obligations of the buyer and the seller?
A discussion of this scenario begins with the “time is of the essence” clause. Virtually all purchase and sale agreements (including the forms used by the MLS in Seattle), contain a clause indicating that time is of the essence. When a contract does not contain such a clause, the law affords the parties some flexibility in regards to performance of their contractual obligations. With such a clause, however, the law requires the parties to perform as indicated by the contract. Thus, assuming the contract indicates that time is of the essence, the transaction must close on the closing date or there will be problems.
If the transaction fails to close because a contingency was not satisfied, such as a financing contingency, then both parties are absolved of their contractual obligations. A contingency is a “condition precedent” — i.e. a condition that must be satisfied before the contract binds the parties. So, if the contract includes a financing contingency, and the transaction fails to close because the buyer did not get financing in time, then neither party is in breach of the contract. The contract simply expires. If the parties want to proceed with the transaction and close beyond the closing date, they need to so agree in writing by amending the contract prior to its expiration.
If the transaction fails to close because one of the parties did not live up to their obligations, however, then the other party may have an action for breach of contract. For example, suppose the seller fails to execute the documents necessary to convey good title to buyer. If, at the time of closing, buyer has performed its obligations, then buyer has a breach of contract claim against the seller. Note, however, that the buyer must have tendered performance — i.e. deposited the funds with escrow to purchase the property — in order to have a breach of contract claim (with two exceptions noted below). If neither party has performed its obligations by the closing date, the contract expires.
If buyer did not tender performance, buyer may still have a claim if seller either waived the “time is of the essence” clause, or otherwise acted in a manner inconsistent with an expectation of performance on the closing date and the seller relied on that action in not performing (the legal term is “collateral estoppel”). In either case, the law concludes that the buyer has a claim because the seller has acted in a manner inconsistent with enforcement of the closing date.
Finally, note that these are exactly the sort of questions that should only be answered by an attorney, not a real estate broker. And when an answer is needed, it’s needed now. If a buyer needs to scramble to get an attorney on board and up to speed, the buyer may not get answers soon enough. So a prudent buyer will have a team of two real estate professionals – a real estate broker and an attorney – in place at the start of the process so that the buyer is fully informed and protected, particularly when the deal gets off track.
Here is an article I wrote on the findings and recommendations of a NAR Work Group that addressed REALTORS use of the Internet and the interplay betweent the REALTOR Code of Ethics and MLS Rules and Regs:
Many “average” Americans are dipping their toe into the world of investment real estate. Not satisfied with owning REITs, many non-real estate professionals are turning to buying vacation homes, single family rental properties, small multi-family dwellings and even small commercial buildings.
If you are in this group (or thinking of joining this group), I want to give you three letters to remember as you begin your journey – LLC.
LLCs is an acronym for limited liability company. It is a form of entity recognized by states as providing liability protection for its members. At the same time, it receives different tax treatment than traditional corporations. It also is much more flexible than corporations when structuring relationships between members. The following is a very high level discussion on some benefits of forming an LLC. While forming LLCs can be done by laypersons, you should consult an attorney or CPA before taking that step.
TAX TREATMENT – When an individual forms an LLC, the feds disregard the entity and tax the individual as if no LLC existed. If more than one unmarried persons form an LLC, again there is entity protection like a corporation and the individuals are taxed as partners by the feds. So, instead of filing a separate corporate tax return, the members file form K-1s as part of their individual return. The benefit of this is that there is no double taxation as there would be if the investor(s) had created a C-Corp. Moreover, the members can have a much more flexible relationship than had they formed an S-Corp.
LIABILITY PROTECTION – This is the main reason to form the LLC. Say you want to purchase a rental house. If you purchase it in your own name, all of your personal assets are subject to risk in the event that something goes wrong. If you and your renters get into a lease dispute, they may sue you and your individual assets are on the line. What if someone gets hurt on the property and your insurance coverage is not enough to cover the loss? Again, your assets will be at risk. If you form an LLC, you have just created an entity that is separate from you. Its assets are only those that the LLC owns – usually the property. Thus, if something goes wrong, usually only the property is at risk and not your life savings. This can be worth a lot of sleep at night.
While LLCs may not be for every real estate investor, they are certainly three letters that need to be discussed when buying investment property.
In response to Giles comment and question, here is an Inman article from December 2004 giving the whole story. Lois had been emailing me some strange things. She then went into a coma and passed away. I believe her suit was dropped at that point. I’m pretty sure the Association won on the Kentucky suit. Not sure what happened in Spokane. Not sure how Barry can do these in so many states, aren’t lawyers restricted to the state where they are a member of the bar?
“A Florida Realtor is suing the Sarasota Association of Realtors for allegedly forcing local real estate agents to buy memberships in the association as a condition of purchasing lockbox keys and multiple listing service data.
The suit, filed Wednesday in federal district court in Tampa, Fla., seeks $5 million and class-action status, amounting to $4,500 for each member of the class, and names 14 association directors as defendants. Lois M. Hekker, broker with Buyer’s Agents International Realty in Sarasota, is the plaintiff in the suit.
A representative from the Sarasota Association was not available to comment on the suit Wednesday afternoon.
The complaint cites the 1991 federal appeals court decision in Thompson vs. Metropolitan Multi-List in Florida, which held that a Realtor association that had monopoly power over its MLS could not force real estate agents to purchase memberships in the trade association as a condition of gaining access to the MLS. The complaint alleges that the Sarasota Association and other Realtor associations in Florida evade the Thompson decision by tying lockboxes and historical MLS data to purchases of membership.
The suit seeks an injunction ordering the Sarasota Association to sell lockboxes and historical MLS data without requiring MLS users to purchase trade association memberships.
“In order to practice her profession as a real estate broker, plaintiff needed to buy lockbox services and MLS comparable data from the Sarasota Association, which forced her to purchase trade association services she did not want,” the complaint states.
Agents purchasing the local trade association services also must purchase state and national association services, totaling about $424 per agent in 2004, the complaint states.
Sarasota Association members rent electronic lockbox keys from the association, which purchases them from GE, according to the complaint. Lockboxes are attached to the front door of a for-sale home and contain a key so agents can show the home to prospective buyers. “Licensees who purchase lockbox services have lockbox keys that open all lockboxes in the area covered by the MLS,” the complaint states.
The 21-page complaint cites other states where courts have declared it illegal to tie the sale of trade association services to the sale of the MLS, including California, New Jersey and Colorado.
San Francisco-based attorney David Barry of Barry & Associates represents the plaintiff. Barry has filed more lawsuits against Realtor associations than any other attorney in the country. He has racked up a number of losses with the exception of one case in San Diego that accused the Sandicor MLS of illegal price fixing. Barry has attempted repeatedly but unsuccessfully to obtain class-action certification in the Sandicor lawsuit.
Barry filed two similar lawsuits this year against the Northern Kentucky Association of Realtors and the Spokane Association of Realtors in Washington, alleging antitrust violations through Realtor association and MLS membership ties-ins. Both suits are pending and neither has reached trial.
The plaintiff in the Kentucky suit is Sherry Edwards, broker of Florence, Ky.-based Buyer’s Corner Realty. Edwards seeks return of association membership dues from the past four years.
Real estate brokers Mathew Prencipe and William Koshman of Prencipe Realty and Robert Cooke of R.H. Cooke & Associates are the plaintiffs in the Spokane suit, which seeks up to $8.7 million in damages and an injunction ordering the association to sell MLS memberships to agents whether or not they join the Realtor association.”
Ok, this post is really not about golf balls but they are part of the story. A recent case illustrates how courts are putting more obligations on buyers of residential property to understand the condition of the property notwithstanding the seller’s customary obligation to provide a disclosure form to the buyer.
This case involved a buyer who was purchasing a house on a golf course. I can already hear you thinking that anyone who buys a house on a golf course surely knows that one thing follows: errant golf balls. The seller did not consider errant golf balls being a problem and therefore did not disclose them in the property disclosure statement. Although they fell into the yard with some frequency during the summer, he did not remember that they caused damage to the house, his family or even their dog. When buyer first viewed the house, he noticed a ball in the street and even inquired as to “whether the balls fly here.