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FIDUCIARY DUTIES TO CLIENT: ADRE Commissioner’s Rules define a broker’s duties to a client (A.A.C. R4-28-1101): · Protect and promote the client’s interests · Disclose any known material defect existing in the property · Perform all duties expeditiously · Provide services that conform with the standards of practice and competence expected of a real estate professional · Exercise reasonable care in obtaining information for a client and accurately communicate it · Take reasonable steps to assist a client in confirming the accuracy of material information relevant to the transaction · Recommend a client seek appropriate counsel from insurance, legal, tax and accounting professionals (ADRE substantive policy statement 2005.13).
Commissioner’s Rules also detail what an agent may not do: · A licensee may not allow a controversy with another licensee to jeopardize, delay, or interfere with the initiation, processing or finalizing of the transaction on behalf of a client · A licensee shall not participate in a transaction without informing the parties in writing before they enter into an agreement that the licensee is acting as a principal, the buyer or seller is an immediate family member, the buyer or seller is employed by their employing broker or that the licensee has a financial interest in the transaction other than the receipt of compensation for real estate services · A licensee shall not accept compensation, rebates or other considerations for goods or services provided without prior written acknowledgement · A licensee shall not provide professional services outside their field of expertise · A licensee shall not permit occupancy of real property by a third party without prior written authorization · A licensee shall not deliver possession to a buyer prior to closing unless instructed to do so by the owner
FIELD OF EXPERTISE: SEE EXPERTISE
FILE REVIEW, NEW: 5/20/2021: Create spot for RSA and RSB stuff.:
FILE SET UP: LISTING FILE SET UP: Q: What are the steps to set up a listing file? When creating a new listing, do I need approval of the listing contract before I enter info into MLS? A: Basically it's a three step process: 1) Have all listing documents signed by seller, 2) Enter into MLS, 3) Create HomeSmart transaction file and upload all listing documents for broker review. Please feel free to reach out to our paperwork dept if you need any help along the way. FILE SET UP PROCESS: Q: It's my first transaction, I'm a buyer agent, I opened the escrow last Friday. Both agents are HomeSmart, do we have both access on the same page? A: 1) If both seller and buyer agents are with HomeSmart, then the listing agent is responsible for setting up the sale file, 2) Listing agent will add you as an "in-house" agent for the buyer. Once you are added, you will then have access to the file and will be able to upload documents to the file, 3) The next step in the process after that is that our paperwork dept will sort out the documents and forward to the broker dept for review, 4) That can take up to a day or two depending on the backlog of files, 5) You will receive an email once the file is reviewed, you can also upload documents as you receive them from your client. FILE REVIEW COMPLAINT FROM AGENT: The paperwork department has a condition for me to require an indication of where earnest money will be deposited on the contract. By both parties initialing each page and signing the contract, they have agreed to terms, whether or not they indicated where earnest money is to be deposited. By virtue of action of the buyer in depositing it with the escrow company (receipt attached), and seller not raising issue, this has been acceptable by both parties. It is not my place as an Agent, or our place as Brokers, to REQUIRE buyer and seller agree to something in addition to a contract, other than what has been accepted in writing and by action of both parties. Can you please remove this condition in our system? Thank you. Michael, it is our duty as brokers to exercise reasonable supervision over our agents, that includes a broker review of transaction documents to ensure there are no ambiguities, errors, missing signatures, etc. Boxes left unchecked or unmarked as to the disposition of the Earnest Money creates an ambiguity. ADRE has a real affinity for the handling of EM when they audit files and they do not like ambiguities when it comes to Earnest Money. I don't think we want to set a precedent by leaving that line blank in the Purchase Contract. You will need to make the correction as the reviewing broker requests. Please feel free to call with any questions. Jeff. I will ASK parties to indicate on contract page 1 or with an addendum, I cannot REQURE them to do so. Thank you for the detailed response. Michael Samora FILE REVIEW, INCOMPLETE FILE, NOTE TO AGENT: Dear Agent: Currently, we do not have the information needed to process your commission. We are missing one or more of the following: 1) Accurate Commission amounts including any commission splits. 2) Title/Escrow information which includes Name of Company, Title Officer's first and last name, Phone Number and E-mail address. (Note: Please be sure the e-mail address is correct to ensure delivery of the OTPC) 3) Referral Amounts (if applicable). Without this information, the Order to Pay Commission Instructions cannot be sent to title and will delay your commission check. Please update the file accordingly in RealSmart Agent (RSA). Once the information is updated, and the request to resend the OTPC has been completed, we will process the commission instructions to the Title/Escrow company. If you have any questions/concerns, please contact the closing department at 602.889.2125 or email commission@hsmove.com. Thank you! FILE REVIEW: From SherryxKettner: 9/11/2020: Olga- Please only write to this email with situations you are needing advice on or if you are in need of a Broker signature or if you need approval for advertising, etc. Please do not write to this email each time you upload a document to a file- We review paperwork in the order received. Thank you for understanding that there are other Agents who have paperwork waiting in the queue to be processed as well. Take care, Jeff. SHERRY REMINDER: We do not require initials on all pages of the MLS input sheet or the PC- OR THE SPDS PER KYLE... FINAL WALKTHROUGH ALSO SEE WALKTHROUGH AND UTILITIES AND PRECLOSING WALKTHROUGH FINAL WALKTHROUGH AND UTILITIES: Q: I am getting ready to have my first close of escrow on Monday. When should I do the walk-thru with my clients? Also, should my clients have the utilities put in their name effective Monday? A: Contract says repairs and receipts will be provided to buyer three days prior to COE, so that is a good time to schedule the final walk through (unless you make other arrangements with your buyer and the listing agent). You should definitely have your clients contact the utility companies to have them put into their name on the day of closing. The sellers should be calling the utilities as well to set up final billing. (Sellers should not have utilities turned off, only switched into buyers name!). FINAL WALKTHROUGH: Never complete the final walkthrough on behalf of your buyer! Friend, family member, inspector, do not sign off on a final walkthrough. Same thing on the Home Inspection/BINSR.
I represent the seller, the buyers agent/broker waived commission and have a buyer broker arrangement with buyer for flat fee. Buyer’s agent will not do anything but write contract. Buyer wants me to do final walk through with him. Thoughts? Hi xxxx,, “My thoughts are that this is not your client and the buyer's agent should do the walk through. The Buyer’s Agent is violating their fiduciary responsibility to their client. It does not matter what compensation is received, that does not affect representation. Even if they don’t have a signed Real Estate Agency Disclosure and Election form, they have implied consent if the Agent wrote the contract.” Tell the other agent to continue representing their client and do the final walkthrough. You could also remind them that they will be violating both the Code of Ethics and ADRE rules and regulations and could face possible sanctions for failing to put their clients best interests ahead of their own. Thank you FINAL WALKTHROUGH: Q: My buyer's live in California and will not be here for the final walkthrough. Can I do it for them? A: No, you can't do their final walkthrough for them. That is against HomeSmart policy. Have them ask a friend, family member, their home inspector, anyone but you. Q: What happens if they don't have anyone that can go? Do they waive the final walkthrough? A: Someone (not you) needs to do a final walkthrough on behalf of the buyer. Even if they need to pay someone to do it... It is the final opportunity to accept or reject the condition of the home. Q: A family member will be there for the final walkthrough. Do I have her sign the final walkthrough form? A: Yes. You should also have instructions, in writing from the buyer authorizing that this person will be performing the final walkthrough on their behalf. That way everything is documented. FINAL WALKTHROUGH: I have a buyer who is purchasing a model home which will be leased back to the builder - David Weekley Homes for several months. We did our inspections. Agreed upon repairs will not take place until the end of the lease. Should I do a walk through before close of escrow, or before the end of the lease, both? The buyers will not be here at close of escrow. Hi Mary. Definitely both, that would be one prior to ownership, the second prior to possession. We have a form for each on zipForms, the buyer pre-closing walkthrough and the move-in move-out condition checklist. FINANCING CONTINGENCY CLAUSE, GET LEGAL ADVICE! SEE SELLER CARRYBACK, ALSO SEE LOAN CONTINGENCY IMPORTANT: PLEASE ADVISE BUYER - IN WRITING - TO SEEK THE GUIDANCE OF AN ATTORNEY AND ACCOUNATANT BEFORE COMPLETING THIS TRANSACTION FIRE SPRINKLER SYSTEM: Q: Hello! Do you recommend a company who will inspect the fire sprinklers/system in a residential home? A: Hi Melissa, I believe you will contact your city fire department and/or fire marshall to have your system checked. Google your city’s website and find the links or phone numbers to contact them. Take care, JT.
FIRPTA MAY APPLY: SPECIAL LISTING CONDITION IN ARMLS FIRPTA: Most title co’s will withhold anyway until FIRPTA satisfied. FIRPTA, EXAMPLE: FILE #S2020126352, LizXRolfe, 12/2020 FIRPTA: Foreign sellers are subject to a 15% withholding (of the Gross Sales Price) unless the transaction is exempt from FIRPTA withholding. The most common exemption: The sales price is not more than $300K. The buyer or a family member must have plans to reside at the property for at least 50% of the number of days the property is used by any person during each of the first two twelve month periods after the sale. Other Exemptions that may apply include: 1) Seller provides a certificate showing they are not a foreign seller, or 2) Seller receives a withholding certificate prior to close of escrow from IRS excusing withholding or reducing withholding , or 3) Seller is a resident alien. NOTE: Seller is responsible for completing all IRS tax withholding forms and applications. Visit www.IRS.gov. FIRPTA, IRS FIRPTA, IRS & Withholding Exceptions WHAT IS FIRPTA: https://federaltitle.com/blog/what-is-firpta FIRPTA, MLS LANGUAGE: Q: What is the best way to handle/moderate buyer's anxiety in regards to FIRPTA. Is it a good idea to disclose FIRPTA on MLS listing, in private remarks? A: You could put something in the private remarks section of MLS such as: FIRPTA applies, Buyer must be an owner/occupant, Seller will not consider offers from investors. Buyer must agree to execute the FIRPTA Buyer Affidavit within 5 days of contract acceptance (or buyer must submit the signed FIRPTA Affidavit along with their offer). Call Listing Agent for details. This way you are addressing the FIRPTA question upfront, hopefully it will not be an issue going forward. FIRPTA: Language for purchase contract when representing buyer: “Seller agrees to pay any FIRPTA tax which may be due upon sale.” FIRPTA: Several areas in the listing agreement and pc already address FIRPTA, for example: (Updated 6/5/2021 with new ER). 1) The ER Listing Agreement has language regarding FIRPTA: (sect 8.4 line #194). 2) The MLS Residential Input Form has a box to check if FIRPTA may apply (SPECIAL LISTING CONDITONS). 3) There is also a question (#13) on the SPDS where the seller discloses FIRPTA. 4) Finally, there is a section in the PC which addresses FIRPTA: (4c, line #162). FIRPTA LANGUAGE (FIRPTA WILL APPLY UNLESS SELLER HAS AN EXEMPTION): MLS LANGUAGE: “Seller will sell to owner occupants only due to FIRPTA tax requirements.” “Buyer agrees to execute FIRPTA exemption document within __ days of contract acceptance.” I've seen this a few times recently, and would say it's fine. She just needs to be clear on MLS. I would put this in private remarks: “Buyer absolutely must be an owner/occupant, Seller will not consider offers from investors. Buyer must agree to execute the FIRPTA Buyer Affidavit. Call Listing Agent for details.” I also think that she really needs to have something in the contract that protects her Seller from this issue as well. Having the language in MLS is great, but it doesn't give the Seller a leg to stand on if the Buyer changes their mind during the escrow (which is one of the scenarios I've discussed with an agent recently). I would counter any offer and say that the Buyer affirms that they are purchasing the property as an owner occupant, and that they agree to complete any necessary documentation for title stating that is the case. At least something to that effect so that if the Buyer does have thoughts about not agreeing to be an owner occupant, the Seller has an angle for a cure notice. As far as paying a commission to an agent that has a full price offer for an investor, that won't be a problem. You're never obligated to pay a commission just because an agent brings a Buyer with a full price offer, so she doesn't need to worry about that. (And I think the language about Owner/Occupants only in the private remarks should squash any complaint from those agents since its put right there in front of them). I also wouldn't worry about the fair housing issue since an owner can freely discriminate against investors :) Investors are not a protected class. Q: Hi There HomeSmart Broker. I have a listing owned by a Canadian woman who may choose not to sell to an investor because of tax withholding which is a considerable amount to her. My question is twofold: 1. Can I put wording on the MLS plano stating “no investors”? If so, what would be the appropriate wording to use? 2. Could I be certain that I would not be liable to pay a co-broke commission in the event another agent presented a full price offer for an investor? Thanks, I believe she could state in the MLS that the property will only be sold to an owner who will occupy the property, due to FIRPTA regulations. Probably come up with some better language but something to that effect. Just my opinion....Jane. Adding to what Kyle stated...Seller could request the buyer sign the FIRPTA documents within 5 days (i.e.) of contract acceptance (or during inspection period). Get it done early in the transaction. Jane Q: Can I exclude investors from buying my listing due to FIRPTA and the Owner Occupant Exemption? Hi, there is a property my investor buyer is interested in within a development that I know for fact allows rentals. Seller is Canadian and they are saying owner occupancy is required. I know they are likely saying this due to FIRPTA. Can they legally do that when the community allows rentals? A: Hi X, One of the exemptions for a FIRPTA seller is when the buyer will live in the property (owner occupant). The seller can legally require the buyer to be an owner/occupant, and require them to sign documentation regarding that (the name of the document is the FIRPTA Affidavit). Investors are not a protected class, so the seller has the legal right to require that the buyer will be an owner occupant. FIRPTA, SIGN AFFIDVIT, OFFER OR COUNTER OFFER LANGUAGE: Buyer acknowledges and agrees that they will occupy the property as a full time owner/occupant. Buyer agrees to execute the attached FIRPTA Buyer Affidavit simultaneously along with this Counter-Offer. OR Buyer agrees to execute and deliver to title the FIRPTA Buyer Affidavit within 3 days of contract acceptance or this contract shall be immediately cancelled with a full refund of earnest money to the buyer. (Attachment-FIRPTA Addendum). FIRPTA: SELL FOR LESS THAN MARKET VALUE: We are selling our home in Scottsdale, AZ. We are not American citizens. We have consulted with a tax professional and are clearly aware of the FIRPTA guidelines and requirements. We are able and willing to sell our house. Knowing our FIRPTA options, we have chosen to sell our home for $300,000 or less, below current market value. All other terms and conditions of our listing agreement shall remain in effect. Have I covered my bases with this statement? Donna, that would be fine. I talked with another one of our brokers Kyle, and he thought it would also be a good idea to state in an email to your clients that we also strongly recommend that their attorney review this as well to ensure there are no other liabilities we may not be aware of (ie, selling the home for less than fair market value). Probably a very good idea. Jeff. FIRPTA: We have a listing that will be subject to FIRPTA. We've received an offer for $312,000, with the buyer also wanting to purchase some of the furniture on a separate bill of sale for $2500. Would it be possible to counter the purchase price to be $300,000 to avoid FIRPTA and raise the price of the furniture to 14,500? Would this be too risky- with the buyer potentially backing out of the furniture deal? Just wanted to see if you had any thoughts before presenting the offer to the sellers, Hi Sherry, other than the general mechanics of FIRPTA, I would not be comfortable giving advice regarding "manipulating" the numbers to make a transaction FIRPTA vs NON-FIRPTA (for example, selling the property below fair market value). My recommendation to you is to recommend to them to seek legal, tax and/or any other professional advice regarding that. FIRPTA: X, I have attached a FIRPTA flyer for your review, it outlines the general process. The ER listing agreement has language regarding FIRPTA, you may want to review that specifically with the seller(s): (sect 11g, line #181). You will also check the box on the MLS Residential Input Form that FIRPTA may apply (special listing conditions section). There is also a question (#13) on the SPDS where the seller discloses FIRPTA. Finally, there is a section in the pc which addresses FIRPTA: (4c, line #162). FIRPTA AND 1031 TAX EXCHANGE: SEE 1031, FIRPTA ISSUES MADE SIMPLE FIRST AM COST SHEET http://www.firstam.com/assets/title/az/documents/state/buyer-seller-realtor-information/closing-costs.pdf FIRST AM NET SHEET https://netsheet.firstam.com/Calculator/Estimate https://www.costsfirst.com/dashboard FIRST AMERICAN TITLE CLOSING COST CALCULATOR http://facc.firstam.com/ FIXTURES VS PERSONAL PROPERTY: http://content.moneyinstructor.com/1976/personalproperty.html FIXTURE: What is a fixture? 1) Method of Attachment 2) Agreement of the Parties 3) Intent of the Parties 4) Adaptability Was it custom made for this property? CASE STUDY: Q: Fast forward to now and the sellers would like to take another chandelier in the master bedroom. So the questions are: How do we determine the best way to remove the chandeliers? Are they capped? Do we have to have the buyer pick what they want to replace the chandelier? (At this point, it's probably easier to leave both chandeliers.) And, what to do about the TVs? A: As you noted, these things need to be defined in the purchase contract upfront so both parties know what to expect, ie, whether or not a fixture will stay with the property, whether or not it will be replaced, etc. In this case you should prepare an addendum outlining any changes from what they originally agreed to in the purchase contract. The chandelier could be replaced, there could be a credit so the buyer can replace it with their own, maybe the buyers want it to stay and not be removed...whatever sellers and buyers agree to. As for the TV's, if they were also included in the purchase contract, they will stay. If not, the contract states that "wall mounted TV brackets and hardware stay, but the TV's themselves do not."So you might need to clarify that on the addendum as well. FLAGSTAFF, NORTHERN ARIZONA MLS HERE ALSO SEE ARMLS PAGE FOR LINKS FLIPPER, RENOVATION, ER LANGUAGE WHEN LISTING AGENT: “Seller states that permits were/were not required for renovation work. If requested by Buyer, Seller agrees to provide Buyer with copies of all permits for all renovation work completed during Sellers ownership of property. Seller states that costs of renovation were greater than/less than $1000.00.”
FLIPPER, WHEN REPRESENT BUYER: “Seller agrees to provide Buyer copies of all permit(s) for renovation work completed during sellers ownership of property. All permits to be provided during the inspection period along with a list of participating Contractors/Vendors.”
FLIP, MUST O/A OR FLIPPER USE LICENSED CONTRACTORS? Q: Do you guys know what the statute is that says an owner/agent that is not a licensed contractor, must used licensed people to perform work on a flip? A: https://www.aaronline.com/2018/02/26/realtor-owned-fix-and-flips/ The statute isn't specific to owner/agent, rather anyone acting as their own GC overseeing a remodel that they essentially plan to flip. Owner/agent held to higher standard. (Look for second link)...
FLIPPER LANGUAGE WHEN REPRESENT BUYER: “Contractors lien protection shall be included in the title commitment and policy with any and all premiums paid by seller.” THIS DOES NOT EXIST-SEE TITLE INSURANCE
FLOATING CLOSE: The state of Arizona does not recognize or allow a floating close. Example: “For any reason should lender need additional time to secure loan documents for a successful close of escrow, Buyer and Seller agree to adjust the close of escrow date accordingly but no longer than 15 calendar days.”
FORECLOSE, FORECLOSE OR SUE…? Mortgage lender generally has the right to either foreclose or sue, Chris Combs, Arizona Republic Article, November 15, 2020; https://combslawgroup.com/mortgage-lender-generally-has-the-right-to-either-foreclose-or-sue/
FORECLOSURE PROCESS: Q: I got a call last night from a man who said his wife filed divorce and left him with custody of their 3 little kids, she was not making the payments on the house even though he gave her the money to make the payments, he got notice of auction on 10/2/18 and the auction is scheduled 1/3/19 on court steps. He owes about $108,000 plus attorneys fees of about $3000, the home is worth about $189,000 more or less depending on condition. He wants me to list and sell it. However, it is scheduled for Trustee's sale. I'm attaching a copy of the notice. Do you know how I can help him - he does not have the money to catch up payments, can he list it and sell and avoid the auction? Let me know what you think. Law firm is Tiffany & Bosco - owner said Leonard McDonald is the attorney. I just want what is best for this man and his kids. Any suggestions? Does anyone you know help people in his situation? A: XYZ, The homeowner should reach out to his lender and explain to them what you have said here in your email. He can try to convince them to delay the auction and allow him to sell the home at which time the lender will be paid in full. Please confirm the payoff numbers to make sure he is not upside down, otherwise it will be a short sale. You could take the listing now, if you get a contract the lender would be paid in full at COE. The seller should still try to get a delay in the auction to allow the home to sell. Otherwise, they will sell the home at auction, and he will be entitled to any "proceeds" once the creditors are paid in full. FORECLOSURE STRIPPING: Foreclosure Stripping is the process in which the owners of a foreclosed property will remove fixtures and fittings from the property in an attempt to salvage some of their investment. Malicious foreclosure stripping is done by home owners who render damage throughout the property to significantly decrease its value and cause resale to be almost impossible. Foreclosure stripping has been a growing trend in recent years [1] and has reached an all-time high in 2009 because of the economic downturn. https://en.wikipedia.org/wiki/Foreclosure_Stripping FORECLOSURE: POSTPONE, PROOF OF POSTPONEMENT: Seller agrees to provide written documentation that the lender agrees to postpone the foreclosure sale to allow this transaction to close. FOREIGNER: Q; Would you be able to guide me on who to speak to, and how to go about helping to make a purchase for a family that is still working on residency…? A: Hi X, Not sure of your question...You can assist a buyer whether they are a US citizen or a foreigner as long as they qualify financially to purchase the home. That means having the cash to close the transaction or being pre-qualified through a mortgage company for a loan. Otherwise, I would suggest that you reach out to an immigration attorney or someone who has experience in that area, or US Citizenship and Immigration Services. Here is a link to their website: https://www.uscis.gov/ FOR SALE BY OWNER: See FSBO
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