I’m getting an increasing number of calls to the VAR Legal Hotline about the legal and ethical issues REALTORS® face in increasingly-common short sales. In this brand new 29 minute webcast, I address some of the most frequently asked questions such as:

1. Is it legal or ethical to require the seller to state that the home is a short sale listing in the MLS?
2. What happens when a ratified contract with a third party approval clause fails because the third party rejects the offer?
3. What are my obligations when the bank asks me to reduce my commission on a short sale?
4. Why aren’t lenders be required to pre-approve the selling price before short sale listings are entered into the MLS?
5. Are “conditional commissions” permitted in the MLS?

One of the most controversial Standards of Practice to come from NAR in long time, would have to be the new Standard of Practice 12-12, which became effective January 1, 2008.  Just to refresh your memory, Article 12 is known as the “truth in advertising” article.  We have come a long way from the published newspaper ad.  Years ago, that was pretty much all that was available to REALTORS to spread the word about their new listing.  Now, advertising can be instantaneous thanks to the internet.  In addition to company web-sites, many agents have their own personal website.  Some of the URLs and domain names used can be either dull or attention getters, and sometimes down right misleading.  The new Standard of Practice 12-12 states:  REALTORS shall not:  (1) use URLs or domain names that present less than a true picture, or (2) register URLs or domain names which, if used, would present less than a true picture. 

The new NAR Case Interpretation 12-20 address this new Standard of Practice.  So, here it is–you be the judge–REALTOR A, a residential broker in a major metropolitan city, spent several weeks each year in his cabin in the north woods where he planned to retire one day.  Even while at home in the city, REALTOR A stayed abreast of local news, events, and especially the local real estate market by subscribing to the print and on-line editions of the local newspaper.  He also bookmarked a number of north woods brokers’ websites to stay current with the market and to watch for potential investment opportunities.

One evening while surfing the internet, REALTOR A came across a URL he was unfamiliar with–northwoodsandlakesmls.com.  REALTOR A was pleased to see the MLS serving the area where he vacationed for so many years had created a website accessible to the public.  Clicking on the link, he was surprised to find that the website connected with REALTOR Z’s company website, not an MLS website.  Having had prior dealings with REALTOR Z, REALTOR A spent time carefully scrutinizing the site.  He noted, among other things, that the name of REALTOR Z’s firm did not include the letters MLS.  REALTOR A sent a letter to the association’s EO asking whether REALTOR Z had been authorized to use the name northwoodsandlakesmls.com and whether it presented a true picture as required by Article 12 of the Code of Ethics.  REALTOR Z filed a complaint alleging that when he clicked on what appeared to be a real estate-related URL that included the letteres “MLS” he expected to be connected with a website operated with a multile listing service.  He stated he felt that REALTOR Z’s URL was deceptive and did not meet the true picture test.

At the hearing, REALTOR Z defended his URL on a number of grounds including the fact that he was a participant in good standing in the MLS and he was authroized to display other participants’ listings  on his website under MLS rules.  “If I used `MLS’ in the name of my firm, I could see how that might be perceived as something less than a true picture,” he argued, “but by simply  using MLS in my URL I am telling consumers that they can get MLS-provided information about properties in the north woods from me.  What could be truer than that?”

How do you think the hearing panel ruled?  Do you think REALTOR Z  was found in violation of Article 12?  What do you think of the new Standard of Practice?   

Here’s the agenda for tomorrow’s PPAG meeting at VAR’s Headquarters. For those who don’t know, the PPAG committee helps to set the VAR’s legislative agenda for the Association. I’m looking forward to the discussion about convicted felons. If anyone ever has any questions, please let me know. A lot happens in these meetings that directly affect Realtors’ businesses; it’s incumbent on all Realtors to pay attention to what happens here.

1. Call to Order – Chair Suzy Stone
2. Approval of Minutes
3. 2008 General Assembly Up-Date

a. 2008 VAR Legislative Agenda

b. Impact Fee bill

4. 2008 Voting Record

a. Staff Overview

b. Staff Recommendations

5. 2009 VAR Legislative Agenda

a. Timeline

b. Issues

i. License prohibition of convicted felons

ii. Recordation tax / grantor tax assessments – stated consideration

6. 2008 Virginia Housing Commission Work Schedule

photo credit: kellypuffs

Did you know?  In Virginia, out of the estimated 7.6 million residents, nearly one million speak a language other than English – about 13 percent of the population.

With markets in Virginia changing rapidly to include a multitude of nationalities, REALTORS® sometimes clamber to minimize the risk they take when working with a non-English speaking client while maximizing their ability to get the listing, make the sale, and nurture their relationships with clients.  With the introduction of a new benefit for VAR members, bridging a language barrier is a professional advantage that Virginia REALTORS® have that competitors don’t. 

Interpreters were not always readily available or affordable, but VAR members have a new tool to help them capitalize on the growing international market.  VAR has recently partnered with a Virginia-based company, LLE-Language Services, to provide discounted rates to Virginia REALTORS® for telephonic interpretation and document translation services in over 150 languages.  LLE has been in business since 1979 and is recognized nationally as a leading language services provider to government, business and non-profit organizations.  Their accurate and reliable telephone and face-to-face interpretation as well as document and e-mail translations are provided on a pay-as-you-go basis, making it that much easier for Virginia REALTORS® to accommodate a wider array of clients and customers. Now, VAR members can access LLE’s world-class services at a negotiated low price.

Communication breakdowns cost hundreds of thousands of dollars each year. And it’s not just the language that gets lost. The rapport, loyalty, and the productive business relationship are hard to create and maintain when languages separate the REALTOR® from the client.

Virginia REALTOR® Jo Anne Johnson, managing broker at Westgate Realty Group, Inc. in Falls Church, says most clients who do not speak English are uncomfortable trusting English-speaking REALTORS® – especially with financial information. Agents can’t figure out what houses to show clients if they can’t find out what the clients can and cannot afford to buy.

Having someone involved in a transaction who does speak both English and the clients’ language is handy, but as Sarah Stelmok, an associate broker with Century 21 New Millennium in Fredericksburg, explains, that’s not always the solution, either. Her Spanish-speaking buyers were doing great throughout most of a transaction with the aid of a Spanish-speaking buyer’s agent, but when it came down to presenting the HOA documents, the buyer’s agent wasn’t available, leaving Sarah’s team scrambling to try to find someone fluent in English and Spanish to help the buyers over the hump.

The competition for clients is fierce. Finding your edge is your key to building business, and with a growing segment of the home-buying public speaking another language these days, figuring out how to break that language barrier might not be a bad way to spend a strategy session or two, or at least to minimize risk and keep your non-English speaking client transactions on track.

Information about VAR’s new member service partner, LLE, can be found at www.VARealtor.com/LLE.

VAR Standard Forms are expertly crafted and time-tested to best serve REALTOR® needs throughout the Commonwealth. They are protection for your business. Beginning with this issue, we’ve asked our special counsel Lem Marshall to regularly take a close-up look at specific portions of VAR’s Standard Forms.

Acceptance provisions in purchase agreements can cause more angst than warranted, so it’s worth a moment to remind ourselves of a few important things. When a buyer wants to goad a seller to prompt action on an offer, he will sometimes include a provision such as that found in the VAR Form 600 purchase contract:

“This…offer shall remain in effect unless earlier withdrawn until ______. If not accepted by such time, this offer shall be null and void.” The first point to note is that this provision does not obligate the offeror (typically, the buyer) to keep the offer open until the stated date and time. Any offer may be withdrawn at any time until it is accepted. Second, if the stated date and time arrive with no acceptance having occurred, the offeree has nothing to accept, and the offeror who wants to keep the deal open will need to reauthorize the offer, usually by changing the effective date and time or re-executing the contract.

In some parts of the state it’s becoming common for buyers to add, after acceptance language like that set out above, the words “at the option of the buyer.” I guess this means that the offer dies at a certain time and date if the buyer decides it does. But how does the buyer manifest this intent? How does seller know if the offer is still there to accept? Nothing but confusion and ambiguity can arise from such language, and I hope brokers will educate their agents about the danger of such provisions, and that listing agents will be alert to such silliness. Acceptance provisions can be useful, but we need to remember that once the time comes and goes without acceptance, complications can arise. Unless you’re sure about how to use them, it might be best to leave the offer open.

WE’RE TAKING ON simple, routine, non-controversial topics this time, involving the Attorney General, the Real Estate and Appraiser boards, foreclosures, fraud – things like that.Support the troops

Q. Have you heard from the Attorney General lately?

A. I got a nice call a couple of weeks ago, thanks. Actually, an attorney from the Coast Guard called and asked me to remind all REALTORS® that regardless of what your landlord’s lease provides, a landlord subject to the Residential Landlord Tenant Act may not charge members of the military for early termination of their leases, if termination is done in accordance with the Act. Mitigation is no longer permitted, even if the lease so provides. (The Act was amended a year or two ago, but old leases may still be in effect.) According to the Coast Guard, the AG is watching Virginia property managers and landlords closely, so remember that whatever your lease says, mitigation is no longer permitted, and you may not charge active duty tenants for early termination. Please be sure that all new leases are consistent with the Act as amended.

No licensed agent? no open house

Q. May my unlicensed assistant conduct open houses if she merely permits access and hands out general information about the property and does not answer any questions about the house or give advice to the visitors?

A. There are two theories about how unlicensed assistants can legally do open houses in Virginia. Unfortunately, neither works. The Real Estate Board (REB) has long considered holding open houses to be the practice of real estate, and thus appropriate only for licensees, regardless of whatever is said or done at the open house. When the subject was raised again recently, I asked REB to revisit the issue and let us know whether its position had changed. The board confirmed its long-standing position that only licensees may hold houses open. I realize there has been quite a bit of information disseminated lately to the opposite effect, in articles, on blogs, in continuing education courses and elsewhere. In many cases, this information deals with the law in other states where the law may be different. In Virginia, however, at least in the opinion of the REB, this practice requires a license.

Pay up…dead or alive (or retired)

Q. An agent left my firm with several deals pending, but was not affiliated with another firm by the time the deals closed. If the agent’s license is inactive, may I legally pay him the commission he is owed on these deals as they close? If he has affiliated with a new firm, must I pay the commission to his new broker?

A. There is a great deal of confusion on this matter, so let’s clear it up once and for all. The only relevant issue is whether the agent was actively licensed at the time he performed the act for which the commission is due (obtaining the listing or buyer agency relationship, obtaining a purchase contract or lease, or whatever it is that gives rise to the entitlement to a commission). His license status at the time of payment is irrelevant. So if, for example, he obtains a listing, and it goes under contract while he is at your firm, you may pay him at closing whatever his status. The verity of this can best be illustrated with the following example. Suppose a commercial agent obtains a ten-year lease with a ten-year renewal, on which the firm is to be paid its commission monthly as rent is received from the tenant. Can we really require the agent to remain actively licensed for the next 20 years to receive his monthly commission split? What if he died during the term of the lease? Obviously, we can’t outlaw retirement or death for this fellow, but may pay him, or his estate, or his designee, whatever his license status at the time of payment. It is license status at the time of his actions giving rise to the entitlement that matters, not what he decides to do thereafter. He can go to Tahiti and paint the natives while basking like a lizard on a rock, or he can keep working. You can pay him either way. By the way, if he joins another firm, you pay him, not his new broker. Your debt is to him, and the new firm has no entitlement to any of his fee. The broker of the firm receiving the commission on the deal is the broker the REB regulations are speaking of when they require all fees to be received through the firm’s broker.

An exemption…with exception

Q. Do foreclosing lenders have to provide disclosure statements, Property owners Association (PoA) packets or condominium resale certificates to buyers who buy at the foreclosure?

A. No. The relevant statutes exempt foreclosing lenders and their trustees from these requirements. As to REO, the lender is likewise exempt from the requirements of the Residential Property Disclosure Act, and thus does not have to provide a disclosure statement. Lenders selling REO must provide the POA packet and the condominium resale certificate, but buyers may waive the right to receive the condominium resale certificate, although they may not waive the right to receive the POA packet. Got that? I knew you would. Be very careful about language in REO contracts attempting to affect a waiver as to these documents.

These provisions often say something like “to the fullest extent allowed by law” buyer waives the right to receive the information, but Virginia law is clear that contract waiver language is unenforceable against buyers of POA property. The Condominium Act has no such prohibition against waiver, so I assume the right to receive the resale certificate can be waived by contract.