risk_archive by zhangyun

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     Tucson Association of REALTORS®
                                   Risk Reduction Tips

A Little Leak, A Lot of Trouble                                Page 3
ADRE Advertising Complaints on the Rise                        Page 4
Ad Writing Wisdom                                              Page 5
Answer All Questions Carefully                                 Page 6
Antitrust New Year’s Resolutions                               Page 7
Appraisal Fraud                                                Page 8
Appraisals-What’s Your Practice?                               Page 9
Are You Checking Your Listings?                                Page 10
A Slap in the Face… or Cure Notice Opportunity?                Page 11
Be Safe With Keys                                              Page 12
Beware! Secret Shoppers on the Prowl                           Page 13
Beware When You Self Server Your License                       Page 14
Business Cards - Innocent Incentive or RESPA violation?        Page 15
Copycat! Beware Copyright!                                     Page 16
Debt Relief                                                    Page 17
Deemed Reliable but not Guaranteed?                            Page 18
Did you read the New Home Builder contract?                    Page 19
Dog Ate My Homework                                            Page 20
Don’t Be a Victim – Practice Safe Showings                     Page 21
Don’t Pooh-Pooh a Drain Inspection                             Page 22
Duties to REALTORS®                                            Page 23
Email Etiquette                                                Page 24
Email Protections                                              Page 25
Fair Advertising Practices                                     Page 26
Fair Housing: 5 Keys to Reducing Liability                     Page 27
Fair Housing Red Flags                                         Page 28
Garage Door Repairs                                            Page 29
Imputed Knowledge Can Be Dangerous                             Page 30
Importance of 5 year C.L.U.E Report                            Page 31
Innocent Conversation or Boycotting?                           Page 32
Is Your Builder Liening on You?                                Page 33
Is Your Builder Liening on You? Part II: Buyer’s Perspective   Page 34
Is Your Vacant Listing Covered?                                Page 35
Keybox Reminders                                               Page 36
Load It & Lock It                                              Page 37
Loan & Investment Fraud                                        Page 38
Moving Scam Alert!                                             Page 39
No LSR… No Loan Terms!                                         Page 40
Owner/Agent Disclosure                                              Page 41
Purchase Contract with Financing Contingency Requires LSR           Page 42
RADON- The Invisible Risk                                           Page 43
Read Before Signing…the Public Report                               Page 45
Risk Reduction with Professional Designations                       Page 46
Say it Fairly Quiz                                                  Page 47
Seller Held Open House Using Company Signs…What’s In Your Policy?   Page 48
Septic or Alternative Waster Water Systems: New Regulations         Page 49
Short Sale Caution                                                  Page 50
Sign, Sign, Everybody Sign                                          Page 51
Six or More Requires Public Report!                                 Page 52
Someone Stole My Identity! What Now?                                Page 53
Steal My Identity? No Way! Think Again!                             Page 54
Stop Losing Your Signs!                                             Page 55
Test Your "BINSR" IQ!                                               Page 56
Too Cool                                                            Page 57
To Survey or Not to Survey?                                         Page 58
Unintentional Fixtures                                              Page 59
Unknown Property Taxes                                              Page 60
Vacant Home Issues                                                  Page 61
What’s In Your Ad?                                                  Page 62
What’s Your Answer When the Judge Asks…                             Page 63
When “None” means “Something!”                                      Page 64
You Be the Judge: Racial Steering?                                  Page 65
When Over Communication is a Good Thing!                            Page 66
Working With Investors? Watch What You Promise!                     Page 67




Updated: June 10, 2008




                                                                              2
A Little Leak, A Lot of Trouble
Vacant home listings present many challenges and risks for real estate agents. One risk, among the
events that has one of the greatest potential dollar amount of damage is a water leak inside the
home. What might be done to reduce that risk?


The Scenario:
The home has been vacant for weeks, there have only been sporadic showings, and you have just
done your periodic check of the property, locked up and went on your way. Then, minutes later, by
pure chance, one of the old, cracked water supply hoses on the clothes washer simply splits open and
starts leaking water at full pressure. The water leaks for days, soaking the flooring and walls
throughout most of the house, until finally it builds up enough to start running out from under the
garage door. Finally, a neighbor notices and calls the owner – who then calls you.


The Risk:
The amount of damage done is unbelievable. This initial estimate is $25,000 and there is some
question about whether the homeowners’ insurance is going to cover this event. Not only is there
water damage, but there is now a very real potential for a mold problem as well.


What To Do:
Consider advising your clients to turn off the water supply to the house. Where the water supply
comes from underground (from the meter or the well), there should be a cutoff valve located such that
the supply to the house can be turned off, while allowing water to go to the irrigation system.


On some houses, this will be a simple matter – while on others, they may have to hire a plumber to
make some modifications. Whatever this expense may be, it is well worth the reduction in risk of
major water damage.


Keep in mind that the toilets will not be functional at this point. So, signs should be placed on each
toilet advising visitors to not use them as the water supply has been turned off.


Periodically (perhaps monthly), the water supply should be turned back on for the few minutes it will
take to run water in all of the plumbing fixtures such as sinks (don’t forget the one in the garage), tubs,
showers and toilets. This will ensure that the drain traps are kept full of water which prevents sewer
gases from coming back into the house.




                                                                                                         3
ADRE Advertising Complaints on the Rise!
ADRE is interested in obtaining compliance, not in initiating discipline. Take an extra few minutes to
review your advertisements to ensure they meet the requirements of the law. If you have any
questions about the legality of your advertising, contact your broker or ADRE. If you have questions
about the legality of your advertising on the web, contact Tom Adams at 602-468-1414. Be sure to
have your link, ad copy or URL handy when you call. The Commissioner's Rules, A.A.C. R4-28-502, set
forth the rules for all advertising.




                                                                                                         4
Ad Writing Wisdom!
The fair housing act makes it illegal to advertise any preference or limitation, or encourage
discrimination due to Race, Color, Religion, Sex, National Origin, Handicap or Familial Status. The
English language is extensive and so is imagination. Anyone can write captive and persuasive
ad's about a property. Just avoid alluding to the kinds of people who might live in a particular home,
because that is where the misconception sneaks in.


In other words, mention number of bedrooms not number of people; in an ad specify "no drinking" and
"no smoking," not non-drinkers and non-smokers. Even a phrase as simple as "handyman's
dream" could, in the wrong context, be construed as indicating preference for a single male. The
solution? Stick to "fixer-upper."


Emphasize amenities, not potential participants: tennis courts, not tennis players; paths, not bicyclists.


Emphasizing a property's proximity to certain landmarks also creates some potential problems. A
home advertised near a "church," or "synagogue," or "temple," could be interpreted as an attempt to
steer a certain religious group to or away from the area. Stick with the geographical descriptions:
"central", "northwest".


After writing an ad, re-read it to see if any word could be translated as a discrimination against a
particular protected class. Consider avoiding the usage of certain words like: Adult, Single, Bachelor,
Couple, Family, Executive, Exclusive, Integrated, Physically Fit, Active Adult, Empty Nester, etc.


Get a second opinion to protect yourself. Have your broker approve the wording.


If the ad seems to be in a gray area ask yourself if you want to take the risk? Remember, just because
someone prints it does not make it legal!!!




                                                                                                          5
Answer All Questions Carefully
As a real estate practitioner, it is especially important to answer all questions carefully. Don’t be
tempted to exaggerate or fabricate answers, information, or property descriptions in pursuit of an
income.


The Scenario:
Someone – a prospect, a customer, or a client – asks you a question related to real estate or about a
particular property or transaction. Naturally, you would always like to be able to say whatever it will
take to get that person to ultimately move in a direction that causes a commission check to be
deposited into your bank account. Nothing is wrong with that. So, how best to do it? Tell them what
they want to hear? Tell them only the good parts of the information you have? Make up something
that sounds favorable, even if you don’t know whether it’s true or not? Exaggerate or “puff” the
information to make it more favorable? Or maybe just tell a lie? Well, hopefully your answers to these
questions are obvious and fall on the side of accuracy and truth.


The Risk:
The risk associated with doing anything short of providing correct, complete, and truthful information
can range from simply doing damage to your reputation, or all the way to civil liability for damages. If
the other party – the prospect, customer, or client acts upon the information you provide to their
detriment and they suffer a loss as a result, you may be held accountable and liable. Remember too
that telling only a portion of the truth is a form a lying.


What To Do:
Provide a prompt answer to all inquiries with all of the factual information you have. When you don’t
have some or all of the information necessary to satisfy the question being asked, simply say so and
promise to try and obtain it. If you don’t think you are supposed to provide a complete, truthful answer
because doing so may jeopardize your fiduciary relationship with your client, then simply state that
fact and politely refuse to provide an answer. Do not alternatively fabricate a false answer instead of
simply telling the truth.


As in all things, complete honesty is the best policy. The truth, the whole truth, and nothing but the
truth is really the only way to go in this business. And, the truth is always a lot easier to remember
than a lie.




                                                                                                           6
Antitrust New Year's Resolutions
1. Perform an informal antitrust audit by discussing the issue with your agents. Ask relevant questions
of your firm's managers and agents to learn their level of sophistication and awareness of the
fundamentals of antitrust.
2. Give a written "pop quiz" on antitrust followed immediately with a group or individual discussion with
the participants to discuss the errors they made on the test.




                                                                                                       7
Appraisal Fraud
Be aware that appraisers have felt pressure from lenders, mortgage brokers and real estate agents to
overstate property values to close a sale. Do not participate in schemes to inflate the sales price to
"make a deal." Lawsuits have been brought against mortgage brokers paying appraisers to come in
higher. The inflation of home prices may be helping to push a real estate bubble. Most top lenders are
introducing stricter guidelines and requiring the use of a neutral third party (such as Land Safe) to
assure a "true value." Remember to keep it ethical. Avoid exaggeration or concealment of pertinent
facts. Limit your comment on the appraisal if it is outside the scope of your competency. Article 1,
Article 2, and Article 11.




                                                                                                         8
Appraisals-What’s Your Practice?

The Scenario:
You represented the Buyer on a successfully closed transaction. A few weeks later, they contact you
and are very angry claiming you failed to disclose two important facts from their appraisal: the
proposed zoning change on the property by Pima County, and the considerable difference in the stated
square footage of the MLS listing as compared to the actual square footage on their appraisal.

The square footage of the home as indicated on the MLS Listing was 2100 sq. ft. When the Buyer’s
contractor and architect began their preliminary inspection for the remodel, they discovered the home
to be considerably smaller. In checking the appraisal, the client noted that the square footage of the
home to be only 1800 sq. ft. The client is now holding you accountable.


The Risk:
As stated above, these facts represent only two possible items on an appraisal that may be of material
importance to the Buyer of a property. What is your practice or that of your company when it comes to
reviewing the appraisal? Do you review the appraisal? Do you and your client review the appraisal
during the Inspection Period? Do you and your client review the appraisal at all?

Proposed zoning changes may severely diminish your client’s ability to add on to the property as
planned. They may no longer be able to perform the “remodel” they wanted, and as a result may hold
you responsible.

If most agents and buyers allow the lender to order the appraisal at their leisure, and only see a copy
long after the Inspection Period is over, if at all, the buyers may have little recourse at a later date.
This may be especially true if it is an item that does not prohibit the buyer from obtaining loan
approval in the first place.


What to Do?:
Brokers and agents alike should be reminded that the appraisal is not the only source for determining
square footage and zoning. Section 6, Due Diligence 6a of the Purchase Contract directs the buyer at
their expense, during the inspection period, to make inquiries concerning suitability of the premises
and investigate applicable zoning codes. Further, 6b in bold print states any reference to square
footage is approximate and if a material matter to the buyer should be investigated during the
inspection period.

Appraisals ordered by a lender are performed for acceptability and benefit to the lender. If the
buyer/borrower wants a copy of the appraisal they should contact the lender, prior to the purchase, to
verify that the lender will release a copy of the appraisal to them before close of escrow. It is
important to note that not all lenders will do so.




                                                                                                            9
Are you checking your listings?

The Scenario:
Your buyers have finally selected the home they want. An offer is made, negotiated and accepted.
They couldn’t be happier with their choice. And you are very happy too - because the co-op amount
offered in the MLS is unusually high for this type of property – double what you would have you would
have expected. Incredible – who knows what comes next in this market with hundreds of listings out
there offering high co-op commissions - so you don’t really question it.

Contingencies are satisfied and everything moves forward to a couple of days before signing
documents and close of escrow. Estimated HUD-1 forms are sent to the listing broker and the selling
broker showing the unusually high coop commission scheduled to be disbursed to the selling broker –
but no commission payable to the listing broker.

The listing agent sees that a simple but horrible mistake must have been made and runs to their
broker for help. The broker sends a commission instruction to the escrow officer “correcting” the
mistake and specifying a 50/50 split of the commission.

The escrow officer had already received a commission instruction from the buyers’ broker specifying
the amount that had been advertised in the MLS listing.


The Risk:
The listing agent or their clerk made an honest mistake when entering the listing information – the
intended co-op amount - into the MLS system. Instead of entering one half of the total commission to
be paid by the seller, the entire amount was entered. The mistake was never noticed. The listing
agent feels that they shouldn’t be penalized so harshly for a simple clerical error.

The buyers’ agent rightfully feels that they are entitled to the amount promised in the MLS. After all,
the Multiple Listing Service (MLS) Rules and Regulations, Section 6 clearly states:

“The Listing Broker shall specify, on each listing filed with the Service, the compensation offered to
other Service Participants for their services in the sale of each listing”, “Such offers are unconditional
except that entitlement to compensation is determined by the cooperating broker’s performance as
the procuring cause of the sale (or lease).”


The escrow company has conflicting instructions and decides to delay payment of the commission to
anyone until an agreement is reached by the sellers’ broker and the buyers’ broker.

What To Do:
It is the responsibility of the listing agent, to carefully proofread and double check all information
entered on a new listing.

As a buyers’ agent, when something seems to be odd or “to good to be true” with the information/co-
op presented on MLS, it might save a lot of aggravation to make a quick phone call to clarify or
confirm the information with the listing agent.

In this example, the parties will either have to negotiate an agreement between them or go to
arbitration and/or other legal remedies that may prove time and energy consuming and expensive.




                                                                                                         10
A Slap in the Face... or Cure Notice Opportunity?
So, you and the buyer are at the walk-through and sure enough, your suspicions are correct! The seller
has not completed the repairs and the buyer is furious and wants the house! With repairs! Okay, what
happens if one of the parties fails to fulfill a promise made in the Residential Resale Purchase
Contract?


Timing is critical in these issues, knowing what the buyer is to expect, and when, are important factors
in the equation when a Seller is obligated to complete repairs. When would a buyer want to know that
the repairs have been completed? Are we advising our buyers what the contract stipulates?


Let’s say the seller fails to deliver paid receipts for repairs 3 days prior to COE date. The buyer needs
to issue a Cure Notice to the seller.


If the buyer is focused on buying the house, the buyer may be reluctant to issue such a notice,
believing the seller may take this as a slap in the face. But, without the Cure Notice issued, when can
the non-breaching party move toward a cancellation of the contract, or seek other remedies they may
have in law or equity? (Lines 275-276 of the contract).


The buyer does not have to cancel if the seller doesn’t “cure” the potential breach. But the buyer
cannot move forward with any other remedy either.




                                                                                                        11
Be Safe With Keys

You may recall, with many of us “old-timers” kicking and screaming along the way, the Tucson
Association of REALTORS® effected a gradual transition from the older, electromechanical style of key
safe to the latest in design, the GE Supra iBox key safe during November and December of 2006. As a
friendly reminder, you may find it helpful to re-visit the complete information about the iBox product by
accessing www.supraekey.com.

As with many other advances in technology, we have learned that these are far superior products with
many new advantages and features. The iBox has two lithium batteries rated for six years of service
life. And, there is a low battery level warning. There is a no-contact, infrared communication range of
up to three feet between the Supra key and the iBox – no more hassles with the key fitting into the key
safe. The new larger key compartment comfortably stores up to three keys. Electronic notes, flyers
and business cards can be stored in the iBox for showing agents to see. Leaving an alarm code or
“beware of big dog in basement” can ensure a smooth showing and result in higher client/seller
satisfaction.

The iBox is compatible with a large variety of PDAs and smartphones as well as Supra’s entry level
DisplayKEY.

The new system tracks buyer’s agents access to the iBox and property showings. This information is
easily accessed by logging onto the “Kim” system:
https://www2.suprakim.com/aeiiiweb/login.asp?LOGINTYPE=LOGOUT&MLS=90&MLSPOD=2.90.

Another significant improvement in practical use is that the iBox can be programmed for restricted
access times in a number of useful ways. Virtually any access time range can be set to accommodate
a property owner’s schedule and desires. For example, a homeowner may decide they only want their
door key to be accessible between the hours of 9:00 am until 6:00 pm – or literally whatever hours
work best for them. They also have the option of different settings for Saturdays and/or Sundays.
Note that the iBox comes from the factory with default settings of access from 7:00 am until 10:00
pm.

These time restriction settings can be accomplished by the agent if they are using an EKey – but not if
using the DisplayKey. DisplayKey users will have to bring the iBox into the MLS office for setting
changes to be made by TAR personnel. However, a new version of the DisplayKey, called the
ActiveKey, is scheduled for release next year that will have a larger display, more functionality, and not
require a cradle for updating.

Listing agents may want to consider asking the property owner what access times and schedule they
want programmed into the iBox to accommodate any changes that may be desired over the course of
the listing. Consideration may also be given to mirroring that schedule in the “Showing Instructions”
and/or the “Agent Only Remarks” on the MLS listing.

To minimize potential risk, agents may want to consider keeping a backup copy of the door key(s) in
their transaction file, just in case the ones from the iBox are accidentally carried off by a distracted
buyers’ agent. New technology can’t always prevent human oversight or forgetfulness.

And, one final suggestion, it is an extremely good practice to remove the iBox at the earliest possible
time after it is no longer needed and absolutely no later than immediately after the transaction has
“closed” and ownership has transferred.




                                                                                                           12
Beware! Secret Shoppers on the Prowl
It's a known fact. The U.S. Department of Justice utilizes secret shoppers throughout the country to
pose as buyers and sellers to track what agents are saying and doing. They may contact you by phone
or by internet. They may meet with you personally to shop for a house or claim to own property they
want you to list. They keep notes! They are looking specifically for antitrust violations to prosecute. Are
you and your agents prepared? Does your firm have a written policy advocating against any antitrust
policy by an employee or associate?




                                                                                                        13
Beware When You Self-Sever Your License!
Real estate agents may elect to sever their license from their employing broker online with the Arizona
Department of Real Estate. Here are the appropriate steps to sever your license online from your
current broker:
1. Notify your employing broker of your intent to sever.
2. Review your independent contractor agreement and fulfill all its obligations.
3. Supply all applicable documents and information relating to your sales or listings to your employing
broker.
4. Return office keys and other materials relating to your employment to the broker.
5. Request permission from your employing broker to assist with any pending sale or owner bound by
an existing listing agreement. Licensees will be required to attest to the Department they have
followed the above procedures when severing online. The Department will provide written notice of
an administrative severance to your employing broker. Beware! Failure to take the steps outlined
above, or making false or misleading statements to your employing broker, may subject you to
disciplinary action against your license by ADRE. So, do it right and avoid the risk!




                                                                                                    14
Business Cards - Innocent Incentive or RESPA violation?

The Scenario
A home buyer is having an inspection performed during the ten (10) day inspection period. The
Buyer’s Agent sets up the appointment and after the inspection the home inspector gives the selling
agent his business card. Printed on the back side of the home inspector’s business card received by
the agent the following statement appears… “The inspection company will pay the sales agent a
referral fee for referring a client to their firm.”

The Risk:
When the recipient of the card accepts the card and attempts to collect a referral fee a serious RESPA
violation may have occurred. RESPA specifically prohibits giving or receiving anything of value for the
referral of settlement services subject to certain exceptions. Violators of RESPA may receive harsh,
costly penalties, including treble damages, fines and even imprisonment.

What to Do:
Contact the Home Inspection Company and tell them that you cannot receive a referral fee for
referring a client to them since this action may be viewed by RESPA as a violation of the Settlement
Procedures Act. Further, advise the owner s and/or supervisors of the Home Inspection Company to
remove the statement from their business cards and any promotional material where it might appear.
AND equally important, as a fellow professional in the real estate business, attend the next scheduled
TAR RESPA seminar to get updated on what you can and cannot do when it comes to working with
settlement service providers…it just may prevent you from becoming blindsided, save you some “big
bucks” and even your license.




                                                                                                    15
COPYCAT! BEWARE COPYRIGHT!


The Scenario:
You just listed a great home, and you are given a copy of the builder’s floor plan by the Seller. The
Seller also gives you a disc with several professionally done photographs of the home - another gift to
the Seller from the builder.
You proudly upload all to MLS, and await the Buyers’ agents to show and sell your listing!


The Risk:
The builder just happens to be scrolling through MLS listings, checking out homes he’s built in the
past, and notices your property’s listing. He recognizes the floor plan is his, designed by him, and also
notices the “glamour photos” that he shot of the home. He also recalls that he never gave permission
to the Seller, nor to you, the agent, to utilize his photographs or his floor plan design in any way. Guess
what? You have just violated his copyright!

He decides to contact you, the listing agent, and offers to let you continue to use his photos and floor
plan, but says that he expects you to immediately send him a check for $5,000.00. You are stunned,
and decline his offer. Too late! You have already used them, and have already violated his copyright.
He hires an attorney, and sues you for the copyright violations - plural violations - because it was
several photographs.


What To Do:
Understand copyright laws have changed. The photographer, the architect, the sketch artist, the poet -
anyone who “CREATES” immediately owns the copyright to their creation. You do not have the right to
copy it, or fax it, or publish it in any way - including via internet - without the express permission of that
creator. To do so, violates their copyright, and makes you liable.

Make sure, if you are not shooting your own photos, that you have written permission from the creator
(the photographer) to use and publish his photos. Do not copy a previous agent’s photos from MLS,
crop the watermark, and then re-use; it’s the same problem: You have violated their creative copyright
ownership.

Be the creator, or make sure you have written permission to use!




                                                                                                           16
Debt Relief

The Scenario:
President Bush signed into law HR 3648 – Public Law 110-142 on December 20, 2007
This is the MORTGAGE DEBT CANCELLATION RELIEF ACT.

A brief summary of this bill:

Generally, individuals who are relieved of their obligations to pay some portion of a mortgage debt on
a principal residence between January 1, 2007 and December 31, 2009 will not be required to pay
income tax on any amount that is forgiven.

The RISK!
When consulting a homeowner who is in default and moving toward foreclosure, we often work with
them to obtain a “short-sale” payoff from their lender(s). During the distress that accompanies this
type of transaction, some agents are tempted to soften the impact by stating, “The President just
signed into law the Mortgage Debt Cancellation Relief Act and you will not have to pay the capital
gains associated with the deficit.”

You may have made an untrue representation with that statement.

What to DO!
This a complicated bill with many, many provisions. The PROPER advice would be, “This is an issue
that you must discuss with your legal and or/tax advisor. We cannot give advice that falls out of our
area of expertise.”

As per our NAR Code of Ethics, Article 11:

The services which REALTORS® provide to their clients and customers shall conform to the standards
of practice and competence which are reasonably expected in the specific real estate disciplines in
which they engage; specifically, residential real estate brokerage, real property management,
commercial and industrial real estate brokerage, real estate appraisal, real estate counseling, real
estate syndication, real estate auction, and international real estate.

REALTORS® shall not undertake to provide specialized professional services concerning a type of
property or service that is outside their field of competence unless they engage the assistance of one
who is competent on such types of property or service, or unless the facts are fully disclosed to the
client. Any persons engaged to provide such assistance shall be so identified to the client and their
contribution to the assignment should be set forth. (Amended 1/95)




                                                                                                        17
Deemed Reliable but not Guaranteed?
Not when commission is involved. Make sure that you as a real estate practitioner personally review
your listings after they have been placed into the MLS.


The Scenario:
You, the real estate practitioner, place a listing in the MLS with a cooperative compensation stating
4% in the Coop Fee field on the MLS input sheet. After a period of time without receiving an offer the
seller decides to reduce the listing price and subsequently requests that the cooperative
compensation be reduced to 3% of the gross sales price. You have the seller sign a status change
form and you change the listing price but neglect to change the commission in the Coop Fee field.
Prior to you noticing that there is a mistake on the listing, you receive an offer which is negotiated
successfully and escrow is opened. You do not realize that there is a discrepancy on the listing until
you are reviewing the HUD-1 statement prior to close of escrow.


The Risk:
You will be obligated to compensate the cooperating broker the 4% of gross sales price due to the
information on the MLS listing at time of acceptance of purchase contract. The buyer's broker's
commission is not affected by the listing broker's agreement with the seller. Unless otherwise agreed,
the listing broker is obligated to pay the buyer's broker the amount of commission offered in the MLS,
regardless of any subsequent agreements between the listing broker and the seller.


What To Do :
Review all new listing information as well as changed information on all listings as soon as possible.
Mistakes happen but can easily be resolved if corrected prior to acceptance of a contract. If you are
working with an agent and you realize a mistake, notify the agent in writing as soon as possible,
sometimes mistakes can be resolved easily if both parties agree in writing to make a change.
Communication is the key!




                                                                                                         18
Did you read the New Home Builder contract?

The Scenario:
Your clients are planning to look at model homes built by a new home builder and you know that you
need to be there on the first visit to register them. Everyone is excited by all of the opportunities and
discounts you can get from the builders these days. You spend days showing all of the new home sites
to your buyers trying to find the right one that fits their lifestyle. Once a home is selected and a
decision is made to purchase, we go see the site sales Agent. This is the point where our services and
expertise becomes invaluable. Negotiating and reading the entire contract, looking for stipulations is
the key. Plan on spending a couple of hours at a minimum to ensure the buyer is aware of what they
are agreeing to.

The Risk:
Are you fully representing your client if you did not read the builder contract and the Public Report?
Builders have the right to use their own contracts as stated in the Builder Broker Code. These
contracts are different than what we normally use as an Agent and mainly represent the new home
builder, not the Buyer. There are no guarantees that it will have the loan or appraisal contingencies
built into it to protect your Buyer, like the resale purchase contract does (see line 50-61 of the RPC
5/05). If the new home does not appraise for full purchase price, your Buyer might have to complete
the purchase or risk losing the earnest money.

What To Do:
 Read everything the Buyer has to sign and make the recommendation that the Buyer have an
attorney review the documents before they sign anything. Negotiate with the builder to make the
necessary changes to the contract to add the contingency verbiage you need to protect your Buyer,
before they sign. Once you are under contract there is little hope that a builder will agree to something
in the Buyers favor. It is very important to fully understand what your client is about to sign and making
sure they do too.




                                                                                                       19
The Dog Ate My Homework


The Scenario:
It is late Friday afternoon and a tech savvy buyers’ agent, after leaving a detailed message on your
home office phone recorder about that vacant listing of yours, sends a signed purchase offer
(prepared with ZipForm®) via email to your email address shown on the MLS listing. Just in case, she
also sends a copy to your home office fax machine.

You however - a struggling self-employed, one-man-show, owner/broker, have decided at lunchtime
that you and your spouse need to get away for a weekend to Rocky Point. None of your listings have
been shown for over two months anyway. It is time to just take a couple of days and get away from the
stress of this difficult market and recharge your batteries by “unplugging” for a short rest.

The Risk:
You don’t discover it until Sunday afternoon on the ride back to Tucson, but your cell phone service
apparently went out and there are now six messages waiting for you on the cell phone. You later find
out there are four messages on the home office phone recorder also.

The full price offer that came in specified a response deadline of 5:00 pm on Saturday. Since the
buyers’ agent did not hear back from you and there was no supervision for them to try to contact, the
buyers were put off and decided to keep looking. At 9:00 am, Sunday morning, they instructed their
agent to withdraw their offer by phone message, email and by fax. By noon on Sunday, the buyers
found a house they liked better and were no longer interested in your listing.

What To Do:
Decide how you are going to explain this to your seller. No excuse is going to work very well. You
might as well use the old standby: “The dog ate my homework.”

In this business, all avenues of communication: telephone messages, text messages, emails, faxes,
snail mail must be checked on a regular frequent basis – daily, at an absolute minimum – even in
slow times.




                                                                                                     20
Don't Be a Victim... Practice Safe Showings!
1. Always keep a mobile phone at your side; program emergency numbers into speed dial.
2. Meet all new clients at your office and verify their identity.
3. Whenever possible, avoid being at the office alone.
4. Take a personal safety course.
5. Install deadbolts with full one-inch bolts on all entry doors to your home and the door to your home
office.
6. Make sure you know your route to and from each property you visit.
7. When you are alone getting into your car, the first thing you should do is lock the doors.




                                                                                                     21
Don’t Pooh-Pooh a Drain Inspection!

Scenario:
A buyer’s agent shows a new construction home with a large tree in the front yard. A contract ensues.
The physical inspection reveals that the tree may cause problems in the future with the sewer lines
and drain pipes. Because of the relatively new construction of the home nothing further happens and
the parties involved determine it will be a long time before any potential problem would arise.
In a similar situation, but this time with an older home, a buyer’s agent prepares and successfully
negotiates a contract with a huge tree in the front yard. In this case, the physical inspector also
reports that the location of a tree and its size could cause drain problems. Because no problems have
ever been detected and/or experienced by anyone no additional inspections are conducted.

The Risk:
Ignoring, overlooking and minimizing input from inspection reports, as depicted in the above
referenced scenarios for both a newer home as well as an older home, can result in a highly
uncomfortable situation with dire consequences.
In the first case, after living in the newer home for several months, the buyers experienced a serious
problem where the plumbing was backing up into the home causing all kinds of unspeakable
situations. The plumber called in to clean and repair the mess determined that pieces of wood during
the construction phase were carelessly allowed to enter the commode drain causing the main drain to
mal-function. The buyers wanted to know who they could hold responsible for the mess and if the
brokers/agents involved could chip in and help pay for the costly repairs and damage.
With the older home, some months after occupancy, the sewer started backing up. This unsettling
situation was accompanied by an unbearable odor that had erupted. After scoping the lines, the
plumber determined that the root (no pun intended) of this problem was twofold: large, overgrown
tree roots were responsible for the blockage; and the lines going to the house from the street,
including the pipes under the home were collapsing and that the cost of repair in this instance would
come to $11,000.00. The buyers were furious.

What to do:
When a potential problem is brought to the attention of your buyer have the inspector relate suggested
options for them to consider. For example, the physical inspector may recommend that a plumber
perform a “boroscope” (fiberscope) inspection. Ask your client what they want to do as a result of the
counsel and warnings from the inspector concerning the appearance of large trees on their property.
Record your discussion with the buyers and their subsequent decision. Whatever the cost of this
additional inspection (depending on the property some estimates range between $155-175) it sure
beats the alternative.




                                                                                                   22
Duties to REALTORS®
When previewing a home listed by another REALTOR®, do not offer a negative opinion on the merits or
validity of the other agent's business model or practices to the seller. Article 15, Duties to
REALTORS®, states that REALTORS® shall not knowingly or recklessly make false or misleading
statements about their competitors, their businesses, or their business practices. Moral of the story:
Resist the urge to knock another REALTORS® way of doing business, especially to that person's own
clients. If you believe there is a violation of REALTOR® ethics, however, file a formal complaint.




                                                                                                     23
Email Etiquette
It is important to understand that email users differ in their ability to read and handle email. The
sender of an email needs to be aware of the skill level and even the technical limitations of their
audience. To conduct effective email communications, it is suggested that you do the following:


• Create a useful subject line. This helps sort and locate messages in the future.
• Check your spelling and use spell check before you send your email. Misspelled words can play
havoc on your image and reputation.
• Respond to your email promptly. Except when it may have an emotional impact on you or when it
makes you angry. Remember once you hit the send button, you can’t bring it back.
• Check your email multiple times daily.
• Avoid using all UPPER CASE letters. It is a form of shouting and is hard to read.
• Consider the size of an attached file. Make sure large files don’t create problems for the recipient.
• Use good professional judgment when describing situations and talking about others in your email
messages. Email is easily forwarded. What you say and how you say it might come back to haunt you
at some time in the future. Email lives forever!
• Limit, if possible, your line length to 75 characters. This will ensure properly wrapped lines and a
complete receipt of your message.
• Keep your message brief and to the point.
• Send messages in plain text or rich text format.
• Convey meaning through the occasional use of emoticons (“smileys” or characters strung together
to form a picture when read sideways, such as ☺ a smile and        a frown.




                                                                                                         24
Email Protections
Protect yourself! Remember that despite the ease and spontaneity of email, courts are still treating
electronic communications in the same manner as traditional written communications. Even merely
forwarding an email that contains defamatory statements could result in liability - for the forwarding
party, as well as the original author. Linking to another site that contains defamatory information also
has its risks, which can be minimized by posting a disclaimer. Any company that provides internet and
email access to employees should educate them on defamation risks and prohibit the transmission of
defamatory statements electronically. Bottom line - treat all messages placed on the Internet as if they
were a postcard.




                                                                                                         25
Fair Advertising Practices
All forms of promotion done by a brokerage company and by individual sales associates, including
marketing brochures, newspaper advertising and radio ads, must comply with the nondiscriminatory
goals of the Fair Housing Act. Even owners of single-family rental homes aren't exempt from the
requirements of fair advertising. To comply:
- Avoid using language that indicates a bias against a protected class
- Use consistent language in all advertising for the same property
- Describe the attributes of the property, not of the prospects you think would like it. For example, say
"a beautiful, fully-fenced backyard," not "a great backyard for children."
- Use human models of different ages, sexes and races in your advertising, if you use models
- Choose advertising media that cover a broad range of markets and don't exclude certain groups




                                                                                                       26
Fair Housing - 5 Keys to Reducing Liability
Ensuring that your company provides equal service standards and encouraging sales people to keep
careful records provides a strong defense against charges of fair housing violations.
1. Develop a standardized list of questions salespeople can use to qualify all prospective sellers;
develop a similar list for buyers. Have salespeople take down responses to the questions on these
forms and keep them on file.
2. Establish specific formulas that salespeople can use to determine the price range of houses that a
prospective buyer can afford so that the salesperson’s judgments don’t seem based on discriminatory
criteria.
3. Keep a record of every property shown to buyers so that you can later demonstrate that you
followed the criteria established in the qualification process. If buyers make requests for specific
areas, note that in your records.
4. Keep phone logs of inquiry calls made to the company and train receptionists in a standardized
response to questions about the company’s services. Remember that a prospect doesn’t have to
become a client to sue for discrimination.
5. Record how the salesperson chose the houses that were shown and what criteria were used to
eliminate other potential homes.




                                                                                                       27
Fair Housing Red Flags
An ounce of prevention is often worth a pound of cure in correcting fair housing violations among your
staff and salespeople. Look for:
• The use of racial comments or excessive use of sexual or ethnic humor by associates;
• The use of inconsistent standards in qualifying prospects;
• An unwillingness to attend fair housing training; or
• Warning signals in client surveys that indicate a bias by an associate.
If you see a salesperson or member of your support staff engaging in any of these activities more than
once, counsel the associate on fair housing requirements immediately. If this conduct persists, you
don't want him or her on your staff.




                                                                                                      28
Garage Door Repairs
The Scenario:
Seller has a dent in his garage door, and it is noted during Buyers Inspection.
BINSR requests that the dented panel of the garage door to be replaced. Sellers’ Agent says, “No big
deal…” and encourages Seller to agree to that repair, which Seller does.
Sounds like a simple repair, as the panel CAN easily be slipped out, and a new one installed.


The Risk:
BE CAREFUL! If the garage door is more than 6 months old, your Seller may discover that his garage
door is no longer being manufactured, and there are no replacement panels available! Garage door
companies change designs regularly, and most do not stock replacement panels at all!


What will your Seller need to do to fulfill his agreement to replace the one dented panel? He will find
that he will be required to purchase an ENTIRE new door. Instead of a simple $75-$100 repair, the
cost of the new door will average $450-$850.00 or more!!! He will be looking at you, his Sellers’
Agent, to pay for this, as it was YOUR recommendation to agree to this BINSR request.


In addition, almost all HOAs require that garage doors be PAINTED. Did the BINSR address who will
paint this one panel if it could have been replaced? Who paints the whole new door? Probably the
Buyers’ Agent will foot the bill for this, as he should have made that part of the BINSR repair request.
(We have found that garage door paint jobs average about $125.00-$250.00 minimum, in case you’re
wondering…)


What To Do:
If BINSR requests replacement of garage door panel, get an immediate quote to determine actual
cost, and if the panel is even available at all, BEFORE your Seller responds and agrees to the repair.
And remember the paint, too!




                                                                                                         29
Imputed Knowledge Can Be Dangerous


The Scenario:
During a property tour with the owner at a listing appointment you notice extensive evidence of termite
damage and the presence of subterranean termites. In your discussion with the prospective seller you
recommend a pre-listing termite treatment by a licensed pest control company. The home owner says
he will address the problem immediately and implement other pre-listing suggestions to prepare the
property for sale, and schedules a second listing appointment with you for two weeks later to list the
property. When you arrive for your appointment with the required listing documentation you find the
property owner working on the exterior of the home scraping and removing subterranean termite
tubes. He informs you that he has decided to handle the termite problem himself in order to save
money and avoid the expense of chemically treating the premises, and proceeds to tell you that he
has elected to hire another agent to represent him in selling the property. A few days later you
discover that another agent with your company has listed the property for sale.


The Risk:
Imputed knowledge is the legal term for the presumption that what one person in a company knows,
everyone in the company knows. The failure to disclose the seller’s intentional actions to hide
evidence of the existence of termites and defraud a future buyer are of a material nature. The failure
of the seller and listing agent/broker to disclose any information that may materially and adversely
affect the buyer’s decision to purchase the property, including but not limited to the existence of
current or past wood-destroying organisms or insects (such as termites), may result in the seller’s and
the broker’s liability for damages.


What To Do:
Immediately notify your designated broker and/or company branch manager of your knowledge of the
property so listing agent can make sure the proper disclosure notice is made to any prospective buyer,
and arrangements can be made to properly treat the




                                                                                                       30
Importance of 5 year C.L.U.E Report

The Scenario:
A home buyer closes on their transaction and within 30 days after COE receives a notice from their
insurance company of a cancellation of their homeowners insurance policy. The insurance company
said they would continue coverage for an additional $1290 or the policy would be cancelled because
of an extensive water damage claim 4.5 years ago. The insurance company informs the new home
owner that the claim would have been discovered with a 5 year C.L.U.E history report if it had been
ordered during the escrow period.

The new owner contacts her agent and demanded to know why the agent would allow her to close the
transaction with a report from the seller’s insurance company (per line 135 of the contract) instead of
a full 5 year C.L.U.E. report, especially since the cost of the report is only $25.00.

The agent paid the additional dollars to keep the home insured and ordered an inspection to verify the
home had been repaired and was free of mold. The home had been remediated and eventually the
insurance company reduced the cost of coverage and refunded the additional money.

The Risk:
Using an insurance report from a Seller who has lived in the home less than 5 years may not give a
complete history of claims for the property. Insurance companies issue a temporary binder for the
closing on the home based on the client’s consumer report history, not based on the home. These
companies have 60 days after close of escrow to review a C.L.U.E on the property and underwrite the
policy or they can cancel their initial insurance policy if the home has had significant claims especially
water damage claims.

What to Do:
If you represent a buyer you may want to consider asking the seller to provide a full 5 year C.L.U.E
report on page 7 of the contract. Remember to review the CLUE report with your buyer during the
inspection period and give them a copy to take to their insurance company.

Listing agents can order a C.L.U.E. for their sellers with authorization and have the cost billed to
escrow, so there really isn’t any reason for a property to close without a 5 year report even if it is an
Estate Sale or bank owned property. A buyer’s insurance company is a third party cannot order a
C.L.U.E to review until the home has closed and belongs to their customer.




                                                                                                            31
Innocent Conversation or Boycotting?
Agents need to know just how simple it is to formulate a boycott during an informal discussion about
"business". They need to be aware and not let their conversation drift into a discussion suggesting they
each do their small part to show competitors who offer low cooperative fees that it won't work
anymore. They must avoid making statements such as "we just won't show their properties - that will
show them!" Often, this discussion begins very innocently and people get lulled into going with the drift
of the conversation. Don't let it happen to you. Boycotting is illegal!




                                                                                                      32
Is Your Builder Liening on You?
When listing a property that was built in just the last one to two years, be certain to ask your seller and
then verify that the seller does NOT have a special lien on the property from the new homebuilder.
Several of the area's homebuilders, to discourage flipping of properties, added a special lien on new
homes for large amounts - some upwards of $50,000 - that the sellers would be required to pay in
order to sell the home anytime during the first 12-24 months. Most of these builders WILL NOT release
these liens, so be sure to check this! If the timeline of the lien expires in 60 days, then simply make
sure that you disclose that the close of escrow is AFTER that date.


However, be aware that some of the liens do NOT automatically expire, release from the property, and
go "off the record". You may find that the sellers needs to request, in writing, for the lien release, and
that there is no time requirement for the homebuilder to respond. So, this would affect the sellers'
ability to give clear title and close escrow. Find out the builder's requirements prior to listing the
property!




                                                                                                          33
Is Your Builder Liening on You? Part II - Buyer's Perspective
Many new home builders in a busy market will attempt to restrict the "investor" or "flipper"-type buyer
by including in their Purchase Contract a paragraph that prohibits the resale of the home for up to two
years after closing. In addition, builders will sometimes attach a lien of up to $50,000 on the home,
payable to the builder, if the buyer DOES sell the property during that restricted time frame. This could
definitely be a problem for your client if (s)he needs to sell due to a job transfer, illness, etc.


When the builder requires placement of a lien, and it is acceptable to your buyer, make the builder
sign a Lien Release to become effective immediately at the termination date. This action by your buyer
client will avoid having them jump through hoops to find someone at the builder's company to sign off
in a year or so, assuming the builder is even in business at that time. BOTTOM LINE: READ the fine
print of the builders' contract! ASK about these restrictions. And, most importantly, make sure you
OBTAIN the properly prepared LIEN RELEASE up front to automatically take effect on the correct date.




                                                                                                        34
Is Your Vacant Listing Covered?

The Scenario:
If your property is vacant or not lived in for 30 days you must notify your insurance company in order to
change your coverage.

If you rent your property you have to notify both your insurance company and the taxing authority of
the county where the property is located.

Why?
Residential insurance policies normally do not cover empty or vacant properties unless specifically
provided for. The same can be said if you decide to rent the property. You must notify your insurance
company to change your coverage, and you must notify the county to change your tax basis.

What can happen? The Risk:
Lack of proper notification to the insurance companies and/or the county is considered fraud. Thus
your insurance company can and will drop your insurance coverage like a hot potato.

The taxing body of the county where the property is located won’t be as kind. If found out you’ll be
looking at some heavy fines for not notifying them that your property is now a rental.

What do to:
Notify your clients accordingly! Have a serious conversation if you know they are in violation and what
the consequences are. Have them get in touch both with their insurance agent and the county to
notify them accordingly. Is it worth it to cheat? I don’t think so!




                                                                                                       35
Keybox Reminders


The Scenario:
Times are tough, budgets are stretched, and your TAR/MLS approved Supra Keybox inventory is
depleted. Another listing is taken and needs to get placed into the system. Where’s the harm in just
putting one of those great little key safes that you can buy at the hardware store for $20 on the front
door instead of spending the money on another one of those expensive Supra Keyboxes?

The Risk:
Using an unapproved device for the purpose of making a key available for showing the property to
other MLS participants and falsely representing in the listing that the property is on Keysafe is a
violation of the rules and can often create a significant inconvenience for your fellow members.

What To Do:
Follow the rules! There are numerous rules for the proper use of keyboxes scattered throughout the
TAR/MLS Rules and Regulations (revised 02/26/2008):

Section 3.14 – Restrictions to Listing Information:
d. Keyboxes: Only the approved keyboxes shall be referenced in the MLS.

Section 4.10 – Availability of Listed Property:
Listing brokers shall not misrepresent the availability of access to show or inspect listed property.

Section 22 – KeyBox System: Only one common, approved keybox system is available for voluntary
use by Participants and their licensees. Use of the common system shall be governed by the following:
Only the approved common KeyBox System shall be used. The MLS will levy a fine for misuse of the
approved keybox system for MLS member access regardless of whether or not penalties have been
levied by the keybox provider.

Section 22.1 - KeyBox Availability:
Access to the keybox keys is limited to licensed Participants/agents acting in the capacity of the listing
agent, or buyer’s agent, member appraiser, or in other agency or nonagency capacities defined by law.

Section 22.2 - Owner Authorization Required:
The use of the approved common KeyBoxes shall require written authorization of the owner in the
Listing Agreement.

Section 22.3 - Penalty for Security Violation:
Members who hold keybox keys shall not attach their individual
personal identification number (PIN) to the keybox key in any manner, lend their
keybox key to any other individual, disclose their individual PIN number to
any other individual, or permit any other individual to use their keybox key.
Violation of this section is subject to: 1) a fine up to $5,000.00 2) confiscation of
member’s keybox key 3) revocation of member’s future keybox key privileges.
4) and any remedies as outlined in Section 8.

Section 22.4 - Securing Property:
Failure to secure a property and/or replace the property key(s) into the KeyBox may be subject to a
fine.

Section 22.5 - Indicating Keyboxes on Listings: Participant shall not indicate a
property has a Keybox until the approved Keybox has physically been placed on the property. Only the
approved keybox may be represented in the MLS. Prior to removal of a Keybox from an active listing
(also including CAPA and contingent), the listing shall
be reported to the service indicating the keybox has been removed.

Section 22.6 - Removal of KeyBox.
KeyBox shall be removed from the property upon expiration of listing agreement, recordation of deed,
or release of listing.

Section 22.7 - MLS shall only provide service on keyboxes to the individual to whom those keyboxes
are registered, as recorded in the official MLS KeyBox records.

                                                                                                        36
Load It & Lock It

The Scenario:
Your buyers are pre-approved and ready to proceed with a home purchase. Their LSR specifies they
are approved based on the currently available interest rate, up to a certain maximum purchase price.
You figure you are good to go. However, the buyers have decided to not lock in the interest rate in
anticipation of a lower rate coming soon and they are not sure how long it will take to find the right
home. The perfect property is found within two days. An offer is written, aggressively negotiated, and
ultimately accepted. The final purchase price is the absolute maximum they could qualify for – but
this place is absolutely perfect. Your buyers are happy and very excited. The due diligence begins.

The Risk:
Two weeks later, after the inspection period has lapsed, the buyers remember to call their loan officer
to lock in their interest rate – something they simply forgot all about. Unfortunately, they learn that
the interest rate has risen by almost three-quarters of a percent and they no longer qualify for this
purchase at the higher interest rate. They are not going to be able to proceed to closing.

Remember that the Loan Status Report (LSR), which “is attached hereto and incorporated herein by
reference” in the Purchase Contract. And, it states in bold: “Buyer agrees to establish the interest
rate and “points” by separate written agreement with the Lender during the Inspection Period or the
interest rate provision of the Loan Contingency shall be waived.”

The sellers are notified of the mistake, and they are irate upon hearing the news. Their home has
effectively been off the market for two weeks and they are keeping the $5,000 earnest money as
damages.


What To Do:
Be certain to remind buyer clients to lock in their interest rate on financing at the correct time – and
get written confirmation from their lender. When the buyer does not lock their hoped for interest rate
during the inspection period, say for example at 6%, but is able to obtain the loan by locking in at a
rate up to the maximum specified in the LSR, say for example 7%, the buyer will be obligated to
proceed to close of escrow or will be in breach of contract (after the expiration of a noticed cure
period).




                                                                                                      37
Loan & Investment Fraud
Be extremely wary if a mortgage broker asks you to rewrite a purchase agreement to mischaracterize
the nature of the purchase to obtain more favorable loan terms for your buyer. Consider it a red flag
and an invitation to commit fraud. Remember - the entire deal on the contract goes to the lender... on
the HUD1! No outside deals! If the mortgage broker insists that you do it to make the deal fly, ask
them to put their instructions in writing on their letterhead with a copy to your Designated Broker and
see what happens. You guessed right - they won't do it, so why should you?




                                                                                                        38
Moving Company Scam Alert!

As a REALTOR®, how many times have you heard about how important the Arizona Department of
Weights & Measures (ADWM) may be to your clients? Not so much? Well, except perhaps for your
investor types, every other client may very well appreciate your familiarity with what the ADWM may be
able to do for them. Why? - Because they all are moving from one property to another. Whether it will
be an interstate move from New England, or an intrastate move from Scottsdale, they are all coming
to Tucson and we should be here to help reduce their risks.

We all know, first hand, what a nightmare moving a household can be. How many times has someone
that has just moved declared, “I am NEVER doing that again?” Along with the physical work, the
psychological stress, and the expense, there are many different risks associated with moving a
household. Not the least among these risks may be the professional moving company – especially if
the wrong moving company is hired.

There can be many facets to moving scams, but the typical scenario goes something like this. The
consumer contacts a moving company and obtains an estimate. Let’s say the estimated weight is
3,000 pounds and the cost to move from point A to point B is estimated to be $2,800. A 25% deposit
is required and paid. The move is made, and of course the truck hasn’t arrived on schedule. The
driver calls and says that they are on the scales in Phoenix and the actual weight turned out to be
4,100 pounds and the total cost will be $3,950 – and they are going to need a certified check for the
entire balance due before they unload the truck. That’s $1,150 that wasn’t in the budget (and may
not be in the checking account). How close to the boiling point do we want to get here?

The consumer is already behind on schedule and stressed to the max, and has a new job to go to, and
kids to take to a new school, and everything else bearing down on them. They are angry and
frustrated but see no alternative but to write the check and get this over with.

Not so fast! If their lovable real estate agent is paying attention to this event, we can help. A quick
phone call to the ADWM in Phoenix, (602) 255-5211, or (800) 277-6675 can bring an investigator to
the site along with local law enforcement officers to greet the moving truck when they finally do arrive.
There’s nothing like giving a bunch of scam artists a little surprise of their own.

An excellent in-depth discussion on this topic with absolutely brilliant advice is presented on the
ADWM web page:
http://www.azdwm.gov/CONSUMERS/ConsumerTips/MovingInformation/tabid/262/Default.aspx
Also, the consumer fraud that may be occurring with bad moving companies is of interest to the
Arizona Attorney General. If direct dealings with the moving company are not going favorably and
fraud is suspected, then it may be time to contact the Attorney General:
http://www.azag.gov/consumer/index.html.

Other excellent resources on this topic include:

Arizona Department of Weights & Measures
http://www.azdwm.gov/HOME/tabid/53/Default.aspx

American Moving and Storage Association
http://www.moving.org/

Moving Company Guide
http://www.moving-company-guide.com/

Moving Scam.com
http://www.movingscam.com/

Move Rescue
http://www.moverescue.com




                                                                                                      39
NO LSR... no Loan Terms!
Accepting a residential resale purchase contract without an LSR could put your sellers in jeopardy. The
loan contingency references the terms in the LSR, and if no LSR is presented than the seller has
potentially left the door wide open. Make sure that when you do receive an LSR that it is the most
recent version dated 11/05 which states that the purchaser must establish rates and discount points
in writing with the lender during the inspection period or they waive the interest rate contingency.




                                                                                                       40
Owner/Agent Disclosure

The Scenario:
You have decided to sell your own real estate – whether it is your primary residence, a vacation home,
or investment property. Regardless of whether you are going to be the listing agent, co-agent, or just
simply the seller with another agent actually taking and submitting the listing. Or, you are related to
the seller of the property and you are going to be the listing agent or co-agent. And, for whatever
reason, you don’t think about disclosing to the public that you are a licensed real estate agent.

The Risk:
Not making a full disclosure of your personal interest in a real estate transaction runs afoul of the
Tucson Association of REALTORS® Multiple Listing Service’s Rules and Regulations and the Arizona
Administrative Code.

What To Do:
Make the disclosure. It is really very easy and harmless. Simply put the words “owner/agent” in the
Property Description section of the listing. Placing the disclosure in the Agent Remarks section or
elsewhere does not satisfy the notice requirement.

The Tucson Association of REALTORS® Multiple Listing Service’s Rules and Regulations include the
following provision on this topic for its members (referred to as Participants) in Section 6.1- Participant
as Principal:

If a Participant or any licensee affiliated with a Participant has any interest in the property, the listing
of which is to be disseminated through the Service, that person shall disclose that interest in the
Property Description of the “Profile Sheet” filed with the Service.

Arizona Administrative Code, Title 4, Chapter 28 – State Real Estate Department, Article 5 –
Advertising, Section 502 – Advertising by a Licensee (AAC R4-28-502B) requires:

B. Any salesperson or broker advertising the salesperson's or broker's own property for sale, lease, or
    exchange shall disclose the salesperson's or broker's status as a salesperson or broker, and as
    the property owner by placing the words "owner/agent" in the advertisement.




                                                                                                          41
Purchase Contract with Financing Contingency Requires Loan Status Report (LSR)
As a buyer's broker, unless your purchase agreement is an all cash transaction make sure you always
attach the Loan Status Report (LSR) to your offer. As the seller's broker, if it is missing, present the
offer, but advise the seller against accepting the offer without it. The buyer's obligation to complete the
contract is contingent upon the buyer obtaining loan approval for the loan described in the LSR. If the
LSR is missing, no loan terms are included in the contract, which creates an ambiguity in the terms of
the loan contingency. Besides being mandated by the contract, the information in the LSR allows the
seller to evaluate the buyer's offer. It provides vital, detailed information about the buyer's loan and
whether the buyer is relying on the sale or lease of a property to qualify for the loan.




                                                                                                           42
RADON – The Invisible Risk

Odorless, colorless, tasteless – completely invisible, radon gas can be very harmful even at very low
concentrations when exposures (dose) are extended for significant amounts of time. Therefore, the
presence of radon gas in a residence can potentially be hazardous to the occupants. Many factors
affect the presence and concentration of radon gas in a home – or any structure for that matter, and
there are also many variables that affect dose to the residents.

The Scenario:
Radon is a naturally occurring, radioactive decay product that comes from natural deposits of uranium
in the ground. When it is out in the open air, it dissipates readily and is of no concern. However, this
inert gas can migrate into buildings in two primary ways: through cracks in the ground surface directly
into openings in the foundation and structures and, from well water that may contain dissolved radon
that is released upon running water in a sink, shower or tub.

If radon gas concentrations are allowed to build up in a residence – especially in circumstances found
in modern housing with ever tightening construction materials and techniques in the name of energy
conservation, toxic levels can be reached and health affecting doses received by the occupants.

The Risk:
Radon gas has been recognized by Tucson’s own Dr. Richard H. Carmona when he served as the
United States Surgeon General and warned the American public, in January 2005, about the risks of
breathing indoor radon by issuing a national health advisory. The advisory is meant to urge Americans
to prevent this silent radioactive gas from seeping into their homes and building up to dangerous
levels.

"Indoor radon is the second-leading cause of lung cancer in the United States and breathing it over
prolonged periods can present a significant health risk to families all over the county," Dr. Carmona
said. "It's important to know that this threat is completely preventable. Radon can be detected with a
simple test and fixed through well-established venting techniques."

According to U.S. Environmental Protection Agency (EPA) estimates, one in every 15 homes nationwide
have a high radon level at or above the recommended radon action level of 4 picoCuries (pCi/L) per
liter of air.
Radon gas in the indoor air of America's homes poses a serious health risk. More than 20,000
Americans die of radon-related lung cancer every year. Millions of homes have an elevated radon
level. If you also smoke, your risk of lung cancer is much higher.

What to Do:
Be certain to emphasize the AAR Buyer Advisory caution about radon:

Radon gas and carbon monoxide: Radon gas and carbon monoxide poisoning are two of the more
common and potentially serious indoor air quality (“IAQ”) concerns. Both of these concerns can be
addressed by the home inspector, usually for an additional fee. For information on radon levels in the
state go to www.arra.state.az.us/radon.htm.

Provide all of your buyer clients with a copy of the EPA pamphlet: Home Buyer’s and Seller’s Guide to
Radon (EPA 402-K-00-008, July 2000) – which is now also available in Spanish at
http://www.epa.gov/radon/pubs/hmbyguidsp.html.

Also, on every residential transaction, sellers must complete and provide a nine page, AAR
RESIDENTIAL SELLER’S PROPERTY DISCLOSURE STATEMENT (SPDS) . On page 6 in the
Environmental Information Section, the following disclosure is made by the seller of the residence:

Are you aware of the presence of any of the following on the Property, past or present? (Check all
that apply):

□ Asbestos □ Radon gas □ Lead-based paint n Pesticides
□ Underground storage tanks □ Fuel/chemical storage

Make sure your buyers check this response in their review of the SPDS.
                                                                                                      43
Assist your clients in locating professional information and advice, and reputable testing services and
products. If remediation of high levels of radon is going to be necessary, assist in locating qualified
contractors to mitigate the problem.

Links to More Information About Radon:
         EPA Radon Page: Guides for building, buying, and selling homes
         Testing Homes for Radon
         Correcting Radon Problems in Homes
         Radon FAQ
         Radon-Related Hotlines
         Radon and Real Estate
         Finding a Qualified Radon Service Provider
         Radon-Resistant Construction Techniques
         National Academy of Science's BEIR VI Report on Radon
         EPA's Radon Publications




                                                                                                     44
READ before Signing…the Public Report

The Public Report is one of the very important documents involved when you represent your client in
the purchase of a new construction home. As you start through the myriad of papers for the
purchase, the site salesperson will hand your client this report. At that time, they generally ask the
Buyer sign an acknowledgement showing the document has been provided and the fine print will also
say and it is understood. More specifically the statement reads:

For your protection, do not sign this receipt until you have received a copy of the report and have had
the opportunity to read it. By signing this receipt, the buyer has accepted the public report and
acknowledges the information it contains.

In additional to general facts, there is an amazing amount of information about the area around the
home and any items they are required to disclose. [Gas pipe lines, noise, fissures, aromas and the list
go on.] You can see why it is imperative that both you and your client have studied the report prior to
signing a purchase agreement or an acknowledgement for having received the Public Report and
understanding the content.

For you and your client’s convenience, you can pre-view the Public Report on the following website and
have an advanced opportunity to do your homework:

http://159.87.254.2/publicdatabase/SearchDevelopments.aspx?mode=2.

The Arizona Department of Real Estate (ADRE) maintains this public database of all Public Reports
that have been filed for subdivisions in Arizona. However, Public Reports issued before 1/1/1997 are
not available online and Public reports over 20 years old are not available.




                                                                                                     45
Risk Reduction with Professional Designations

As you well know, REALTORS® are required to complete 24 hours of continuing education every two
years to maintain their license. Why not make the most of those hours? Instead of taking the same
classes over and over again every two years, use the training that culminates in a professional
designation to satisfy the required license training and earn your ABR, CRS, e-PRO, GRI or one of
dozens of other designations or certifications that are available at the same time.


And, for that matter what would be wrong with taking more than the minimum 24 hours of training
that are required every two years. Suppose you took one class per month – that would be 3 hours per
month or 36 hours per year. Is one morning or afternoon per month too much time to devote to
building your professional knowledge? Maybe take two full days of training every calendar quarter –
that would be 48 hours per year.


Another twist on taking best advantage of training is to consider taking qualifying classes in another
city in Arizona. Make a mini-vacation of it and take a day two off while there. Recharge your batteries
along with your brain cells. The bonus is that you may meet an agent based in that location that you
could exchange referrals with. It is always better to have some personal knowledge or experience with
someone you send your referrals to – and vice versa.


Here is another bonus: the training that is presented for the designation programs usually far exceeds
the caliber of training otherwise available for simple license renewal. These programs are often taught
by nationally recognized instructors that are on the cutting edge of real estate practice.


Simply put, the more you know and the more frequently you spend time studying this profession, the
better chance you have of reducing the mistakes you make and the resultant liability. And, you are
better enabled to serve your clients’ best interests.




                                                                                                         46
Say It Fairly Quiz
Take this brief quiz and test your understanding of how the Fair Housing Act applies to advertising.
1. You must include an Equal Opportunity logo in ads larger than 3 inches by 3 inches that promote
residential property for sale. TRUE or FALSE?
2. The description of a house used on the local MLS is also subject to fair housing guidelines. TRUE or
FALSE?
3. Indicating in an ad that a property has handicapped accessibility is a violation of the Fair Housing
Act. TRUE or FALSE?
4. Brokers are liable for discrimination in ads placed by sales associates, even if they had no
knowledge of the ad before publication. TRUE or FALSE?
5. It is acceptable to use only white models in your advertising provided that your market area is at
least 85% white and that you do not include any discriminatory language in the copy of your ads. TRUE
or FALSE?




1. FALSE
2. TRUE
3. FALSE
4. TRUE
5. FALSE




                                                                                                          47
Seller Held Open House Using Company Signs…What’s In Your Policy?

Scenario:
A listing agent is busy and only has time to hold an occasional open house. The sellers want to help
and ask their agent for the use of the agents’ company open house signs so that they can hold their
own open house from time to time. The agent grants the sellers request and thinks wow this is
great…now I can spend my time doing other productive activities.

Risk:
During an open house which was held by the seller only, a prospective buyer walks into the home.
While she “oohs” and “aahs”, with animated gestures about the Elizabethan period mirror on the
bedroom ceiling, the owner’s dog grabs her heel tripping her and causing her to fall and hit her head
on the corner of the dresser. It’s easy to determine what happens next from this unfortunate event -
medical rescue and recovery expenses associated with physical injury, pain and suffering;
procurement of legal counsel on behalf of the injured party and last but not least a lawsuit naming the
owner and the Broker.

Solution:
Take the time today to review your broker policies addressing this and similar issues. Do you have a
policy on this subject? If so, what’s in your policy? If not, decide if you need such a policy. Carefully
assess if it is in your best interests and that of your company to mandate company open house signs
not be given out to unlicensed owners. If appropriate, consider language that provides a policy setting
forth strict guidelines for the owner to follow, complete with a sign-in form releasing the Broker and
agent from liability. Even weigh the impact of having the seller/owner of your listed property sign a
statement that says they are well aware of the risks and that they assume full responsibility.




                                                                                                       48
Septic or Alternative Waste Water Systems - New Regulations
Septic inspections have been occurring prior to the close of escrow, and have been addressed in our
resale contracts for some time in Pima County. Recently added requirements have been placed upon
buyers in by ADEQ to submit a notice to either Pima County or ADEQ. Effective July 1st, the new ADEQ
rule R18-9-A316 requires a report of inspection of a septic or alternative system by a certified
inspector to be delivered from the seller to the buyer. The buyer must submit a completed notice of
transfer and fee to ADEQ or Pima County within 15 days of property transfer. Click here for the report
of inspection form to be completed by an inspector and given to the seller, and click here for the
notice of transfer form to be completed by the buyer and filed with ADEQ.




                                                                                                      49
Short Sale Caution

The Scenario:
Excited Agent gets call to come and list a home for sale. Discovers that the property-owner is upside
down in the home, and determines the sale will be a “Short Sale”. Prepared Agent pulls out the “Short
Sale Addendum” and proceeds to complete the listing paperwork, including this new Addendum.
Agent returns to office and promptly enters new listing into MLS.

The Risk:
The new Short Sale Addendum form states at the very top: “if you desire legal, tax, or other
professional advice, consult your attorney, tax advisor, insurance agent, or professional consultant.”
Then, in boldface, the form goes on to state: “… the Seller is advised to consult independent legal
counsel regarding the advisability of entering into a short sale agreement…” and also: “… Seller is
advised to obtain professional tax advice immediately regarding the tax implications and advisability
of entering into a short sale agreement.”

When did the Agent give the client the opportunity to actually go and consult? No time was given!
In most cases, the Agent fills out the Short Sale Addendum and proceeds full steam ahead to enter
the listing into MLS while attempting to find a buyer- business as usual.
What if it is not in the best interests of the client to do a Short Sale? What if it is better for the Seller
to do a Deed in Lieu of Foreclosure?
What will happen when the short sale is over, escrow closed, and then, at tax time, the client receives
a 1099 for the amount of the forgiven debt- which is now shown as regular income and is taxable?

For example: A short sale of $40,000.00 will show up on a 1099 form as $40,000.00 additional
ordinary income. At a 28% tax bracket, the tax bill owed by the Seller to IRS could be $11,200.00. How
many clients can afford to pay that? And, IRS charges ONLY 25% interest!

If the Agent fails to disclose this very real possibility, and/or never gives the client the opportunity to
consult with their attorney or tax advisor, who will the client turn to/against when hit with this
surprise?

What to Do:
Complete all the Listing paperwork as usual, including the Short Sale Addendum form. Consider filling
out a Delayed Input Form allowing enough time for your client to actually make appointments to
consult with their attorney and/or tax advisor. Then, if the client still believes the short sale is the best
choice, and instructs you in writing to proceed, enter the listing in MLS.

Make sure to give your clients the necessary time to actually seek the legal and tax advice we tell
them to seek! And above all, always, yes always check with your Designated Broker to see if they
approve and consent to this suggested practice and to what you are doing.




                                                                                                         50
Sign, Sign, Everybody Sign

The Scenario:
The husband and wife have been debating selling off a piece of land that they have held for a number
of years to build their dream home on after retirement. However, like many people, they find do not
have the financial resources they had hoped for and the husband decides to sell this piece of property
just to make ends meet. No real agreement on any action has been reached between the married
couple. Despite this, the husband decides to hire a REALTOR® and signs a listing agreement,
promising the agent that the wife will sign when she returns from caring for her sister back east who
just had surgery.

The Risk:
Within two days the agent presents a full price, cash offer to the husband who signs and accepts the
purchase agreement. He is excited about the successful sale for more than he thought possible. His
excitement diminishes however when he relays the news to his wife over the telephone. Her
response: You did WHAT?! I’m not signing! You moron!! My only sibling is dying and is leaving me her
entire estate – enough money for us to build our dream home on that perfect piece of land.”

What To Do:
It is simple: everybody needs to obtain expert legal advice – including the agent. Listing and purchase
agreements may be enforceable even if only one spouse signs them.

For additional information on this subject, the reader is directed to pages 98-99 of the Arizona Real
Estate – a Professional’s Guide to Law and Practice written by K. Michelle Lind, Esq., General Counsel
for the Arizona Association of REALTORS®.




                                                                                                    51
Six or More Requires Public Report!
The Scenario:
You represent the seller and are in escrow. During the due diligence period, the buyer discovers
polybutelene piping and requests that the seller replace it. The seller refuses and the buyer decides to
proceed to closing. Two years later, a pipe bursts and causes over $20,000.00 in damages.


The Risk:
The owner goes to a Real Estate Attorney to see if he can get relief. In conversation, he mentions that
the seller owns five other homes in the subdivision - - the attorney smiles. Because the seller owned
six homes in the same subdivision, he was obligated to give a Public Report to the buyer prior to COE.
Because he did not, the buyer was able to rescind the sale, and you and your Broker are now being
sued by the seller for not informing him of his obligations!


What to do:
When taking a listing, ask the seller if he/she owns any other properties, and check the tax records to
confirm. If the seller owns six or more in the same subdivision, the seller must get a Public Report
from the AZ Dept of RE and deliver it to the buyer to review prior to COE. The seller cannot use the
original Developer's Public Report.




                                                                                                        52
Someone Stole My Identity! What Now?
If you know or suspect that your social security number, driver's license or credit cards have either
been stolen or compromised, take the following action immediately.
1. Place a fraud alert on your credit reports by calling one of the following services. Calling one will
notify all three, and the initial alert is active for 90 days, with extended 7-year alerts available. Equifax
- 800-525-6285; Experian - 888-397-3742; Trans Union - 800-680-7289.
2. Close all accounts that have been tampered with or opened fradulently.
3. File a police report.
4. Report the theft to the FTC (Federal Trade Commission).
5. Hire a professional service to monitor your credit 24/7 such as Identify Theft Shield, for a modest
annual fee. Call 888-494-8519.
6. Make sure you get a detailed copy of your credit report for immediate review.




                                                                                                           53
Steal My Identity? No way!... Think Again!
Skilled identity thieves use a variety of methods to steal your identity, including:
1. Dumpster Diving: going through trash to find your info
2. Skimming: stealing your credit card numbers by using a special storage device when processing
your card
3. Phishing: pretending to be a financial institution and sending spam or pop-up messages to get you
to reveal your personal information
4. Changing Your Address: diverting your mail to another location by using a "change of address" form
5. "Old-fashioned" Stealing: stealing your wallet, purse, mail, pre-approved credit offers, new checks,
etc. Stealing personnel records from employers or stealing computers and servers.
Don't think it can't happen to you! Take simple and easy precautions, like shredding all financial and
personal information, to avoid being a victim of identity theft.




                                                                                                      54
Stop Losing Your Signs!
Here’s a practical tip that will save you and your agents time, aggravation and money. For the proper
placement of Yard, Open House and Directional Signs please follow these suggested guidelines:

    1. You are allowed ONE freestanding yard sign per property on the street frontage. (in front of
         property unless HOA rules are different)
    2. Open House signs are allowed on a temporary basis as long as they do not disturb the view of
         traffic and are not placed in the public right of way.
    3. Directional signs are permitted as long as they are not in the public right of way or on public
         property. Public right of way is defined as follows: A right of passage by the public over the
         surface of land without impediment.
As a rule of thumb no sign shall be permitted which is placed on any curb, sidewalk, post, pole,
hydrant, bridge, tree, or other surface located on public property or over or across any street or public
thoroughfare.

    •   Between the street and the street sign are not allowed.
    •   Directional signs are to be placed at least 12 feet from the pavement or edge of the dirt road
        if no curbs or sidewalks exist. (See illustration below)
    •   Signs are to be on the inside of the sidewalk which is private property.
    •   All signs placed on private property shall get permission from property owners.

All directional signs must display Broker/Company name or logo Agent Name & phone number. Make
sure your company has a blanket permit in the City of Tucson to cover your signs.

Please note that this information is in compliance with the City of Tucson Sign Code. For more
information or questions please contact City Sign Code Committee member, Dan Santa Maria, Realtor
® at 795-1492.

For information on signs picked up by City of Tucson you may contact The Department of
Neighborhood Resources at (520) 791-5601 or (520) 791-5550. Pick up signs at 201 N. Stone Ave.

Directional signs are prohibited in Oro Valley.
For information regarding picked up signs in Oro Valley call (520) 229-4877.

For information on picked up signs in Pima County you can search the yard on Wednesday’s between
8:00 am – 3:00 pm at 1301 S. Mission Rd. near Bldg. #1. (Do not call)

For information on picked up signs in Marana contact Development Services at (520) 382-2600.




                                                                                                      55
Test Your "BINSR" IQ!
All of the following statements about the Buyer Inspection Notice and Seller's Response Form (BINSR)
are true EXCEPT:
a. By executing the form, the buyer represents that the buyer has completed all desired inspections.
b. By executing the form, the buyer acknowledges that the buyer has verified all information deemed
important.
c. If the buyer disapproves of items, the buyer may request that the seller reduce the purchase price
in lieu of repairs.
d. If the buyer disapproves of items, the buyer may cancel the contract. <br<>
ANSWER: C - The contract provides that the buyer may either elect to immediately cancel the contract
or provide the seller an opportunity to correct the items disapproved. If the buyer wants a reduction in
purchase price in lieu of repairs, the buyer must negotiate a reduction and reduce the modification to
writing prior to delivering the BINSR.




                                                                                                      56
Too Cool
The Scenario:
It is January 23, and at 1:00 pm the home inspector is already at the property when you pull in the
driveway with your buyer to conduct the scheduled home inspection. Your regular inspection company
could not accommodate your schedule, so you are using a different company that came highly
recommended to you.

There was a hard freeze overnight with the temperature dropping to 25° F – quite cool for Tucson.
Not to worry though – the afternoon temperature is predicted to be back to 70° F by 3:00 pm.

As usual, the home inspector has already begun looking at things on the outside of the property and
has noticed that the air conditioning unit is on the north side of the building – shaded from sunlight
the entire day.

The Risk:
On completing the inspection, the inspector is reviewing the findings with you and your buyer. To your
surprise, the inspector notes that the air conditioning system was not inspected because of the risk of
damage due to the cold weather. Naturally, the buyer knows that they are going to need a properly
operating air conditioner in a few short months and is upset to learn that its operation will not be
checked.

One peculiar difference among home inspectors seems to be their position on evaluating the Heating
Ventilating and Cooling (HVAC) system. This somewhat controversial issue that has surrounded home
inspections is over the advisability of operating the air conditioning unit in cool weather. In Tucson,
cool weather means below 65 – 70° F. Many home inspectors advise against, or refuse doing this
evaluation unless warmer temperatures prevail – and they each seem to have their own “critical
temperature”. Other home inspectors don’t seem to think it is a problem and go ahead and run the
AC unit regardless of outside temperature.


What To Do:
So, it will be important to discuss this subject with the chosen home inspector to ascertain what their
practice will be – and who will be responsible for any damage that may result from operating an air
conditioner in cooler weather. And, just as important, a discussion of this subject needs to take place
with the buyer and seller clients in advance.




                                                                                                     57
To Survey or Not to Survey?

The Scenario:
The home was built by the seller himself - 5 years ago. The county inspector gave the home owner all
of the appropriate permits and approvals. There is a surveyor’s stake in the ground that is alleged by
the seller to be the property line – and based on the available records, it looks like it is the appropriate
distance from the home.

During the home inspection a neighbor comes by and says that 60 feet on the west side of the home
is dedicated to the County. After much urging on the part of the buyer’s agent, the buyer reluctantly
decides to have a survey performed since the measurements are not matching up with what the seller
is saying.


The Risk:
The buyer has paid for the survey and learns that indeed somebody has moved the stakes. The
County owns much of the land and will charge $5,000 to begin abandonment proceedings – which
may take several months. Who will pay for all of these unexpected expenses? What about the loan
application costs, and the interest rate lock, and the appraisal?

Too many buyers make assumptions about property boundaries based on circumstantial evidence or
seller representations. The seller or anyone else may have moved the surveyor stakes or other
“boundary” or “corner” markers. Don’t be so naïve to think that people don’t do these things – it
happens all the time.


What To Do:
Buyer agents should never make personal judgments, or make statements, or agree with other’s
statements that could lead a potential buyer of property to assume anything about property
boundaries. Whenever there is any doubt, a licensed surveyor should be employed. As real estate
agents, we simply have no expertise on this subject.

Whenever it may be appropriate, buyers should consider the advisability of having a professional
survey performed. It can be a negotiated item in the contract as to who, the buyer or the seller, will
order and who will pay for a survey by a licensed surveyor to determine or verify the property
boundaries.




                                                                                                         58
Unintentional Fixture

The Scenario:
Though it is attached to a mounting bracket on the wall, the large, expensive, flat-screen TV has been
identified as “personal property” and has been specifically excluded, in writing, from items that convey
with the sale of the house. The escrow proceeds normally – all parties have signed several days in
advance of COE and closing draws near without event – except that on the final walkthrough
inspection, the buyer notices that the expensive mounting brackets used for the flat-screen TV have
been removed by the seller leaving gaping holes in the wall.

The buyer insists that they be put back and the wall restored to its original condition. Though in the
large scheme of things, this may seem like a relatively small matter – it is material to the buyer and he
has instructed his lender not to fund until this dispute is resolved.

The Risk:
Not taking the time to thoroughly understand and document exactly what is considered a fixture and
what is considered personal property can cause misunderstanding, disagreement, and dispute. Which
of the two parties will concede? Maybe neither party will. Will the transaction close? Should the
buyer go and ahead and close and then pursue legal action against the seller? Should the buyer
cancel the contract and demand his earnest money be refunded? Are there other remedies?


What To Do:
It is extremely important to be as clear, specific, precise, and unambiguous when writing in additional
terms and conditions in a Purchase Contract. Any items that have potential for a difference of opinion
regarding whether they are a fixture or personal property need to be identified and delineated.

When disputes arise, it is best to remind clients of the provisions of the contract and, if appropriate,
recommend that they seek appropriate counsel – legal or otherwise to help protect their best interest.




                                                                                                      59
Unknown Property Taxes
The Scenario:
Buyer purchases newer home that has Assessor’s office showing taxes as $600.00. Title Company
will only prorate taxes based on what the Assessor’s office shows, which is the $600.00.


The Risk:
The problem is that the $600.00 is for the DIRT only, as the Assessor has NOT yet realized that there
is a house on this lot. Buyer collects from Seller the tax pro-ration based on the $600.00, and then
later in year- long after close of escrow- receives the NEW tax bill. Of course, now the Assessor has
discovered that there is a house on the property, and the Buyer is billed for $3200.00. Seller has
moved out of state and refuses to respond to any pleas to pay his fair share of the taxes, and Buyer is
stuck with the new, considerably larger tax bill. Buyer WILL most probably look to his agent to pay for
this, claiming that this possibility was NOT disclosed to him.


What To Do:
Buyer’s Agents should look carefully at the taxes shown on record and determine if these are
reasonable for a lot with a house on it, or if the taxes appear extremely low, note that the Assessor has
not caught up to reality yet. Buyer’s Agents should point out and disclose this item, and in the
purchase offer, require the Seller to leave in escrow, or credit to Buyers, a mutually-agreed upon
amount that is closer to what the average homes in the area are paying for taxes. Disclose the current
tax bill and possible tax bill to your Buyers, or be prepared to pay!




                                                                                                        60
Vacant Home Issues
As real estate practitioners, we are often called upon to go above and beyond our normal level of
service and standard of practice in assisting our clients. And, we often do so in the spirit of providing
exceptional customer service. However, doing so can be a source of real problems when it comes to
what we should be responsible for and what we should politely refuse to do – especially with vacant
home listings. At what level of service do we advise the property owner to hire a caretaker, handyman,
service personnel, or a licensed professional?


The Scenario:
You have taken a residential listing that is or has become vacant. The owners say that everything is in
good shape and no routine maintenance is going to be necessary. The market is slow, so you are not
routinely able to show the property nor is anyone else showing it.


The Risk:
So, do things go wrong with houses that are just sitting there all alone? You bet they do. The only
question becomes: Who is responsible for doing what about it? The risks associated with doing
something vs. not doing something yourself may be significant. Should the listing agent periodically
check on the condition of the property? Is monthly often enough? How about weekly? Should the
property be checked after every rainstorm during the monsoon season? Should it just be a drive-by,
look-see or a careful walkthrough inspection?


What should our observation / inspection include? Will it depend on the age and existing condition of
the property? How about it’s location? Does it matter how far away from our office or home the listed
property is?


Just a few of the possible problems and issues may include: water leaks, power outage issues,
irrigation system operation failure, burned out light bulbs, smoke detectors blaring because of a dead
battery, security systems on/off / alarming, HVAC problems, storm damage, erosion, weeds, blown
over trees, insect / pest infestations, dead animals, broken windows, pool / spa / waterfall
maintenance issues, lawn maintenance, etc., etc. What about the need to run water in all of the sinks
and flushing the toilets to make sure there is water in the plumbing traps to prevent sewer gases from
entering the home? How about mail, package, and newspaper delivery issues? And, access for
routine maintenance by others – pools, pest control, repairs? And signing for the acceptance of those
services rendered? Is the real estate professional to be held accountable and liable for all of these
and more?
What To Do:
Have a thorough and frank discussion with your seller clients about all of these potential issues and
reach an agreement about how all of these possibilities are to be handled. It may also be prudent to
remind the homeowner that their hazard insurance should reflect the vacant status and have them
contact their insurance agent regarding proper coverage.
And, as always, make sure your Broker approves of your consultations, agreements, and activities



                                                                                                        61
What’s in Your Ad?
Advertising violations by real estate practitioners appear to run rampant across the state and even in
our own backyard here in southern Arizona. Everything from business cards to newspaper, billboard
and television ads, to websites - advertising by real estate agents takes many forms - and every form
of advertising must meet certain guidelines and restrictions.

Perhaps one of the more prevalent shortcomings in agent advertising these days is on the internet - on
licensees’ websites and web pages. Standard of Practice 12-5 of the Code of Ethics states:

 “REALTORS® shall not advertise nor permit any person employed by or affiliated with them to advertise
 listed property in any medium (e.g., electronically, print, radio, television, etc.) without disclosing the
 name of that REALTOR®’s firm in a reasonable and readily apparent manner. (Adopted 11/86,
 Amended 1/07)”

 And more specific to website advertising, Standard of Practice 12-9 states:

 “REALTOR® firm websites shall disclose the firm’s name and state(s) of licensure in a reasonable and
 readily apparent manner. Websites of REALTORS® and non-member licensees affiliated with a
 REALTOR® firm shall disclose the firm’s name and that REALTOR®’s or non-member licensee’s state(s)
 of licensure in a reasonable and readily apparent manner. (Adopted 1/07)”

The Arizona Department of Real Estate (ADRE) has taken a position in writing on this subject and
specifically on internet advertising:

“The employing broker’s name must be on each page of an associate broker or salesperson’s website.
Web sites or emails that target Arizona residents with the offering of a property interest or real estate
service also constitute advertising and is a regulated activity. A.R.S. §32-2163(D) and A.A.C. R4-28-
502(L). The employing broker’s name must be visible on the first page of the web page, without the
necessity of scrolling down, regardless of the screen size of the computer. Web pages should identify
the broker on each page because it is possible to link to a single page and, if that is done, the broker’s
name needs to be visible. In contrast, if the employing broker produces a magazine that includes only
the broker's listings, the broker can be identified on just the front cover, not every page, because a
consumer picks up the whole magazine, not just one page.”

The entire memo from which this excerpt is taken is available at the following link:
http://www.aaronline.com/documents/advrules.aspx

Another violation that occurs less frequently is the improper use of the term REALTOR® - especially
when used as part of an agent’s web address or URL (Uniform Resource Locator). Anything that
incorporates a modification of the term REALTOR® in anyway, is a federal trademark violation. Things
like: www.bestrealtor.com, www.greatestrealtorontheplanet.net, are not permitted - no variation is
permissible.

ADRE has also issued a memo on this topic, and is available in its entirety at this URL:
http://www.aaronline.com/documents/trademark.aspx.

And, the NAR Membership Marks Manual, which contains the use guidelines for the REALTOR®
trademark, may be viewed in its entirety on the NAR website at:
www.realtor.org/letterlw.nsf/pages/trademarkmanual.

Real estate agents and their brokers share in the responsibility for proper and accurate advertising. It
is in the best interest of the public that we serve and it is also in our own best interest. Take the time
to review your advertising for compliance – and make any changes necessary. Why wait for a
complaint to be filed? This kind of issue can damage an otherwise good reputation and create ill will
among our peers. It can also be an expensive proposition to correct when you are finally discovered.
And, aside from the need to maintain regulatory compliance we also need to be wary of tort liability as
well.

Our local, state and national organizations may not be interested in spending money and resources on
enforcement of these rules – but, they are very much interested in compliance.




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What's Your Answer when the Judge asks...
"Don't you owe it to your client to review the Wood Infestation report with them? Shouldn't you obtain a
full and accurate report? How would you advise the buyer if the inspector indicated on the report that
some areas are "inaccessible" or, because there are boxes in the attic, they cannot inspect it at all?
Would you not alert the client to the fact that they have a less than complete report?"


Is it typical for a buyer’s agent to read the report, make note of the inaccessible areas and discuss
these with their client? If not, why not?


If a home inspector cannot inspect the gas furnace because the gas is not turned on, what actions do
you take as the buyer’s agent to assure that the furnace can be property inspected? If the dishwasher
cannot be tested because the water is turned off, how do you handle that? Surely you would be getting
in touch with the listing agent and making sure these utilities were turned on so the inspection can be
completed.


The Wood Infestation Report is the result of one of the inspections the buyer has deemed important to
complete for their due diligence. Let’s make sure they receive the information they need from ALL
inspections they have decided to obtain, so they will be able to make informed decisions about
requests they may make of a seller to correct important items to the buyer or to decide this is not a
property they wish to purchase.




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When “None” means “Something”!
Lines #179 & 180 of the Purchase Contract
The Scenario:
The REALTOR® is reviewing our 9 page contract with his prospective Buyers. Their infant is fussy and
toddler bored. “Just hit the highpoints” the husband insists. The price and closing dates are carefully
arrived at and every box is checked, page initialed and the offer is signed. Seemingly innocuous parts
are breezed over. Nothing is written on the blank lines that follow lines #179 and 180 that read:
Buyer warrants that Buyer is not relying on any verbal representations concerning the Premises except
as disclosed as follows: ________________


The Risk:
Shortly after closing the Buyers discover the property boundaries “aren’t where the Seller or agent said
they were when they saw the home and asked that they be pointed out.” Section 5c of the contract is
cited in the Seller’s defense. “You didn’t disclose any verbal representations that you were relying
on!” The Buyer responds that “we didn’t even go over that section!”


What to Do:
Section 5c is intended to prompt a discussion between the Buyer and their agent. “Do you have to sell
a house? Is your down payment reliant upon an estate settling? Are you relying on any verbal
representations made by the Seller or anyone else?” This is the time to question and hesitate. If this
Buyer had said “well the Seller/or agent showed me the property boundaries” it would be the time for
an agent to say “let’s write that in and confirm it during the inspection period.” If nothing is written
there is no evidence that the discussion occurred. Have the discussion, take the time to confirm
verbal representations before presenting the offer or describe what representations the Buyer is
relying on. Write ‘None’ on those empty lines if you asked the Buyer and they said “None.” This is one
time when “nothing” means something.




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You Be the Judge... Racial Steering?
Facts: Over a one-year period, sales associates for Matchmaker Real Estate showed black testers in
Chicago homes that were below their price range in racially-mixed areas and showed white testers
homes that were above their price range in white neighborhoods. The broker had a written fair housing
policy and required his sales associates to attend fair housing training. BUT, he did not monitor their
actions by keeping documentation relating to prospects' desired locations, locations actually shown or
price range.


Findings: The trial court found Matchmaker, its owner and four sales associates guilty of steering
prospective homebuyers according to their race. But because the broker had actively supported the
fair housing laws, the appellate court overturned the trial court's punitive damage against him and the
company. However, the compensatory award was upheld.




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When Over Communication is a Good Thing!
Scenario:
You receive a purchase contract; the buyer is getting a loan. Under the financing section, the buyer
has marked the box for the seller to pay one discount point and also a 1% origination fee. Then, in
section 8, additional terms and conditions, the buyer has written, “seller to pay $3,000.00 of buyer’s
closing costs.

Risk:
The seller and the seller’s agent understood the contract to mean that the seller was paying a Total of
$3,000.00 towards the buyer’s closing costs. The buyer intended for the seller to pay $3,000.00 in
Addition to the closing fees marked to be paid by seller on page 2. It was only when the escrow officer
went to prepare the HUD 1 that the ambiguity was recognized. In this case, the seller, seller’s agent,
buyer and buyer’s agent split the disputed $3600.00.

Solution:
Clarify, clarify, and clarify! If you are writing in additional terms, over communicate your point so as to
avoid any possibility of misinterpretation. Look carefully on page 2 to see if any of the buyer’s
financing costs are marked, paid by seller. If you get a typed contract, it is hard to see those little
boxes so look carefully! In this scenario, the seller should have responded with a counter offer with
clear language stating their willingness to pay a Total of $3K and no more.




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Working with Investors? Watch What You Promise!
Utmost care must be given when selling or representing residential property (single family,
condominium, townhouse/manufactured home, duplexes, triplexes etc.) as an investment. In general,
good practice dictates that residential agents involved in the sale of an investment property avoid
promising a return on the investment or future appreciation!

In our role as an agent for an investment client we are limited to provide information on how the
property is currently performing and/or has performed as an investment in the past. Our discussions
with prospective clients should focus on current/past expenses, current/past income and past
appreciation.

As residential real estate licensees the scope of our employment does not permit us to project future
investment performance. Pursuing this line of behavior may be likened to practicing, as stock brokers
do, a securities exchange which requires a securities license. Remember, when working with
investment properties, watch what you promise and at all costs “Do not work outside your area of
expertise” or licensing parameters.




These risk reduction tips provided by TAR are a general statement intended to raise important issues
relevant to risk reduction. These tips are not intended to be legal advice. It should not be a substitute
for advice of professional counsel or the assistance provided by an agent's Designated Broker.




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