© 2013 rockwell publishing washington real estate practices lesson 3: listing regulations

Washington Real Estate Practices

Lesson 3:

Listing Regulations

Real Estate Law

Washington real estate law determines:how commissions are paidwho “owns” a listing

Real Estate Law How commissions are paid

Agent’s commission must come from her brokerage.Seller pays brokerage and brokerage

pays agent a portion of that amount.

How Commissions Are PaidDifferent brokerages

If buyer was represented by different brokerage:buyer’s brokerage will receive part of

commission, andbuyer’s agent will be compensated by his

brokerage.

How Commissions Are PaidSame brokerage

If two agents working for one brokerage share credit for sale, brokerage must arrange commission split.One agent cannot compensate another.

Real Estate LawSuing for a commission

If seller owes commission but refuses to pay it, brokerage may sue to enforce listing agreement.

Agent can’t sue seller directly, but can sue brokerage if designated broker fails to pay agent part of commission.

Real Estate LawOwnership of listing

Only brokerage can deal directly with principal, so listing agreement “belongs” to brokerage.

When signing listing, agent should fill in brokerage’s name, and then sign his name as agent for brokerage.

Real Estate LawOwnership of listing

If agent quits working for brokerage and begins working for another brokerage, listing stays with first brokerage.

SummaryReal Estate Law

Paying a commissionCommission splitSuing for a commissionOwnership of listings

Distressed Property Law

In 2008, Washington passed the Distressed Property Law.The law protects homeowners in financial

distress from exploitive foreclosure rescue schemes.

Generally, real estate agents providing routine real estate brokerage services are exempt from the law’s requirements.This exemption doesn't apply if an agent

actually participates in a distressed home conveyance.

Distressed home conveyance: when buyer:buys property from distressed homeowner

(one facing foreclosure), allows homeowner to stay in home for more

than 20 days past closing, and promises to convey property back to

homeowner (or promises homeowner a share of the proceeds from property’s resale).

If agent participates in this type of transaction, he must complete a distressed home consultant agreement with homeowner that describes the additional services to be provided. An attorney should draft the consultant

agreement. It should be attached as an addendum to the listing agreement.

Many standard listing agreement forms now include clause stating that licensee will not assist in a distressed home sale without a separate written agreement.

SummaryDistressed Property Law

Distressed homeownerDistressed home conveyanceDistressed home consultantDistressed home consultant

agreement

Antidiscrimination Laws

Important fair housing laws:Fair Housing Act (federal)Washington Law Against DiscriminationWashington Real Estate License LawAmericans with Disabilities Act

Federal Fair Housing ActProtected classes

Federal Fair Housing Act enacted in 1968 to prohibit discrimination in housing based on:

racecolorreligionsex

national origindisabilityfamilial status

Federal Fair Housing ActProtected classes

Disability: any physical or mental impairment that substantially limits one or more major life activities.

Federal Fair Housing Act Residential transactions

Act applies to sale or lease of:residential propertyvacant land for construction of residential

buildings

Federal Fair Housing Act Residential transactions

Along with transactions, applies to:advertisingfinancingreal estate brokerage activities in

connection with residential real estate transactions

There are several exemptions, but never applicable when real estate agent is involved.

Federal Fair Housing Act Prohibitions

Act prohibits the following when based on protected characteristics:refusing to rent or sell residential property

after receiving bona fide offerrefusing to negotiate for sale or rental of

residential propertychanging terms of sale or lease for different

buyers or rentersusing advertising that indicates preference or

intent to discriminate

Federal Fair Housing Act Prohibitions

representing property is not available for inspection, rent, or purchase when it is available

discrimination by residential lenderlimiting participation in MLScoercing or intimidating anyone for exercising

her rights under Fair Housing Act

Federal Fair Housing Act Blockbusting, steering, redlining

In particular, Fair Housing Act prohibits: blockbustingsteeringredlining

Federal Fair Housing Act Blockbusting

Blockbusting: agent encourages people to list homes by predicting members of another race (or another protected group) are moving into neighborhood.

Federal Fair Housing Act Blockbusting

Agents profit from blockbusting by:purchasing vacated properties at reduced

prices, orcollecting commissions on induced sales.

Federal Fair Housing Act Steering

Steering: channeling buyers or tenants to or away from particular neighborhoods because of race (or another protected characteristic).

Federal Fair Housing Act Steering

Agent cannot advise buyer to buy or not buy based on neighborhood’s racial or ethnic composition.Avoid unsolicited statements about

neighborhood’s racial or ethnic composition.

Federal Fair Housing Act Redlining

Redlining: lender’s refusal to make loan, based on ethnic or racial composition of property’s neighborhood.

Federal Fair Housing Act Redlining

Lender may reject loan application for property in neighborhood where values are declining.Decision must be based on objective

economic criteria.

Federal Fair Housing Act Enforcement

Fair Housing Act enforced:by Department of Housing and Urban

Development through its Office of Fair Housing and

Equal Opportunity

HUD may refer cases to state’s Human Rights Commission.

Violations of act may result in:injunction ordering stop to violation,payment of damages and attorneys’ fees

to injured party, andpayment of civil penalty to government.

Civil penalty as high as:$16,000 for first offenseup to $65,000 for subsequent offenses

SummaryFair Housing Act

Fair Housing ActBlockbustingSteeringRedliningPenalties

Washington Antidiscrimination Law

Real estate agents must comply with state antidiscrimination laws, which include:Washington Law Against DiscriminationWashington Real Estate License Law

WA Law Against Discrimination

Washington Law Against Discrimination is stricter than the federal Fair Housing Act. Covers a broader range of activities and

protects more classes of people.

WA Law Against Discrimination

Law prohibits any discrimination based on:

race creed color national origin sex marital status

sexual orientation familial status disability use of trained guide or

service dog military status

WA Law Against DiscriminationProhibited acts

Law prohibits wide range of discriminatory practices in:employmentinsurancecredit transactionsplaces of public accommodation and

amusementin regard to all types of real property

It is against the law to:refuse to engage in a real estate transactiondiscriminate in terms/conditions of real

estate transactiondiscriminate in providing services/facilities

related to real estate transactionrefuse to receive or fail to transmit a bona

fide offerrefuse to negotiate

claim property is not available for inspection, sale, rental, or lease when it is available

fail to tell prospect about property listingpublish an ad, notice, or sign that indicates an

intent to discriminateuse application form or make any record or

inquiry indicating intent to discriminatetake a listing with an understanding that

someone may be discriminated against

expel a person from occupancydiscriminate in negotiating, executing, or

financing a transactionengage in blockbustinginclude a condition, restriction, or prohibition

based on a protected class in a written agreement

discriminate in any credit transaction through different terms and conditions

WA Law Against DiscriminationExemptions

The law has very few exemptions, and none of them apply to a real estate agent engaged in professional activity.

WA Law Against DiscriminationEnforcement

The Washington Human Rights Commission enforces the state antidiscrimination laws.Individual may file complaint with the

commission within one year of discriminatory action.

Commission investigates all complaints and will try to resolve problem by conference, conciliation, and persuasion. If cannot be resolved, a hearing is

scheduled with administrative law judge.

Administrative law judge can:issue cease and desist order,provide affirmative relief,award compensatory damages, and/orimpose civil penalty.

Washington Real Estate License Law

Real estate agents must also comply with antidiscrimination provisions of license law and regulations.

Licensee’s violation of fair housing or civil rights law is grounds for disciplinary action.

The Department of Licensing can suspend or revoke the license of a brokerage that discriminates against protected class member in sales or hiring activity.

As with any license law violation, individual licensees face a fine of up to $5,000 for each offense.

Licensee may also be required to complete educational course on civil rights laws and nondiscriminatory real estate practices.

Americans with Disabilities Act

Americans with Disabilities Act is a federal law requiring places of public accommodation and other commercial facilities to provide equal access to disabled persons.

Americans with Disabilities ActPublic accommodations

Public accommodations = facilities open to public, including:brokerages and other office buildings storesrestaurantshotels

Americans with Disabilities ActModifications

May require modifications to facilities, such as:ramps or elevatorsspecial bathroom stallsdesignated parking spaces

Americans with Disabilities ActCommercial properties

Brokerage working with commercial property should:be aware of ADA requirementsinform prospective buyers or tenants of

modifications they may have to make

SummaryAntidiscrimination Laws

Washington Law Against Discrimination

Washington Real Estate License LawAmericans with Disabilities Act

Fair Housing Law ComplianceSteering

Never direct members of minority groups to minority neighborhoods.Even if done with good intentions,

steering is always illegal.

Not illegal to truthfully answer client’s questions about residents of neighborhood, even if he decides not to look at that neighborhood because of type of residents.

Agent can’t discourage buyer from looking within a neighborhood, but doesn’t have to show properties buyer doesn’t want to see.

Fair Housing Law ComplianceBlockbusting

When listing property, never imply presence of minorities will:lower property values,make neighborhood less safe, orlower quality of neighborhood schools.

Fair Housing Law ComplianceRefusal to list

Never refuse to list property because of presence or absence of particular group.

Never imply house will be easier or harder to sell because of presence of particular group.

Fair Housing Law ComplianceRacial jokes

Agent should not remain silent if potential clients or customers make such discriminatory statements.

If client’s jokes or comments indicate willingness to discriminate, agent should clarify position on fair housing.

Fair Housing Law ComplianceExplain the law

In any listing presentation, agent should explain fair housing laws to seller.

Comments by seller that aren’t discriminatory but refer to “preserving character of neighborhood” are red flags; agent may be better off refusing listing.

Fair Housing Law ComplianceAdvertising

Advertising flyers should be sent to diverse sample of potential buyers.Don’t limit mailing flyers to persons or

neighborhoods predominantly of particular race.

Ads shouldn’t suggest recipient can control what type of person will buy property.Phrases such as “uphold standards of

community” or “preserve character of neighborhood” are suspect.

Advertise in newspapers of general circulation instead of limiting ads to neighborhood or foreign-language newspapers.

Use diverse images in choice of photos and clip art.

Include Equal Housing Opportunity logo.

Never suggest discriminatory preference.

Ads containing information with religious significance may be considered to convey religion-based preference.

Okay to describe accessibility features.

Don’t suggest preference for adults or limitation on children.Unless property qualifies as housing for

older persons under federal guidelines.

SummaryFair Housing Law Compliance

Avoid blockbusting and steeringDon’t refuse listingsAvoid racial jokesExplain the lawAdvertising

Antitrust LawsSherman Act

Federal antitrust laws require fair business practices among competitors.Sherman Act, passed in 1890, prohibits

any agreement that unreasonably restrains trade.

Sherman ActPenalties

Penalties for violating Sherman Act:for individual, fine up to $1,000,000 and

up to 10 years in prisonfor corporation, fine up to 100 million

dollars

Sherman ActProhibited acts

Antitrust laws prohibit four specific practices:price fixinggroup boycottstie-in arrangementsmarket allocation

Price fixing: competitors cooperating in setting prices.

Competing real estate brokerages may not set uniform commission rates or publish mandatory fee schedules.Commission rates must be freely

negotiable between brokerage and seller.

Sherman ActPrice fixing

Agent should not: say commission rate is fixedsay government, Association of Realtors®,

or MLS sets commission ratesay standard rate exists in communitymention rates that competitors charge

Antitrust LawsPrice fixing

Agents should avoid discussing commission rates with competing agents.

Designated broker may, however:discuss commission split with cooperating

brokeragediscuss commission rates with her own

agents

Antitrust LawsPrice fixing

Antitrust LawsGroup boycotts

Group boycott: agreement between two agents to exclude another agent from participation in real estate activities.Violation of antitrust laws.

Group boycott can be based on:formal agreement carried out by large

groupcasual discussion between two people

Because of group boycott prohibitions, MLS cannot deny membership to particular brokerage.

Even agreement among several agents to not refer business to an agent perceived as unethical would be considered group boycott.

Antitrust LawsTie-in arrangements

Tie-in arrangement: agreement to sell one product only on condition that buyer purchases different product as well.

Example: Builder wants to buy vacant lot from developer, but developer will sell only if builder lists completed property with him.Known as list-back agreement.

List-back agreements are legal if parties enter into them voluntarily.Illegal if a mandatory condition of sale.

Market allocation: agreement between competing firms not to sell certain products or services, in certain areas or to certain customers.

Example: Two real estate firms cannot agree to split up town, one firm taking north end and the other south end.

Antitrust LawsMarket allocation

The Washington Unfair Business Practices and Consumer Protection Act (“Consumer Protection Act”) prohibits anticompetitive practices.Covers same practices as federal

antitrust law.

WA Unfair Business Practices and Consumer Protection Act

Act bans “unfair or deceptive acts or practices in the conduct of any trade or commerce.”Also prohibits misleading or deceptive

advertising.

Under the Consumer Protection Act, the builder/seller of a new home gives the buyer an implied warranty of habitability.Latent defects affecting safety and

livability of home violate the implied warranty.

Private party suing under act may recover damages, court costs, and attorney’s fees.

Court is allowed to triple the damages award.

State may also bring suit against a company or individual.

SummaryAntitrust Laws

Sherman ActPrice fixingGroup boycottsTie-in arrangementsConsumer Protection Act

Environmental Laws

Federal and state environmental regulations may affect real estate transactions:NEPASEPAShoreline Management ActCERCLAClean Water ActEndangered Species Act

Environmental LawsNEPA

NEPA (National Environmental Policy Act) requires federal agencies to provide environmental impact statement for any action with significant effect on environment.Applies to federal development and

private actions requiring federal agency approval.

Environmental LawsSEPA

SEPA (State Environmental Policy Act) requires environmental impact statement for all acts of state and local agencies that may have a significant effect on environment.

Applies to private development since construction requires building permit (granting permit is local agency action).

Environmental LawsShoreline Management Act

Shoreline Management Act regulates development within 200 feet of the high water mark.

Shoreline Management Act applies to:coastal shorelinesshores of lakes larger than 20 acresstreams that flow at certain rates

Developers of shoreline property required to obtain a substantial development permit before work begins.“Substantial” means development in

excess of $6,416 or that materially interferes with normal public use of water or shoreline.

Violators of the act may be fined up to $1,000 per day.

Court may order shoreline restored to its original condition.

Environmental LawsCERCLA

CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) is federal law regulating liability for environmental cleanup costs.

Parties responsible for cleanup of property contaminated by hazardous waste may include both current and previous landowners.

Environmental LawsClean Water Act

Section 404 of Clean Water Act prohibits development of wetlands without permit from U.S. Army Corps of Engineers.

Wetland development may be permitted if developer creates new wetland areas elsewhere or pays into government fund that restores wetlands.

Environmental LawsEndangered Species Act

Endangered Species Act limits property development where endangered or threatened species are present.Development may be allowed if property

owner agrees to Habitat Conservation Plan and takes measures to limit harm to protected species.

Environmental Hazards

Possible environmental hazards on property: asbestos urea formaldehyde radon lead-based paint underground

storage tanks

water contamination illegal drug

manufacturing mold geologic hazards

Environmental HazardsAsbestos

Asbestos was commonly used as insulation, in floor tile, and in roofing material.Harmless in original state but can cause

lung cancer as it disintegrates and turns to dust.

Environmental HazardsAsbestos

Asbestos can be dealt with through:enclosure (placing barrier between

asbestos and rest of space)encapsulation (covering asbestos with

adhesive that seals it off)removal

Environmental HazardsUrea formaldehyde

Urea formaldehyde can cause illnesses such as cancer and breathing problems.May be found in pressed wood building

materials and foam insulation.Urea formaldehyde materials emit

dangerous gases for only a few years.

Environmental HazardsRadon

Radon is gas that can cause lung cancer.Can seep into basements or foundations.Found wherever uranium is deposited in

earth’s crust.

Radon can be dealt with by sealing holes or cracks that allow it to enter house.

Environmental HazardsLead-based paint

Lead is toxic material particularly harmful to young children who may ingest it.Many homes built before 1978 contain

some lead-based paint.Paint may be removed or covered with

non-lead-based paint.

Environmental HazardsUnderground storage tanks

As underground storage tanks grow old, they may rust and leak oil into groundwater.Federal and state laws regulate storage

tank removal and cleanup.

Environmental HazardsWater contamination

Contaminated water may expose people to health hazards:bacteria or virusesnitrateslead or mercurypesticides or fertilizersradonoil from underground storage tanks

Environmental HazardsIllegal drug manufacturing

Properties used for manufacture of illegal drugs may retain residues of highly toxic chemicals.These properties should be thoroughly

tested.

Environmental HazardsMold

Mold is a common problem with no ill effects for most people, but can cause serious respiratory problems for some.

Cannot be totally eliminated, but may be limited by:scrubbing away current growthlimiting sources of moisture to prevent

future growth

Environmental HazardsGeologic hazards

Home buyers should be aware of potential geologic hazards for certain properties:landslidesfloodingsubsidence (collapse of ground into

underground cavities)earthquakes

Environmental HazardsAgent’s role

Agent should be on lookout for potential environmental problems when viewing the property.

Environmental HazardsAgent’s role

Advise seller to consult environmental attorney, engineer, or other professional if problems are suspected.

Buyers shouldn’t buy property until necessary cleanup is completed.

SummaryEnvironmental Issues

NEPASEPAShoreline Management ActCERCLAClean Water ActEndangered Species ActEnvironmental hazardsAgent’s role

© 2013 rockwell publishing washington real estate practices lesson 3: listing regulations

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