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The Real Estate Agent's Guide to Liability Protection
When a home sale closes, it can feel like the end of a journey. Finally, after open houses, showings, contracts, revisions, and all the myriad steps involved, the client gets to move into their new home and your job is done. Unfortunately, things aren't always so cut and dry, especially with mortgage rates, prices, and chances of buyer's remorse on the rise. Even when real estate agents do everything perfectly throughout a sale, they can get pulled into a legal claim months or years later. Let's explore how you can protect your real estate business and your sellers from home sale disputes. Keep yourself covered through disclosures For most home sales, agents and sellers need to complete disclosure forms. These forms list out important information about the property, like condition, assets, fixtures, updates, and more. As useful as they are, these forms can also be the starting point for potential home sale lawsuits for three reasons: They're legal documents, so they're binding and can be enforced They're full of legalese, so sellers have to ask and agents become the source of information Agents can't make any material representations This means there is a wide gap between what sellers need while completing disclosures and what agents can safely provide. The best bet for agents to reduce liability issues is to look into methods to provide this information without directly involving the agent. Protect yourself after the sale closes Of course, even with proper protections in place, there's always the chance of a post-sale lawsuit. Here's a true story of a claim brought against an agent, shared by our friends at Sellers Shield: Note: Names and details have been changed to protect anonymity. A year after selling her home, Abby, a real estate agent, received a text message from the buyer saying that the property had flooded in a recent storm. The buyer, an attorney, was threatening to sue her if she didn't pay for the water damage, and to report her to the state's real estate committee—putting her at risk of losing her license and her career. In the sale process, Abby had been very clear in her seller's disclosure. She had disclosed in detail that the home had flooded during her time living there, and that she had hired someone to install French drains to help resolve the flooding issue. This meant that Abby could protect herself against the buyer's claim. Because this was a client story through Sellers Shield, they kept her covered with a local real estate attorney to represent her, resolved the claim with minimal involvement on her part, and protected her from the stress of a lawsuit. As a real estate agent, you have a lot of things on your plate. Worrying about potential lawsuits after a sale shouldn't be one of them. To view the original article, visit the Lone Wolf blog.
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Termination of Real Estate Contract by Buyer: A Guide for Agents and Buyers
As a buyer, realizing you want to back out of a contract can be frightening and overwhelming. You probably have many questions. Can you back out of buying a house after signing a contract? Do you get your earnest money back? For real estate agents, learning that a client wants to back out also raises many questions and concerns. Termination of real estate contract by a buyer is possible, but it can only be done in certain circumstances to avoid significant consequences. It must also be done properly. Here is what buyers and agents need to know. Agents: Know When to Request a Termination or Release! Make sure you know your state's laws on real estate contract termination versus release and how it affects your client's rights. Only a release of contract releases both parties from liability. If your buyer client has a termination right, the earnest money cannot be released to them without a signed release of contract from the seller or a court order in many states. Automatically asking for a release of contract isn't always the right move. If the buyer has a legitimate right to terminate and the seller does not agree to sign a release, the termination deadline may be missed and the buyer's right to terminate can be forfeited. Can a Buyer Back Out of a Purchase Agreement? When it comes to canceling a real estate contract, you may hear two terms used: release and terminate. These terms are very different. Terminating a real estate contract is something one party does unilaterally when they have the legal right to do so. Real estate contract termination by a buyer may be done when the inspection turns up a problem the seller refuses to fix (with an inspection contingency), for example. A release from a real estate contact is an action the seller and buyer must take together. This move releases the buyer and/or seller from their obligations under the contract. If the buyer does not have cause to terminate the contract, the seller can agree to release them in exchange for forfeiting the earnest money, as an example. In most states, buyers have many opportunities to legally back out of a real estate purchase agreement. The typical real estate contract has several contingencies that give the buyer a legal way to terminate the contract and have their earnest money refunded. Even if these contingencies are waived, many states have a period during which buyers can change their mind. When Is It Too Late to Back Out of Buying a House? It's important to carefully check the purchase agreement and deadlines attached. There may be one dozen or more deadlines to cancel a real estate contract depending on state law and contingencies. For example, an option period may be 7 to 10 days once the contract takes effect. During this time, the buyer may be able to back out for almost any reason. Once this period ends, terminating the contract may only be allowed pursuant to specific clauses in the contract. After reviewing the seller's disclosures, there may be another deadline that allows the buyer to terminate. This may be up to five days. Can a buyer cancel an offer to purchase? The purchase agreement is not a legal contract until it is signed by both parties. A buyer can retract an offer if the seller has not yet responded. If the seller counteroffers, the buyer can still back out. Options for terminating a real estate contract are more limited once an offer is accepted and the contract is signed. Can You Cancel a House Sale Before Closing? Options for Buyers Depending on the contract, a buyer may be able to terminate a real estate contract based on a number of contingencies. Here are the most common options for how to get out of a house contract once it's signed by both parties. Inspection or option period: This is usually a fixed period of time (usually 7 to 10 days) during which the buyer can back out of the contract. There is usually a non-refundable fee for an option period. Financing contingency: This contingency clause allows the buyer to back out if they fail to secure financing. Property approval or appraisal contingency: The buyer can back out if the home does not appraise for at least the purchase price or the property is otherwise not accepted by the lender if the seller will not drop the price and the buyer does not want to pay the difference. Inspection contingency: This clause may allow the buyer to back out before the applicable deadline if they are unsatisfied with the home inspection, the seller refuses to make repairs or reduce the purchase price, or if repairs are estimated to cost more than a certain amount. The seller won't make agreed-upon repairs or treatments: In this case, the seller may be in default of the contract and the buyer can back out. Title issues: Buyers generally have the right to back out of a contract if issues are found with the title and the seller does not fix them before the deadline. These are only common options; there may be other options available to a buyer who wants to back out of a contract. For instance, the seller may have failed to give required disclosures by the deadline. How to Terminate a Real Estate Contract Terminating a real estate contract requires following a specific procedure based on the state. In general, the buyer and their agent must give proper notice of buyer's termination of contract. In some states, there is a specific form to use that informs the seller the contract is terminated and lists the clauses the allows the buyer to terminate. Termination of Contract and Release of Earnest Money In most states, what happens to the earnest money depends on the contract provisions. Earnest money is generally returned to the buyer in one of two scenarios: Buyer cancellation of purchase agreement under a termination right, or Termination of real estate contract by seller The seller generally keeps the earnest money if the buyer backs out of the contract without legal cause. In most states, the buyer's agent must request a release of contract. This must be signed by the seller to release both parties of liability and return the earnest money to the buyer. If the seller refuses to do so, a court may need to decide on the case. Consequences of Breaking a Real Estate Contract There may be financial consequences of terminating a real estate contract, depending on the reason. The farther into the process, the more likely (and more expensive) these consequences tend to be. When a buyer backs out of a contract that's been signed, their earnest money is at risk. The average earnest money amount is 1% to 3% of the purchase price, which is anywhere from $3,700 to more than $11,000 based on the average U.S. home price. For the buyer, getting the earnest money back usually requires the seller signing a release of contract. If they do not, the earnest money can be tied up in a time-consuming process with the case heard in court. If a buyer backs out of a sale without cause for terminating the contract, they forfeit their earnest money and may even be sued for additional damages. Can Seller Sue Buyer for Backing Out? While the law varies by state, a seller can sue a buyer for backing out of a sale – but it's complicated and uncommon. In general, buyers can be sued if they do not properly terminate a contract based on a contingency. In this case, the seller can sue them for specific performance (following through with the purchase) or money damages for breach of contract. If this happens, the earnest money does not necessarily limit the damages. That means a buyer can be sued for damages even beyond the deposit they put down. It's crucial for buyers and agents to understand not only when a buyer can back out of a real estate contract but how it should be done to avoid potentially serious consequences. To view the original article, visit the Transactly blog.
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[Best of 2021] The Top 5 Reasons Real Estate Agents Get Sued
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The Top 5 Reasons Real Estate Agents Get Sued
As a real estate agent, making a mistake can lead to legal trouble if you aren't careful. Being an agent requires you to keep track of sensitive client information and meet deadlines for those clients without letting anything slip through the cracks. Even the slightest mistake can cost you your career. While accidents are inevitable, it is important to know what real estate mistakes you should try to avoid. 1. Failing to disclose a defect If you know that there is a defect on a house that you are selling, you MUST disclose that to your client or the buyer's agent. Sometimes disclosing a defect can deter the buyer, but in some cases, the buyer decides that the defect can be fixed. It is your job as a real estate agent to disclose any piece of information involving the property so the buyers can make an educated decision about the purchase. Buyers backing out of a sale based on a defect is much less harmful to your career than a lawsuit because you failed to disclose an issue. 2. Misleading Be honest with your clients. Providing accurate information about the property and the neighborhood is very important so your clients can make an educated decision and to ensure that all parties involved are satisfied. While the goal of any real estate agent is to sell a home, if it requires you to mislead or lie in order to close the deal, then think again. Is closing a deal really worth your career and reputation? I think not. 3. Breach of contract When you enter a contract with a client, it is incredibly important that you abide by the contract and act in the best interest of the client. Breaking even the slightest rule, whether you do so intentionally or by accident, can be costly. 4. Bodily injury If someone gets injured while you are hosting an open house, you could be held liable. Before you open the doors of the showing, make sure that you have looked around for any possible dangers in the home. In order to prevent injury, post warning signs or verbally communicate the danger with whomever could be hurt. It is very important that you do whatever you can to avoid injury so that you are can avoid being blamed. 5. Selling in unfamiliar territory If you are selling in an unfamiliar territory, do your research! It is your job to be an expert in whatever market that you are conducting work in. If you fail to inform your clients about something regarding the location of the home or facts about the surrounding areas, you could be found at fault if there is an issue. By no means should this deter you from selling in a new area—just make sure that you have done your homework and inform your clients of any potential issues that you learn about. Unfortunately, any one of these mistakes can destroy your reputation and cost you your career. Remembering these tips can not only help you avoid being sued by an unhappy client, but they can also keep you on track to being a great real estate agent with a thriving career. To view the original article, visit the Zurple blog.
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Real Estate Copyright Infringement
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Are Electronic Signatures Admissible in Court?
It's a common question: how will an electronic signature hold up if challenged in court? After all, electronic signatures are becoming a vital business tool in today's remote environment--and people want to know if they end up in litigation that the authenticity of an e-signature can be proved like a traditional wet signature. The short answer: Yes, it can. Authenticity is easier to prove, in fact, thanks to built-in digital audit trails.
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Are Electronic Signatures Legal?
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Tips to Reduce Your Chances of Getting Sued as an Agent
Lawsuits are a concern for many professionals, and real estate agents are no expectation. Lawsuits quickly become very costly, and even if you are found to have not committed any fault, they can still harm your business. So taking some tips to reduce your chances of getting sued as an agent could end up saving your reputation, as well as thousands of dollars.
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Beyond CCPA and GDPR: New Digital Privacy Developments that Realtors Need to Know
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Murder, Death, Suicide, Haunted Houses and Ghosts: Are Agents Required to Disclose?
Halloween is right around the corner and ghoulish conversations regarding real estate are bound to come up. Here are some common questions and helpful advice for dealing with haunted houses and the like. Did you hear what happened? A real estate agent was telling us the shocking story that happened after a closing. Finally, following months of searching, his buyer fell in love with a home, placed an offer, and the condo closed with no problem.
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Building a Real Estate Team: The Legal Pitfalls of a Dual Agency
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CFPB Fines Real Estate Company: Do Agents Need to Worry?
Is Zillow RESPA compliant? Are MSAs illegal? These are a few of the questions posed in a new video that examines the impact of a recent order from the Consumer Finance Protection Bureau (CFPB), the government agency formed in 2011 in the wake of the 2007-08 mortgage crisis. Late last month, the CFPB "issued a warning shot to Realtors and brokers nationwide" when they fined a real estate company for an improper MSA (marketing services agreement) and referrals. According to the consent order, the lender was violating RESPA by offering the brokerage what was, essentially, a disguised payment for a referral. So what does this mean for agents who use, for example, Zillow's co-marketing program that lets them share advertising costs with a lender--or even other lead generation services? Does this arrangement violate RESPA, and do agents need to worry about the CFPB coming after them? Check out the video above to learn more, and then share your thoughts with us in the comments below!
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Real Estate Agent Tax Tips: Are You Really In Business?
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Facebook Housing Ads Run into Trouble with HUD
We talk a lot about Facebook advertising on RE Technology--and for good reason. It's one of the best ways to reach consumers, thanks to finely tuned targeting options. However, those targeting options are exactly what got the social network in trouble with HUD recently. Facebook lets you target ads according to all types of criteria--income level, area, age and, yes, race. It's this last item that brought the social network under scrutiny a few weeks ago. A reporter with Pro Publica created a housing ad, and Facebook let her exclude certain groups of people according to their "ethnic affinity." The article attracted the attention of HUD, who said that excluding people from seeing ads based on their race violated the Fair Housing Act of 1968. Facebook eventually agreed, and has removed the ability to target according to "ethnic affinity" for certain types of ads, including housing ads. You can watch the video above to learn more about this issue. For an more in-depth discussion on this issue, including Facebook's societal impact, see the following video from Tech News Today: Facebook Updates Ethnic Affinity Marketing.
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New Drone Rule Affecting the Real Estate Industry
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Stop Calling Me! Understanding the Do-Not-Call List for Real Estate
We are constantly looking for new ways to prospect in the real estate industry. Social media and digital marketing have taken a spotlight in past years, since they are automated and a more efficient means of attracting future clients. While we may be focused on newer legislation surrounding communication with consumers via email, social media and digital mediums, it's important to remind ourselves of the laws and regulations surrounding more traditional marketing methods, like picking up the phone and calling a prospect. Beginning in 2005 for the United States and 2008 for Canada, telemarketing businesses have been held to strict guidelines of who they can call and for what purposes. Each country has implemented their own Do Not Call list, managed and regulated by the Federal Trade Commission (FTC) and Canadian Radio-Television and Telecommunications Commission (CRTC), respectively. These laws and regulations are to protect consumers from businesses making calls with the sole purpose of solicitation. Make no mistake—real estate brokerages and professionals are subject to these laws. We can try to interpret the laws and find loopholes in wording or ambiguous definitions, but the courts have made it clear that the consumer has the right not to be contacted once they register on the Do Not Call List (DNCL). Don't let these rules scare you. They are there to protect you just the same as any consumer, and there is plenty of business to generate using the phone. It takes understanding the rules to get the leg up on your competition: 1. You are not breaking the law by calling a friend or someone you know on a personal level Even if they are on the Do Not Call List and even if you're calling to solicit business.
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The NAR Code of Ethics: How They Apply to Everyday Business
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Zillow and Move/NAR Settle Lawsuit and End Trade Secrets Battle
Zillow settled several lawsuits recently, including one we've all been watching closely: the Move, Inc. suit that accused Zillow of stealing trade secrets. According to the terms of the agreement, Zillow must pay Move, Inc. $130 million by June 20. Move, the operators of Realtor.com, brought the suit against Zillow in 2014 after two Move executives defected to the rival portal. The suit alleged that the executives, Errol Samuelson and Curt Beardsley, stole trade secrets and destroyed evidence in order to conceal the theft. Move and Zillow "have agreed to dismiss all claims and counterclaims with prejudice," according to an SEC filing, and the settlement is not an "admission of liability, wrongdoing, or responsibility by any of the parties." NAR will receive 10 percent of the settlement after Move deducts legal costs and fees. Move originally sought $2 billion in damages. Despite the settlement, bad blood persists. That means you shouldn't expect to see Zillow at any NAR conferences or events anytime soon. NAR has banned Zillow from their events for the remainder of 2016--and we wouldn't be surprised to see that ban stick around for even longer.
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Best of 2015: Why Reusing Listing Photos Could Mean Legal Trouble
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Why Reusing Listing Photos Could Mean Legal Trouble
That house you sold in 2012 has just come back on the market. You know you still have a picture somewhere--there it is--and the home still looks pretty much the same. You upload the photo and relist the property. No problem, right? Well, actually, you could be stepping into some dangerous legal territory. We spoke with Larry Lohrman, a real estate photographer and blogger in Salem, Oregon. He frequently writes about issues at the crossroads of real estate and photography. One of the most common topics of discussion on his blog is usage rights for photographs commissioned from professional photographers. "I have a friend who's an agent and photographer in Seattle," he says. After a conversation about just this subject, Lohrman's friend went back to his office of more than 80 agents and asked around. "Down to a person, no one" -- not the managing broker, not a single agent -- "understood that when the agents pay a photographer for photos, they aren't getting ownership of the photos. They're only licensing those photos for a specific time and purpose." A number of recent high-profile cases have brought this issue to light, and may be cause for concern if you're not 100% sure of the legal status of your listing images: In 2008, photographer Liz Ordonez-Dawes was awarded more than $12 million when the court agreed that her client's distribution of seven photographs to third parties constituted copyright infringement. In 2013, Palm Beach County photographer Andy Frame sued several websites over misuse of his photos of Olivia Newton John's home in Jupiter, Florida. In 2014, a class action lawsuit was filed against CoreLogic for allegedly tampering with and distributing proprietary photographic works to their MLS clients.
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Before You Cut And Paste Something Into Your Newsletter…
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Instagram: The New Terms of Service
With the rise of social media outlets, it is difficult to tell which were made for what function. For those unsure as to what function Instagram serves, let us at My Computer Works shed some light on this social media service. Instagram is a free photo-sharing program and social network that operates much like Twitter. Users can upload images that show up in a feed of their followers, much like the Facebook newsfeed, but these are just pictures. Now that we have a basis of what Instagram is, let's get into how it is changing. Exploring the New Terms of Service Instagram is further integrating with Facebook, which is causing them change their Terms of Service. The change causing the most buzz is that Instagram can use the images you upload for their ads, or sell them to third party partners. This shows under the headline of "Rights" in the Terms of Service and says: To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take in connection with paid or sponsored content or promotions, without any compensation to you.
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Online Notary: Future of Notarization!
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10 Common Errors Home Owners Make When Filing Taxes
Don’t rouse the IRS or pay more taxes than necessary–know the score on each home tax deduction and credit. As you calculate your tax returns, consider each home tax deduction and credit you are-and are not-entitled to. Running afoul of any of these 10 home-related tax mistakes-which tax pros say are especially common-can cost you money or draw the IRS to your doorstep.
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Steer Clear of a Tax Audit for 2010
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Smarter Agent Sues 13 Real Estate Technology Vendors!
Smarter Agent, provider of mobile search services for the real estate industry filed a law suit on March 26, 2010 in Delaware District Court to sue the following companies for infringement of their patent 35:271. Boopsie Inc. Classified Ventures LLC Hotpads Inc. IDX Inc. Move Inc. RealSelect Inc. Primedia Inc. Consumer Source Inc. Trulia Inc. Zillow Inc. ZipRealty Inc. Multifamily Technology Solutions Inc. dba MyNewPlace TRSoft Inc. dba Planetre
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Keep Private Information Out of the Public Eye
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