by Michele Gillis, Staff Writer
You're busy selling real estate and, unfortunately, you may be so busy that keeping up with all the intricate updates and what you learned when you tested for your license or renewal seems overwhelming.
Result: you get in trouble with the Florida Real Estate Commission.
We went to FREC, as well as local real estate attorneys, to get their thoughts and here's what we found:
Common pitfalls
The pit can be fairly deep when a complaint is filed and most problems lie in three areas, according to Juana Watkins, FREC's director of the Division of Real Estate.
• Escrow violations,
• Poor property management, and,
• Dishonest dealing, misrepresentation and concealment.
Want more?
Attorneys at last month's NEFAR Ponte Vedra Council meeting added these:
• Drafting errors on contracts,
• Not following Fair Housing rules, and,
• Not paying attention to detail in closings.
Let's take them in order:
Escrow
According to Watkins, escrow violations are more common now than in past years.
"These cases range from the competency-based issues such as late deposit of checks and improper or late reconciling of escrow accounts that require education or additional training for the broker to bring the broker into compliance, to the more serious cases involving theft, for which the more stringent punishment is required by the Florida Real Estate Commission," said Watkins.
"There are clear rules regarding the requirements for the handling of escrow funds. Brokers are expected to strictly adhere to those requirements. As a result of the number of new cases received over the last couple of years, the Division of Real Estate re-implemented a proactive escrow audit and inspection program to identify violations and to assist brokers with escrow requirements."
Property management
After the decline in real estate sales, many brokers went into property management and leasing as a way to diversify business, but found this is a very different way to do business.
"The various areas of real estate can be very different," said Watkins. "The broker who previously performed only sales may find that leasing or property management is not the same. Many of the cases involving property management also involve escrow violations because of the continuous deposits and disbursements from the rental escrow account."
Dishonest dealings
"Because of mortgage fraud and many other industry challenges, we have received complaints related to dishonest dealing or misrepresenting or failure to disclose certain facts related to the transaction," said Watkins. "These complaints vary in topic and outcome. The complaint and supporting documents provided by the complainants allege problems ranging from structural defects to the house known by the real estate licensee to listing 'facts' in the advertisement that turn out to be unsupported or inaccurate. It is very important to be clear and accurate when dealing with the public."
Drafting errors
According to Lee Osborne of Osborne & Sheffield, failure to include the names of all buyers, whether as borrowers or those who will take title, is a common mistake on contracts.
"On line one, include only the names of those buyers who will actually sign the mortgage note at closing unless it is a cash purchase, then name all parties taking title," said Osborne. "Include verbiage in paragraph 17 as to those names that will appear on the deed and in what capacity."
Another error: failure to include the names of all sellers.
The Multiple Listing Service doesn't always give you the names of all persons appearing in the title, so "you will need to verify whose names appear on the deed," said Osborne. "Also, always have the Trustee sign both individually and as Trustee."
Osborne said to be careful to take the legal description of the property only from the last recorded deed and then always verify against any existing survey and title policy.
If it's a cash transaction, Osborne gave a tip on that as well.
"If either a 'cash transaction' or 'loan without financing contingency' is checked under paragraph 2, the remainder of paragraph 2 should be struck from the agreement," said Osborne.
Osborne said to ensure that line 93 in paragraph 3 allows sufficient time to obtain title and survey after the time for loan approval, as well as any required repairs/replacement treatment.
"I would suggest not less than 15 days after the time for loan approval," said Osborne.
Two more: latent defects and the 10-day "free look".
"Paragraph 13 must be completed by the seller if the seller has knowledge of any latent defects, nuisance abatement proceedings and/or any open permits or unpermitted improvements to the property," said Osborne. "Failure to complete is equivalent to 'none'. If any of these change during the pendency of the contract, there has to be re-disclosure."
Since paragraph 14 now includes a 10-day "free look", the buyer can terminate the contract any time prior to the end of the 10-day "free look" period for any reason, but must furnish copies of any reports generated, together with proof of payment for inspections performed.
FREC does not monitor drafting errors specifically unless the error rises to the level of a violation of Chapter 475 of the Florida Statutes.
"There are no state approved contract forms, so the licensees generally select which forms to fill in that are most appropriate for their particular customer or property," said Watkins.
Fair housing
You need to be very careful how things are worded by you and your clients in your listings and advertising.
Jeff Marks of Ryan and Marks told of a situation where a customer added information to a listing on the MLS which stated, "Adults only, no children" and it showed on a different Realtor's website via an IDX feed.
The Realtor who had this wording on his website did not author the listing, nor was he the listing agent and he didn't have a link to the listing agent on his site, but he was almost sued by the Fair Housing Tester anyway.
Eventually, the case against him was dropped, but in an interesting twist, the Fair Housing Tester is still suing his broker because the listing agent, whose wrote the listing, was in the same office.
"Article 10 of the Code of Ethics says Realtors should not deny equal professional services to any persons for reasons of race, color, religion, sex, handicap, family status, national origin or sexual orientation," said Marks.
You can see a list of words to avoid in your advertisements or any written words associated with your listing at www.fairhousing.com.
Tips that Marks offered were to delete the private remarks section on the MLS to avoid a customer entering "bad" words onto your listing.
"Fair housing violations fall under federal law," said Watkins. "If a real estate licensee is found by the federal government to have violated fair housing, that referral could come to Florida for processing under our dishonest dealing statute."
Closing details
Rod Schloth of The Law Offices of Rod Schloth:
If a buyer needs to bring funds to a closing for more than $500, the buyer must obtain a cashier's check payable to the closing agent, not to the real estate firm or the seller. Or they can wire transfer the funds to the closing agent prior to the closing. If the amount is less than $500, the closing agent will accept a personal check.
"Remember, if you are the selling agent, bring the binder deposit to closing," said Schloth. "Also, the buyer needs to have two forms of identification at the closing, one with a photograph. The seller should bring one form of photo identification to the closing as well."
Location of the buyer, seller and spouse are very important to convey to the closing agent.
"It is vitally important that you communicate with the closing agent as to your client's location for closing," said Schloth. "Are one or more of the parties to the transaction going to be out of town, so that we must mail away the proper paperwork prior to closing? Is someone living abroad? Is someone active duty military and deployed? These questions must be answered and communicated to the closing agent."
In Florida, you are married or you are not married. There is no "separated" as far as real estate is concerned.
"Article X, Section 4 of the Florida Constitution requires the signature of a spouse to sell or mortgage homestead property," said Schloth. "This language is on the front page of the NEFAR Purchase and Sale Agreement. You must ask the seller and buyer regarding their marital status and it should be on the Purchase and Sale agreement. This presents very difficult circumstances when someone is married, but has no idea where their spouse is located. Likewise, when someone is in the process of divorce, but the divorce has not been completed, we frequently have difficulty with the closing."
Schloth said that if your buyer or seller has a Power of Attorney for another signatory at closing, send a copy of the POA to the closing agent prior to the time of closing for review and approval.
He added, if there are special circumstances with the buyer and seller, let the closing agent know prior to the closing.
"For example, the buyer and seller hate each other, seller is going through a nasty divorce, seller is tipsy everyday by two o'clock, buyer is a 'reader' (they will try to email all documents in advance) or that the seller is negotiating a short sale," said Schloth. "The more information the closing agent has early in the processing of the transaction, the more likely a solution can be implemented prior to closing."
Schloth said it is very important to communicate any new issues or errors as soon as possible.
"Do not wait until closing to resolve issues between the parties. All issues should be resolved prior to closing," said Schloth.