Legal Question and Answers Part 2-BMC #3 – Supervision

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ISSUE:

The buyer wants to take possession of the property before the close of escrow. The seller, who does not occupy the premises, has no objection to this pre-possession.  May the listing agent draft a pre-possession agreement to facilitate the parties’ desires?

ANSWER:

The listing agent may assist the parties in preparing a pre-possession agreement. However, the Commissioner’s Rules require that the listing agent recommends that the clients seek “appropriate counsel from insurance, legal, tax and accounting professionals regarding the risks of a pre-possession” agreement beforehand. See A.A.C. R4-28-1101(K)If the seller refuses to seek the advice of these professionals, the listing agent may want to decline the representation because of the inherently risky nature of a pre-possession agreement.
Quick Quiz

Fill in the Blank:
The listing agent may assist the parties in preparing a pre- agreement.

An Agent’s Bankruptcy Need Not Be Reported To The Arizona Department Of Real Estate.

ISSUE: 

Does a real estate agent have to disclose a personal bankruptcy to the Arizona Department of Real Estate?

ANSWER: 

No. Under A.A.C. R4-28-301, an agent is required to notify the department within 10 days of (a) conviction, (b) adverse decision involving dishonesty or real estate, (c) restriction, suspension or revocation of a professional license, and (d) an order enjoining the agent from engaging in real estate activity.  However, there is no obligation for an agent to report a personal bankruptcy to the Arizona Department of Real Estate.  Arizona REALTOR® Magazine – April 2013 | Brokerage 
 

An Individual Who Does Not Hold A License May Hold An Ownership Interest In A Brokerage Firm

ISSUE: 

Can a non-licensed individual be an owner of a real estate brokerage?

ANSWER: 

Yes. A non-licensee may own a real estate brokerage through a corporation, limited liability company (LLC), or partnership provided that: (1) the entity itself is licensed with the Department of Real Estate as an employing broker; and (2) the entity designates a licensed broker who is an officer of the corporation, manager or member of the LLC (as applicable), or a partner of the partnership, to act as the designated broker. See A.R.S. § 32-2125.  Arizona REALTOR® Magazine – July 2013 | Brokerage
 

Quick Quiz

Fill in the Blank:
A non- may own a real estate brokerage through a corporation, limited liability company (LLC), or .

Backup Offers Require Discussion With Seller

ISSUE:

During the escrow period, the listing broker receives a backup offer. Does the listing broker have to disclose this backup offer to the buyer?

ANSWER:

The listing broker is required initially to present the backup offer to the seller. After consultation with the seller about the backup offer, the listing broker is required to follow the instructions of the seller as to whether or not to disclose the backup offer to the buyer.  Arizona REALTOR® Digest April 2005
 

Broker Can Assign Commission Directly to the Agent

ISSUE:

The broker has instructed the escrow company to pay the commission directly to the broker’s agent. A.R.S. §32-2155(A) requires a licensee to receive commissions only from their broker and also requires a broker to pay commissions only to licensees. Does this payment by the escrow company of the commission directly to the agent violate A.R.S. §32-2155(A)?

ANSWER:

Probably not. There are at least five exceptions to the specific language of A.R.S. §32-2155. One, if the broker is entitled to the commission as discussed above, the broker is probably allowed to assign the commission directly to the agent and the commission can be paid by the escrow company to the agent at closing. Two, a broker can assign the right to a commission to a non-licensee, e.g., a broker’s landlord who is owed rent. Three, a broker can pay the agent directly if the agent is now working for another broker. ADRE Substantive Policy Statement 2005.08. Four, after the death of the agent, a broker can pay the commission to the personal representative of the agent’s estate. Five, a broker can pay the commission directly to the bankruptcy trustee if the agent has filed bankruptcy.  Arizona REALTOR® Magazine – May 2011
 

Broker Can Deduct from Agent’s Commissions for Payments Made by Broker

ISSUE:

The buyer claims that the agent lost the buyer’s $1,000 money order to be used as earnest money.  The agent denies that the agent lost the $1,000 money order.  The buyer got a judgment against the agent and the broker in small claims court for $1,000.  The broker has now paid $1,000 to the buyer.  The broker and the agent have no written employment agreement. Can the broker deduct from the agent’s commissions the $1,000 paid to the buyer?

ANSWER:

Probably.  Under A.R.S. §23-352, the broker is entitled to deduct from the agent’s earned commissions any reasonable expenses paid by the broker on behalf of the agent.

Note:  Most brokers have employment agreements with their agents that authorize the broker to deduct from the agent’s commission any reasonable expenses paid by the broker on behalf of the agent.  Arizona REALTOR® Magazine – July 2011
 

Broker Cannot Solicit a Listing Even though Seller Registered on FSBO.com

ISSUE:

The seller registered on the “Do Not Call” list. The seller at a later date entered into an agreement with FSBO.com, and the seller’s telephone number is now published on the Internet. Can a broker telephone the seller to procure a listing?

ANSWER:

No. If an individual is registered on the “Do Not Call” list, any telephone calls to that person for the purpose of selling goods or services, e.g., a listing, are prohibited. There is no exception to this prohibition because the seller’s telephone number is public information. Note: The major exception to the “Do Not Call” list prohibition is that an unsolicited telephone call is authorized if the caller already has an established business relationship with the individual.  Arizona REALTOR® March 2008
 

Broker Entitled to Contact Buyer Despite Attorney’s Instruction

ISSUE:

The broker represents the buyer in the transaction. The buyer has never mentioned that the buyer is represented by an attorney. An attorney telephones the broker and says that the attorney represents the buyer and that the broker in the future must contact the attorney, not the buyer. Can the broker contact the buyer to confirm that the attorney is representing the buyer?

ANSWER:

Yes. The broker has a fiduciary duty to the buyer and should contact the buyer to confirm that the buyer only wants to have contact with the broker through the buyer’s attorney. The broker should then procure a written confirmation from the buyer.  Arizona REALTOR® July 2008
 

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