Real Estate Brokers Real Estate I Mike Brigner, J.D.
Parties to Real Estate Contract • Buyer • Seller • Listing/Selling Broker • Buyer’s Broker • Real estate transactions are covered by • Text Chapter 6 • R.C. 4735.51-.74
Real Estate Agents • Real Estate Agent = • Real Estate Sales Agent • Broker = • Real Estate Broker = • (Agents work for Brokers) • All are Agents • All are Realtors
Listing Agreement • Agreement between seller & listing broker • “Exclusive Right to Sell” (Text pp. 156-157) • Contract for services (not real estate) • So, not covered by Statute of Frauds • R.C. 1335.05, law that says which contracts must be in writing • Sale of real estate must be in writing • Listing of real estate need not be in writing
Listing Agreement • Must contain a definite expiration date R.C. 4735.18(A)(27) • typically 3-6 months • May be renewed • "extension clause" – commission is due to broker if he/she found a Buyer during the listing period, even if sales contract not signed until after expiration of listing agreement
Listing Broker • Owes to the seller the fiduciary duties of loyalty, obedience, disclosure, confidentiality, reasonable care, diligence and accounting R.C. 4735.62 • a. No duty to obey illegal instructions • b. Must use customary business methods, w/o interference from the seller
Listing Broker • More fiduciary duties: • c. Disclosure - full, fair, timely disclosure of any material fact • d. Material fact = Reasonable person would attach importance in making a decision • e. No duty to the buyer except to deal fairly and non-fraudulently
Other Brokers • SELLING BROKER: Subagent of listing broker. Owes same fiduciary duties to seller as listing broker. • BUYER’S BROKER: Owes fiduciary duties to the buyer only. No duty to the seller except to deal fairly and non-fraudulently.
Agency Disclosure • Ohio Real Estate Commission adopted an agency disclosure regulation as required by Ohio Revised Code (R.C. 4735.57) • Requires all real estate licensees to disclose in writing their agency relationship • That is, which party do they represent? • Purpose: consumer protection – protects both buyer and seller
Dual Agency • Conflict of interests issues – one person can’t be loyal to both sides • Dual agency is permissible in Ohio • A single broker may represent the buyer and the seller, but only with the knowledge and consent of both parties • Must use state form (R.C. 4735.57) • State of Ohio: http://ohio.gov/index.stm
Listing/Seller’s Broker Compensation • Contingency basis: Listing broker is paid only if he/she obtains a buyer • Usually paid a percentage of purchase price (typically 6 to 7%)
Listing/Seller’s Broker Compensation • Usually gets paid from purchase money at closing • Broker’s right to commission is a much-litigated issue
Buyer’s Broker Compensation • Can be flat fee from buyer • But usually is a share of listing broker’s % (“split commission”) • Seller’s Broker 5%, Buyer’s Broker 2% • Or, each broker paid 3½% • Splitting commissions requires consent of seller and buyer
Exclusive Listing • “Exclusive right to sell” in contract means listing broker gets commission if house is sold by any means during the listing • “Exclusive agency” in contract means listing broker gets commission if house is sold by anyone other than the owner himself • Listing broker also gets commission after end of any exclusive period, if broker was the “procuring cause” of finding the buyer
Inspections& Disclosures • Caveat Emptor - “Let the Buyer Beware” is the common law rule as to observable defects in real estate • Ohio Law: Seller now has duty to disclose known material facts. • R.C. 5302.30 • State of Ohio: http://ohio.gov/index.stm
Inspections& Disclosures • Seller NOT liable for failure to disclose if: • defect observable upon reasonable inspection, and • purchaser has opportunity to inspect, & • no fraud on part of the seller • Seller IS liable for failure to disclose if: • defect is not observable
Inspections& Disclosures • Listing Broker has a DUTY to conduct a reasonable inspection. R.C. 4735.67(A) • Listing Broker may not rely on seller’s word if broker has reason to believe seller is incorrect
Inspections& Disclosures • Buyer has DUTY to inspect and inquire • BUT Buyer has NO DUTY to inspect when an affirmative representation is made to buyer about condition
Inspections& Disclosures • "As is" = seller is relieved of duty to disclose defects • So, bars claim against seller for fraudulent nondisclosure • But does not bar claim for fraudulent misrepresentation or concealment • EX: "good sound house", but house has termites = fraudulent misrepresentation • EX: painted-over water marks = fraudulent concealment
Fair Housing • Federal Fair Housing Administration enforces federal law against discrimination in housing practices. Covers sale and rental • 42 U.S.C. 3601 et seq. • 24 C.F.R. 100.204 • Ohio Civil Rights Commission enforces state laws against housing discrimination • R.C. 4112.02(H)
Real Estate Brokers Concluded Thank you Mike Brigner, J.D. END OF CLASS: (EVERY Class) Clean up classroom; log off computers; check for personal property & computer disks; make sure you have signed in.