Real Estate Concepts & Legal Aspects

Reasonable Care

• Reasonable care is the degree of caution and concern for safety that an ordinarily prudent and rational person would exercise in a given circumstance.
• It's a subjective test of negligence, determining if a person failed to exercise reasonable care.

Tie-in Arrangement

• A tie-in arrangement is a contract where one transaction depends on another.
• The arrangement can be recommended but not forced.

Vicarious Liability

• Vicarious liability occurs when one party is held partially responsible for the unlawful actions of a third party.

For Sale by Owner (FSBO)

• FSBO transactions typically involve no commission paid to an agent.

Real Estate Commissions

• Real estate commission for a buyer's agent is often 3% of the sale price.

Exclusive Right to Sell Agreements

• Typical term length for an exclusive right to sell agreement is six months.
• No automatic renewal clause is typically included in these agreements.
• All property owners must be listed on the agreement.

ACRIS (NYC)

• ACRIS (Assessment & City Records Information System) website provides access to tax block maps. [www.a836-acris.nyc.gov]
• Rental compensation for properties differs from typical home commissions, typically 10-15% of the annual rent income.

Contract Precedence (Purchase vs. Rent)

• In cases of concurrent purchase and rental contracts, the purchase contract takes precedence, eliminating the associated rental fee.

Disclosure Forms

• Disclosure forms must be signed at the initial substantive meeting with the seller.
• This is to protect the client. If they refuse to sign, document the time, date, name, and continue the showing/meeting. An affidavit outlining this refusal must be filled out.

Real Estate Agents in NYS

• Real estate agents in New York State are considered independent contractors.

Independent Contractor vs. Employee

• Key differentiators between independent contractors and employees (for real estate agents) include:
  • Instructions and training
  • Set work hours
  • Job location
  • Work order specifics
  • Work expenses
  • Work tools

Independent Contractor Rights/Responsibilities

• Income tax on commissions is typically paid in arrears.
• No set working hours.
• No specific job location.
• Can be employed with another company/employer, but not two different brokers.
• Agents cover their own work expenses.
• Brokers cannot control an agent's work activities.
• Either party can terminate the relationship.

Termination of Agency

• Agency relationships can be terminated due to:
  • Failed agency terms.
  • Completion of the agency's purpose.
  • By law.

Confidential Information (Seller's Agent Perspective)

• The following details do not need to be disclosed to potential buyers:
  • School zones.
  • Traffic flow.
  • Ease of transportation.
  • Reasons for sale by seller.

Buyer's Agent Responsibilities

• Buyer's agents should investigate details not disclosed by the seller's agent.
• Research essential information: school districts, crime rates, etc.
• Assess the client's financial situation and mortgage eligibility.
• Check for lawsuits or funding issues related to the property/building.

Client Financial Verification

• For self-employed clients, ensure financing is feasible.
• Verify buyer qualifications include pre-approval and financial property/building checks.
• Review building assessments
• Understand pending or impending litigations.

Agent Record Keeping

• Agents must maintain records.
  • Buyer's agent records include disclosure forms, affidavits, property showings, prospective listings, correspondence, offers/negotiations, financial documents/applications, and contracts.
  • Seller's agent records include potential purchasers, disclosure forms, purchaser budgets, and correspondence (printed emails).

Disclosures for Sellers

• Agents must disclose lead paint disclosures (for pre-1978 buildings).
• Property condition assessments are required (mold, foundation issues, termites, etc.).

Agent Disclosure Forms

• Used when representing buyers, sellers, or in dual situations.
• The client must sign the disclosure form. Agent signs their name and brokerage.
• First substantive meeting is when the form is signed.
• Affidavit for cases of refusal to sign.

Dual Agency Disclosure Forms

• Required for dual agency situations.
• Separate forms for buyer/seller are needed.
• Client options include declining dual agency or continuing as customers (no fiduciary duties).

Broker Responsibilities

• Brokers are legally required to be present or available, supervising agents.

Independent Contractor Status Maintenance

• Maintaining independent contractor status does not require broker presence; only that they are present/reachable.
• Losing independent contractor status happens if one quits the brokerage.

Broker Allowable Practices

• Offering bonuses to salespersons (e.g., commission or referral bonus).
• Brokers may offer bonuses on top of commissions or referral bonuses.

Salesperson Brokerage Changes

• Potential for bonuses when referring buyers/sellers to a different brokerage or when selling property through a different brokerage.

Brokerage Agreement Negotiation

• Key areas for negotiating brokerage agreements:
  • Commission structure.
  • Time frame of agreement.
  • Early termination clauses.
  • Non-compete clauses.
  • Agreement modification capabilities.

Choosing a Brokerage

• Factors to consider: Global vs. local brokerage.