California Real Estate Practice PDF

Listing Agreements and 2 Property Disclosures Learning Objectives After completing this lesson, students should be able to... Describe the role of listing agreements in real estate transactions Contrast the key features of differe...

Listing Agreements and 2 Property Disclosures Learning Objectives After completing this lesson, students should be able to... Describe the role of listing agreements in real estate transactions Contrast the key features of different types of listing agreements Identify the required (legal) elements in every listing agreement, and explain the importance of core provisions Discuss mandatory property disclosure requirements, and the forms used to make those disclosures Summarize the legal issues and duties real estate agents should be aware of during the process of establishing and implementing a listing agreement relationship with a property seller Suggested Lesson Plan 1. Give students Exercise 2.1 to review the previous chapter, “Real Estate Agency Relation- ships.” 2. Give a brief overview of Chapter 2, “Listing Agreements and Property Disclosures,” and review the learning objectives for the chapter. 3. Present lesson content: Types of Listing Agreements – Open listing – Exclusive agency – Exclusive right to sell © 2021 Rockwell Publishing  California Real Estate Practice Instructor Materials Elements of a Listing Agreement – Terms of sale – Ready, willing, and able buyer – Termination date – Broker’s authority and listing period – Commission – Other clauses EXERCISE 2.2 Finding key contract provisions Mandatory Property Disclosures – Real estate transfer disclosure statement – Environmental and natural hazards – Other disclosures EXERCISE 2.3 Which disclosure is required? 4. End class with Chapter 2 Quiz. Chapter 2 Outline: Listing Agreements and Property Disclosures I. Types of Listing Agreements A. Listing agreement: contract between broker and seller; broker hired to find ready, willing, and able person to buy (or lease) property B. Open listing agreement: seller pays broker only if broker is procuring cause of sale (primary person arranging or negotiating agreement) 1. If seller sells property, or someone else does, broker doesn’t get commission 2. Seller may give open listing to multiple brokers C. Exclusive agency listing agreement: seller lists with one broker, but also retains right to sell property herself 1. Broker receives commission if anyone but seller finds buyer 2. Can result in disputes between broker and seller D. Exclusive right to sell listing agreement: seller lists with one broker; listing broker re- ceives commission if property sold during agreement, no matter who is procuring cause 1. Gives brokers maximum protection; most commonly used II. Elements of a Listing Agreement A. Must contain all basic contract elements (competent parties, offer and acceptance, consideration, and legal purpose) B. Additional required elements 2  Chapter 2: Listing Agreements and Property Disclosures 1. Property description: legal description best; street address not enough a. If legal description lengthy, attach copy to listing agreement; have seller sign as addendum 2. Terms of sale: listing price, financing options (from seller), any personal property included, preferred closing date, etc. 3. Broker’s authority: duties broker may perform, such as listing property with MLS, and receiving offers and good faith deposits 4. Promise of compensation: seller’s promise to pay broker when ready, willing, and able buyer found a. Ready, willing, and able buyer i. Makes offer that meets seller’s terms ii. Is financially able to complete transaction b. Fixed or variable compensation i. Fixed rate or amount: broker’s compensation usually a fixed figure (a percentage of the sales price or a set dollar amount) ii. Net listing: seller sets amount he wants to receive from sale; excess goes to broker (disfavored in California and illegal in some other states) c. State law requires listing agreements to have boldface statement: compensa- tion and/or commission rate is negotiable and not set by law d. If net listing used, law requires broker to disclose commission amount before seller commits 5. Termination date: law requires exclusive listing agreements (agency or right to sell) to have a specific termination date a. No legal minimum or maximum on term (up to parties), but date must be specified 6. Agreement in writing: statute of frauds requires listing agreements to be written; brokers use pre-printed forms a. To sue for commission, broker must have signed listing agreement C. Key provisions in a listing agreement 1. Broker’s authority and listing period a. Even if salesperson completes listing form, contract can only exist between seller and broker b. Brokers usually have authority to present offers and accept good faith depos- its; can’t accept offers c. Listing agreement lasts until termination date, unless terminated before that date i. Mutual agreement ii. Revocation by seller iii. Renunciation by broker 3  California Real Estate Practice Instructor Materials iv. Death or mental incompetence v. Loss of broker’s license 2. Commission a. Listing form has blanks to describe broker compensation and conditions for payment b. Broker usually given right to share good faith deposit with seller (if buyer breaches contract) c. Safety clauses protect brokers against problems with seller avoiding payment i. Broker paid if property sold within a certain time period after listing agreement expired ii. Brokers submit list of potential buyers 3. Seller’s warranties a. Seller has right to sell property b. Information given is accurate c. No undisclosed encumbrances exist d. “Hold harmless” clause, making seller liable for information provided (not agent) 4. Multiple listing provision a. Listing will be submitted to multiple listing service, and be publicly available b. MLS not party to listing agreement, just a distributor 5. Agency relationships a. Relationship between seller and broker, including possible dual agency 6. Photographs and the internet a. Broker has permission to take photos of the property to use on website, MLS, virtual tours b. Broker cannot control images once on Internet 7. Keyboxes a. Broker needs property access to show it; keybox is standard access method b. Need authority for keybox; sellers should also notify insurance company that property is open to public 8. Attorney’s fees a. May have language requiring losing party in (future) lawsuit to pay the other party’s legal fees 9. Dispute resolution a. Some forms include provision requiring parties to use mediation before tak- ing legal action; arbitration may be another option 4  Chapter 2: Listing Agreements and Property Disclosures 10. Signatures a. Must be signed by all property owners; broker can verify legal ownership on the deed, county tax records, or with a title company b. Salesperson signing agreement puts broker’s name on “Agent” line and signs underneath on “By” line (agreement will be enforceable even without bro- ker’s signature) 11. Receipt of copy a. Agent legally required to give seller copy of document at time of signature; listing form usually has place for seller to acknowledge receipt 12. Listing information a. Listing input sheet makes it easier to transfer data to the computer, for MLS listing and other marketing D. Modifying a listing agreement 1. Once signed, can only be modified with written consent of all parties a. For simple changes agent may make corrections on form directly; parties date and initial the changes b. For more substantial changes an amendment form should be used, with signa- tures by all EXERCISE 2.2 Finding key contract provisions III. Mandatory Disclosures Concerning the Property A. Real estate transfer disclosure statement 1. Seller required to disclose certain information a. Condition of buildings and utilities b. Easements and encumbrances c. Other issues affecting property and title 2. Transfer disclosure statements are required in sale of some types of properties a. Single-family homes b. Multi-family homes, up to four units c. Condominiums and cooperatives d. Mobile homes on lot e. “For sale by owner” homes 3. Transfer disclosure statements are not required in some transactions a. New construction in subdivisions with public reports b. Sales by court order c. Transfers between spouses, divorcing spouses, or co-owners d. Foreclosure sales 5  California Real Estate Practice Instructor Materials 4. “Seller’s Information” section should be filled out by seller, not agent 5. Each agent must perform visual inspection of property and disclose material facts and latent defects found 6. Buyer must be given disclosure statement as soon as possible, but before title transferred; can’t waive delivery 7. Buyer has right to rescind agreement, for any reason, within three days if deliv- ered in person or five days if delivered by mail or electronically a. Buyer’s notice of rescission must be in writing b. Buyer entitled to full refund of good faith deposit c. If buyer isn’t given disclosure statement, transaction is valid, but seller and/or agents will be liable for damages 8. If conditions change after buyer accepts disclosure statement, seller gives amend- ed disclosure statement a. Same option for buyer to accept or rescind 9. Once sale has closed, buyer no longer has right to rescind B. Environmental hazards booklet 1. Seller discloses known problems; gives buyers state DRE pamphlet, “Environ- mental Hazards: A Guide for Homeowners, Buyers, Landlords, and Tenants” C. Natural hazard disclosure statement 1. Special disclosures required for designated high-risk areas a. Earthquake fault zone b. Seismic hazard zone (landslides) c. Flood zones d. High forest fire risk 2. Must consult government maps and/or hire experts to complete form 3. Natural hazard disclosure statement gives buyer same rescission right as transfer disclosure statement (three or five days) D. Residential earthquake risk disclosure statement 1. For one- to four-unit residence built before 1960, listing agent must give buyer “The Home­owner’s Guide to Earthquake Safety” a. Pamphlet contains form for seller, telling buyer about retrofitting (or lack of) and other issues E. Pipeline and sex offender website disclosures 1. Purchase agreement forms must disclose where interested parties can find web- sites detailing location of gas pipelines or persons registered as sex offenders F. Lead-based paint disclosure 1. If property built before 1978, seller must meet requirements of federal law a. Disclose whether lead-based paint is present 6  Chapter 2: Listing Agreements and Property Disclosures b. Give copy of inspection report if property was inspected, and EPA pamphlet c. Give buyer ten days to have home tested 2. Listing agent responsible for ensuring seller’s compliance 3. Sellers and agents who fail to comply could be liable for treble damages, plus civil and criminal penalties G. Supplemental statutory disclosure form 1. Law also requires other disclosures that don’t have separate forms; for example, must disclose if property is located in commercial or industrial zone, near airport, or near military site with live ammunition H. Mello-Roos lien disclosure 1. When property sold subject to Mello-Roos special assessment lien, the lien must be disclosed with tax notice from agency or on the transfer disclosure statement EXERCISE 2.3 Which disclosure is required? Exercises EXERCISE 2.1 Review exercise To review Chapter 1, “Real Estate Agency Relationships,” read the following True/False questions aloud to students and have them jot their answers down on a piece of paper; discuss the answers together. 1. A real estate agent owes the duty of reasonable care and skill to the principal only. 2. Both an agent and the principal owe other parties a duty of honesty and good faith. 3. An inspection has revealed that the house you are trying to sell has termites in the foundation. If your client asks you to keep that information confidential, your fiduciary duty to the principal requires you to do so. 4. Vicarious liability protects the principal from being sued for harm caused by the principal’s agent. 5. A principal can be held liable for having knowledge of certain information even if her agent never actually shared that information with her. 6. A seller’s agent may provide information about the property and the neighborhood to a prospective buyer without violating her fiduciary duties to the seller. 7. A buyer’s agent can only be compensated by the buyer. 7  California Real Estate Practice Instructor Materials 8. A finder or middleman owes fiduciary duties to both parties in a transaction. 9. In California, a dual agency relationship is allowed only with the informed written consent of both the buyer and the seller. Answers: 1. FALSE. An agent owes all parties the duty of reasonable care and skill. An agent may be held liable for any harm caused by negligence or incompetence. 2. TRUE. The agent and the principal are both liable for any inaccurate statements or misrepresentations about the property or the transaction in general. 3. FALSE. The termite problem is a latent defect that must be disclosed, and the seller can’t claim that it’s confidential information. The duty to disclose material facts and any known latent defects overrides any duty to the principal. 4. FALSE. The doctrine of vicarious liability allows injured parties to sue the principal for harm caused by the agent’s actions. 5. TRUE. Under the theory of imputed knowledge, a principal can be held responsible for information an agent has, even if the agent never passed that information on to the principal. 6. TRUE. Giving buyers pertinent information about the property and neighborhood is one of the services a seller’s agent provides. It helps achieve the seller’s goal (selling the property) and doesn’t violate the agent’s fiduciary duties to the seller. 7. FALSE. A buyer’s agent is often compensated through a commission split, receiving a portion of the commission paid to the listing agent by the seller. A buyer’s agent may also be paid a flat fee or an hourly rate by the buyer, but this arrangement is typically used when the property being purchased wasn’t listed through an MLS. 8. FALSE. A finder or middleman only arranges an introduction between the parties, and doesn’t have an agency relationship with either party (as long as he doesn’t play any further role in the transaction). 9. TRUE. A licensee who acts as a dual agent must have both parties’ written consent. Otherwise she risks disciplinary action, even if the dual agency was inadvertent. 8  Chapter 2: Listing Agreements and Property Disclosures EXERCISE 2.2 Finding key contract provisions Find the following contract provisions in the C.A.R. Residential Listing Agreement (Ex- clusive Authorization and Right to Sell) form and note which section of the form they appear in. Seller warranties Property description Listing price and terms Hold harmless clause Safety clause alternatives Lockbox authority Authority to accept deposits Compensation negotiable Mandatory mediation Seller receipt of copy Payment to cooperating brokers Agency agreement and term Items included/excluded Commission rate or amount Section 1:________________________________________________________________ Section 2:________________________________________________________________ Section 3, bold print:______________________________________________________ Section 3A:_______________________________________________________________ Section 3A (1), (2), and (3):_________________________________________________ Section 3D:______________________________________________________________ Section 4:________________________________________________________________ Section 9:________________________________________________________________ Section 10:_______________________________________________________________ Section 11:_______________________________________________________________ Section 15:_______________________________________________________________ Section 22:_______________________________________________________________ Below section 24, bold print:________________________________________________ Answers: Section 1: Agency agreement and term, and Property description Section 2: Listing price and terms 9  California Real Estate Practice Instructor Materials Section 3 bold print: Compensation negotiable Section 3A: Commission rate or amount Section 3A(1), (2), and (3): Safety clause alternatives Section 3(D): Payment to cooperating brokers Section 4: Items included/excluded Section 9: Seller warranties Section 10: Hold harmless clause Section 11: Authority to accept deposits Section 15: Lockbox authority Section 22: Mandatory mediation Below section 24, bold print: Seller receipt of copy EXERCISE 2.3 Which disclosure is required? Match each transaction listed below with the correct property disclosure requirement. Transfer disclosure statement Supplemental statutory disclosure form Mello-Roos disclosure Natural hazard disclosure statement Lead-based paint disclosure No disclosure required ______ 1._Sale of home with special assessment lien ______ 2._Sale of residence located near military site ______ 3._Condo owner selling unit ______ 4._Duplex owner selling his interest to co-owner ______ 5._Sale of home built in 1970 ______ 6._Sale of property located in flood zone Answers: 1. Mello-Roos disclosure 2. Supplemental statutory disclosure form 3. Transfer disclosure statement 4. No disclosure required 5. Lead-based paint disclosure 6. Natural hazard disclosure statement 10  Chapter 2: Listing Agreements and Property Disclosures Chapter 2 Quiz 1. Under which kind of listing agreement will an 5. When a listing agreement contains a safety agent be compensated only if she is the procur- clause, the broker is protected from: ing cause of the sale? A. a sale of the property in the period right A. Open listing after the listing expires B. Exclusive agency listing B. a suit against the broker by the buyer due C. Exclusive right to sell listing to misinformation D. Net listing C. the theft of property from the seller’s house when it is being shown D. an agreement to purchase seller’s home 2. All of the following statements regarding the before buyer sells his property multiple listing service provision in a standard listing agreement are true except: A. information about the listing will be shared 6. Which of the following would not be an ad- with other MLS agents equate property description? B. the MLS is responsible for verifying infor- A. Lot and block description mation provided by the seller B. Street address C. the broker will cooperate with other MLS C. Attached copy of description in deed agents to sell the property D. Government survey description D. the MLS is not a party to the transaction 7. The decision about the listing price for a prop- 3. What protects a broker from liability for dam- erty will ultimately be decided by the: ages incurred as a result of inaccurate property A. listing agent information provided by the seller? B. appraiser A. Safety clause C. multiple listing service B. Habendum clause D. seller C. Hold harmless clause D. Keybox clause 8. If information in the listing agreement needs to be changed, who must give written consent 4. If the buyer breaches the purchase agreement to the changes? and forfeits the good faith deposit, typically the A. Seller and listing broker proceeds from the deposit will be used to pay B. Seller and buyer any costs incurred and the: C. Seller only A. balance will go to the listing agent D. Listing broker only B. remaining funds will go to the seller C. remaining funds will be split evenly be- 9. A transfer disclosure statement is required for tween the listing broker and the seller all of the following properties except: D. remaining funds will be split evenly be- tween the listing broker and the selling A. a mobile home and the real property to broker which it is attached B. a three-unit multi-family dwelling C. a single-family home listed for sale by owner D. retail space in commercial district 11  California Real Estate Practice Instructor Materials 10. If a buyer receives a transfer disclosure state- 15. If a broker agrees to be compensated under a ment in the mail, how many days does he have net listing agreement, the broker must: to rescind the purchase agreement? A. disclose the actual commission amount A. 3 days from when buyer received the dis- before the seller is committed closure B. have the arrangement approved by the B. 5 days from the date escrow was opened Commissioner of Real Estate C. 5 days from when the statement was C. disclose the commission arrangement to the mailed buyer D. 7 days from the date when the seller signed D. give the seller a right of rescission the disclosure statement 11. All of the following are legally required for a valid listing agreement except: A. adequate property description B. in writing C. signed by seller D. words of conveyance 12. Which of the following is the maximum du- ration for listing agreements in the state of California? A. 30 days B. 90 days C. 180 days D. Whatever period the broker and the seller agree on 13. A listing agreement may be terminated in all of the following ways except: A. death of the seller B. mutual agreement of the parties C. abandonment D. renunciation by broker 14. If a property owner has to pay a broker a com- mission for any sale other than a sale procured by the owner herself, they have signed a/an: A. open listing agreement B. exclusive agency listing C. exclusive right to sell listing D. net listing 12  Chapter 2: Listing Agreements and Property Disclosures Answer Key 1. A. Under an open listing, the seller pays 7. D. The listing agent will probably be a commission only if the agent is the asked for an opinion (and market person responsible for bringing about data), but the ultimate decision-making the agreement between the buyer and authority for setting a listing price be- seller. No commission is owed if an- longs to the seller. other agent or the seller is responsible for the sale. 8. A. Both parties to the listing agreement, the seller and the listing broker, must 2. B. The MLS will not verify information consent in writing to any changes in provided by the seller in the listing the agreement. This requires initialing agreement, and assumes no legal re- and dating any changes made directly sponsibility for the information that is on the form, or completing and signing reported. The MLS is not a party to the an amendment form. transaction. 9. D. The transfer disclosure statement is re- 3. C. In the hold harmless clause in a listing quired for residential transactions with agreement, the seller agrees to assume up to four units. Commercial property legal responsibility for all information is excluded from the disclosure re- provided. The broker will not be held quirement. liable for any damages caused by the seller’s misinformation. 10. C. If the transfer disclosure statement is mailed, the buyer’s right of rescission 4. C. The remainder of the good faith de- lasts for 5 days from the day the state- posit after costs have been paid is ment was mailed. normally divided equally between the listing broker and the seller, unless 11. D. A valid listing agreement must ade- otherwise agreed. quately identify the property and must be in writing and signed by the seller. 5. A. A safety clause protects the broker’s Words of conveyance are required in a right to receive a commission if a deed, but not a listing agreement. property is sold during a specified pe- riod after the listing expired. The agent 12. D. There is no standard or maximum list- usually submits a list of names of ing period in California. The law does prospective buyers, to document their require exclusive listing agreements contribution to the sale. to have a set term, but the seller and listing broker are free to negotiate that 6. B. A street address alone is not a suffi- time period, based on market activity, cient property description for a listing listing price, and other factors. agreement, since it does not specify the boundaries of the property. 13  California Real Estate Practice Instructor Materials 13. C. A listing agreement may be terminated by all of the ways listed, except aban- donment. (Abandonment is a method for terminating an easement.) 14. B. In an exclusive agency listing agree- ment a seller lists the property with only one broker, but also retains the right to sell the property herself with- out being liable for a commission. Under this arrangement, the only way a broker will not receive compensation is if the property is sold by the owner. 15. A. To make sure a seller understands the implications of a net listing agreement, state law requires brokers to disclose the actual amount of commission that will be paid under the net listing, be- fore the seller is legally obligated to make the payment. State law does not require any special disclosures to the buyer, the MLS, or the Real Estate Commissioner. 14  Chapter 2: Listing Agreements and Property Disclosures PowerPoint Thumbnails Use the following thumbnails of our PowerPoint presentation to make your lecture notes. California Real Estate Practice Lesson 2: Listing Agreements © 2021 Rockwell Publishing 1 Listing Agreements Listing agreements are written employment contract between brokers and sellers. Three types: ⚫ open listings ⚫ exclusive agency listings ⚫ exclusive right to sell listings © 2021 Rockwell Publishing 2 Open Listings Open listing: Seller pays commission only if broker sells property himself. ⚫ To be paid, broker (or brokerage’s salesperson) must be procuring cause: person primarily responsible for bringing about purchase agreement between parties. Open listings rare in residential transactions. © 2021 Rockwell Publishing 3 15  California Real Estate Practice Instructor Materials Exclusive Agency Listings Exclusive agency listing: Broker entitled to commission if anyone but seller finds buyer. ⚫ If seller sells property without assistance from any broker, no commission is owed. © 2021 Rockwell Publishing 4 Exclusive Right to Sell Listings Exclusive right to sell listing: Broker receives commission regardless of who sells property. ⚫ Gives brokers greatest amount of protection. ⚫ Most common type of residential listing. © 2021 Rockwell Publishing 5 Summary Types of Listings Open listing Procuring cause Exclusive agency listing Exclusive right to sell listing © 2021 Rockwell Publishing 6 16  Chapter 2: Listing Agreements and Property Disclosures Listing Agreement Elements Basic contract elements Listing agreement must have: ⚫ competent parties ⚫ offer and acceptance ⚫ consideration ⚫ legal purpose © 2021 Rockwell Publishing 7 Listing Agreement Elements Other required elements Listing agreement also needs to include: ⚫ property description ⚫ terms of sale ⚫ broker’s authority ⚫ promise of compensation ⚫ termination date Agreement must be in writing and signed by seller. © 2021 Rockwell Publishing 8 Listing Agreement Elements Property description Property must be clearly identified, usually through legal description (not street address). Lengthy description may be attached as addendum. Legal description may be obtained from: ⚫ MLS software ⚫ title insurance company ⚫ seller’s deed © 2021 Rockwell Publishing 9 17  California Real Estate Practice Instructor Materials Listing Agreement Elements Terms of sale Agreement should state: ⚫ listing price ⚫ whether seller’s loan may be assumed ⚫ whether seller will offer secondary financing ⚫ what personal property (if any) is included © 2021 Rockwell Publishing 10 Listing Agreement Elements Broker’s authority Agreement should also state if brokerage has authority to: ⚫ list property with MLS ⚫ place ads ⚫ cooperate with buyer’s agents ⚫ receive offers and good faith deposits on seller’s behalf © 2021 Rockwell Publishing 11 Listing Agreement Elements Promise of compensation Broker’s compensation is usually conditioned on finding ready, willing, and able buyer. ⚫ Ready and willing: Makes offer that meets terms of listing or is otherwise acceptable to seller. ⚫ Able: Financially able to complete transaction. © 2021 Rockwell Publishing 12 18  Chapter 2: Listing Agreements and Property Disclosures Promise of Compensation Fixed amount; negotiable Compensation is usually fixed figure, such as: ⚫ percentage of sales price (most common) ⚫ set dollar amount State law requires all listing agreements to state in boldface type that commission: ⚫ is not set by law ⚫ may be negotiated © 2021 Rockwell Publishing 13 Promise of Compensation Net listings Net listing: Provides that seller gets certain amount of cash from sale; broker receives anything over that amount. ⚫ Legal in CA, but discouraged and not widely used. ⚫ Broker must disclose commission amount before seller commits to transaction. © 2021 Rockwell Publishing 14 Listing Agreement Elements Termination date CA law requires exclusive listing to include termination date. ⚫ No minimum or maximum time period; parties may negotiate any length of time. © 2021 Rockwell Publishing 15 19  California Real Estate Practice Instructor Materials Listing Agreement Elements In writing and signed by seller Statute of frauds requires all listings to be in writing and signed by seller. ⚫ If oral listing is used, agent can’t sue to collect commission. Formal agreement not required; it simply must contain all necessary elements. ⚫ Most brokerages use pre-printed listing forms. © 2021 Rockwell Publishing 16 Summary Listing Agreement Elements Listing agreement Terms of sale Broker’s authority Promise of compensation Net listing Termination date © 2021 Rockwell Publishing 17 Listing Agreement Provisions Broker’s authority In most listings, seller grants broker exclusive right to sell property and act as seller’s agent. ⚫ This doesn’t mean broker may accept offer on seller’s behalf. Agreement is usually filled out and signed by salesperson, but contract is between seller and broker. © 2021 Rockwell Publishing 18 20  Chapter 2: Listing Agreements and Property Disclosures Listing Agreement Provisions Listing period Listing agreement usually includes termination date (required for exclusive listings). ⚫ Listing period is negotiable. Listing may also be terminated by: ⚫ closing of sale ⚫ mutual agreement or unilateral decision ⚫ death or mental incompetence ⚫ loss of broker’s license © 2021 Rockwell Publishing 19 Listing Agreement Provisions Commission Listing states how commission will be paid: ⚫ percentage of sales price, or ⚫ fixed dollar amount. Rate must be fully negotiable. Listing should detail how and when broker earns commission. © 2021 Rockwell Publishing 20 Commission When a sale is prevented Agreement may provide that if sale collapses, seller keeps good faith deposit as liquidated damages. ⚫ After costs are paid, seller may be required to split deposit with broker. © 2021 Rockwell Publishing 21 21  California Real Estate Practice Instructor Materials Commission Safety clause Safety clause (or protection or extender clause): Brokerage is entitled to commission if seller sells property: ⚫ within certain number of days after expiration of listing ⚫ to someone who learned about property through broker © 2021 Rockwell Publishing 22 Listing Agreement Provisions Seller warranties Listing agreement may contain these warranties: ⚫ seller has right to sell property ⚫ listing information is accurate ⚫ there are no undisclosed encumbrances Hold harmless clause: seller takes responsibility for all information given to listing agent. © 2021 Rockwell Publishing 23 Listing Agreement Provisions Multiple listing service Listing will state that: ⚫ listing data will be submitted to MLS ⚫ broker will cooperate with other MLS agents to sell property MLS is not a party to listing agreement. © 2021 Rockwell Publishing 24 22  Chapter 2: Listing Agreements and Property Disclosures Listing Agreement Provisions Access and keyboxes Listing agreement typically authorizes broker to install keybox on property. Listing generally states that broker is not responsible for any loss, theft, or damage, including loss related to: ⚫ open house ⚫ misuse of keybox © 2021 Rockwell Publishing 25 Listing Agreement Provisions Attorney’s fees If listing agreement dispute goes to trial, prevailing party wins attorney’s fees. ⚫ Amount fixed by court. © 2021 Rockwell Publishing 26 Listing Agreement Provisions Dispute resolution Parties often agree to mediation as first step. Parties may also choose arbitration. Some agreements require one or both of these methods of dispute resolution. © 2021 Rockwell Publishing 27 23  California Real Estate Practice Instructor Materials Listing Agreement Provisions Signatures Listing is signed by seller and broker (or salesperson on broker’s behalf). ⚫ If property is owned by more than one person, all owners need to sign. © 2021 Rockwell Publishing 28 Listing Input Sheet Listing input sheet: Provides MLS with specific information about property. ⚫ Information provided will be available to public. © 2021 Rockwell Publishing 29 Listing Input Sheet Included information Listing input sheet includes: ⚫ property location ⚫ architectural style ⚫ listing price ⚫ listing agent’s name ⚫ listing expiration date ⚫ age of home ⚫ number of bedrooms and bathrooms © 2021 Rockwell Publishing 30 24  Chapter 2: Listing Agreements and Property Disclosures Listing Input Sheet Included information ⚫ county tax ID number ⚫ commission split ⚫ name of present occupant ⚫ name, address, and phone number of owner ⚫ property features and amenities ⚫ existing encumbrances ⚫ annual property taxes © 2021 Rockwell Publishing 31 Modifying the Listing Agreement Requires written consent Modifications to listing agreement require written consent of all parties. ⚫ Must be initialed and dated by all parties. A simple change can be made on original listing form. ⚫ But use amendment form if possible. © 2021 Rockwell Publishing 32 Summary Listing Agreement Provisions Termination date Safety clause Hold harmless clause Keyboxes Dispute resolution Listing input sheet Modifying a listing agreement © 2021 Rockwell Publishing 33 25  California Real Estate Practice Instructor Materials Required Disclosures California law requires certain disclosures to prospective buyers. Required disclosure forms should be completed by seller and listing agent during listing process. © 2021 Rockwell Publishing 34 Required Disclosures Disclosure forms ⚫ Transfer disclosure statement ⚫ Environmental hazards booklet ⚫ Natural hazard disclosure statement ⚫ Residential earthquake risk disclosure ⚫ Lead-based paint disclosure ⚫ Supplemental statutory disclosure form ⚫ Disclosure of Mello-Roos liens © 2021 Rockwell Publishing 35 Transfer Disclosure Statement When required Transfer disclosure statement required in sale of: ⚫ single-family homes ⚫ multifamily dwellings up to four units ⚫ condominiums and cooperatives ⚫ mobile homes sold with land ⚫ “for sale by owner” homes © 2021 Rockwell Publishing 36 26  Chapter 2: Listing Agreements and Property Disclosures Transfer Disclosure Statement When not required Not required in: ⚫ sales of new construction in subdivisions requiring public report ⚫ sales by court order ⚫ transfers between spouses or co-owners ⚫ foreclosure sales ⚫ commercial transactions © 2021 Rockwell Publishing 37 Transfer Disclosure Statement Cannot be waived Seller must give buyer disclosure form as soon as practicable after purchase agreement is signed. ⚫ Buyer can’t waive right, even if property is sold “as is.” © 2021 Rockwell Publishing 38 Transfer Disclosure Statement Right of rescission Buyer can rescind purchase agreement in writing, within: ⚫ three days of personal delivery of statement, or ⚫ five days after statement is mailed or delivered electronically. Decision to rescind is entirely up to buyer. © 2021 Rockwell Publishing 39 27  California Real Estate Practice Instructor Materials Transfer Disclosure Statement Filled out by seller Principal section of disclosure statement should be completed by seller. ⚫ Listing agent won’t be liable for seller’s inaccuracies. © 2021 Rockwell Publishing 40 Transfer Disclosure Statement Updated disclosure If new information arises or circumstances change, seller should provide new disclosure. ⚫ This reactivates three- or five-day period. © 2021 Rockwell Publishing 41 Transfer Disclosure Statement Defects must be disclosed Disclosure statement doesn’t limit duty to disclose latent defects and other material facts. © 2021 Rockwell Publishing 42 28  Chapter 2: Listing Agreements and Property Disclosures Environmental Hazards Booklet Seller’s agent should give buyer copy of DRE pamphlet: “Environmental Hazards: A Guide for Homeowners, Buyers, Landlords, and Tenants.” ⚫ Any known hazards must still be disclosed in transfer disclosure statement. © 2021 Rockwell Publishing 43 Natural Hazard Disclosures Natural Hazard Disclosure Statement is used to disclose if residential property is located in area designated as high risk for natural disasters: ⚫ earthquake fault zone ⚫ seismic hazard zone ⚫ flood hazard area ⚫ wildfires © 2021 Rockwell Publishing 44 Natural Hazard Disclosures Seller and listing agent consult state/federal agency maps to determine whether property is in high risk area. Natural Hazard Disclosure Statement gives buyer same rescission rights as transfer disclosure statement. © 2021 Rockwell Publishing 45 29  California Real Estate Practice Instructor Materials Residential Earthquake Risk Disclosure Statement If one- to four-unit residence was built before 1960, listing agent must give buyer “The Homeowner’s Guide to Earthquake Safety” pamphlet. Pamphlet provides seller disclosures regarding: ⚫ Has property undergone seismic retrofitting? ⚫ Is property in seismic hazard zone? © 2021 Rockwell Publishing 46 Pipeline and Sex Offender Website Information Purchase agreement forms must disclose where to find websites that list locations of: ⚫ gas and hazardous liquid pipelines ⚫ persons required to register as sex offenders © 2021 Rockwell Publishing 47 Lead-Based Paint Disclosure For residential property built before 1978, seller must disclose if lead-based paint is present. ⚫ Buyer has 10 days to conduct inspection for lead-based paint. ⚫ Buyer may rescind agreement based on disclosure or inspection results. © 2021 Rockwell Publishing 48 30  Chapter 2: Listing Agreements and Property Disclosures Supplemental Statutory Disclosures May also need to disclose: ⚫ release of illegal controlled substance ⚫ location in zone for commercial or industrial use ⚫ property close to airport ⚫ property near former military site with unexploded munitions ⚫ death on property within last 3 years © 2021 Rockwell Publishing 49 Mello-Roos Lien Disclosure Seller must disclose if property is subject to Mello-Roos lien (special assessment that pays for public improvements). ⚫ Disclosure made by giving buyer copy of tax notice. ⚫ Still a good idea to disclose on transfer disclosure statement as well. © 2021 Rockwell Publishing 50 Summary Required Disclosures Transfer disclosure statement Right of rescission Disclosure of defects Natural hazard disclosure statement Residential earthquake risk disclosure Lead-based paint disclosure Mello-Roos lien disclosure © 2021 Rockwell Publishing 51 31