The 12-10-13 Newsletter of the Tennessee Association of REALTORS
Editor: Pug Scoville


1. Upcoming COURSES & EVENTS
2. Working With a Friend? ….Take Care
3. Do You Know What’s NOT Covered by E&O?
4. It Pays to Use Professional Photos
5. HOT LINE: Seller No Longer Wants to Sell?
6. HOT LINE: Cancellation Fees for Release of a Listing?
7. HOT LINE: Negotiating Repairs in “Good Faith”?
8. Check Your Own CE Hours, Etc.

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett


1. Upcoming COURSES & EVENTS

To see upcoming offerings of TREC CORE COURSES, ABR COURSES, etc., – at locations around the state – go to the TAR Course calendar at: http://tnrealtors.com/education/realtor-courses/

Our 2014 GRI Classroom Course Schedule is posted in the “Education” section of the TAR website: http://tnrealtors.com/education/gri/


2. Working With a Friend? ….Take Care

Probably nothing is more distressing in real estate than having a good friend, relative, fellow church member, etc., as a client or customer and THEN having the transaction (or the relationship, or both!) go bad.

On NAR’s YPN Lounge, Scott Newman has posted a VERY useful article (“Tips for Working With Friends”) that provides wise advice on how to make that relationship work as well as possible:

*** BEGIN QUOTE ***
So you just found out your buddy got a big promotion and is now ready to buy a sexy luxury condo in downtown Chicago. He’s your boy – you’ve known him since grade school – of course he’s going to give you first crack at the business, and you’ve already started spending the commission check. But before you blindly agree to be his agent, stop and think of the potential consequences of working with close friends and how you can make sure it’s a positive experience for both of you.
*** END QUOTE ***

To read more: http://ypnlounge.blogs.realtor.org/2013/12/04/tips-for-working-with-friends/


3. Do You Know What’s NOT Covered by E&O?

RISMedia addressed this issue in a recent article (“Too Few Real Estate Agents understand Their E&O Policies”).

Maintaining adequate errors and omissions (E&O) insurance is crucial. However, there remains a sizable majority of firms in both sectors that do not fully understand E&O policies. According to a recent industry study, brokers and agents who fail to completely comprehend the details of E&O policies may underestimate their needs when it comes to comparing different insurance options. Consequently, some may make poor decisions that could result in coverage gaps or polices that do not fully meet their unique requirements.

To read more: http://rismedia.com/2013-12-01/too-few-real-estate-agents-understand-their-eo-policies/

You should familiarize yourself with the EXCLUSIONS in your own E&O policy. You can review a sample E&O policy in Tennessee at: http://www.tn.gov/regboards/trec/documents/P03042.pdf


4. It Pays to Use Professional Photos

With the majority of house-hunters (92 percent) combing cyberspace during their search, having stellar listing photos is a crucial ingredient in real estate marketing today. A report by the online property firm Redfin concludes that photo quality influences both how fast a home moves off the market and what price it commands. Using a professional camera, meanwhile, is a first step in snapping good property photos. According to the Redfin analysis, listings in the $200,000-$1 million range that are photographed with DSLR cameras fetch $3,400 to $11,200 more than their asking prices. And no matter the list price, homes advertised with DSLR images are more likely to sell within six months than those marketed with common point-and-shoot photos.

To read more: http://blog.chron.com/primeproperty/2013/12/real-estate-photography-101-use-a-good-camera/?cmpid=hpts#18556101=0


5. HOT LINE: Seller No Longer Wants to Sell?

QUESTION: I represent the buyer in a transaction. We had a binding agreement and now the seller has decided not to sell. I have been working with this buyer for around a year. Can I legally request the commission I would have earned on this transaction from the seller?

ANSWER: There are a couple of ways in which this can be addressed. First, you could potentially pursue the offer of compensation from the listing broker. However, if the listing broker is not paid (which he likely would not be if he is continuing to work with the seller and does not file a breach of contract action against him), then this would be highly unlikely.

However, there is a little known part of the TAR Purchase and Sale Agreement which may be of assistance to you. Lines 314-321 state:

“11. Brokerage. As specified by separate agreement, Seller agrees to pay Listing Broker at Closing the agreed upon compensation. The Listing Broker will direct the closing agency to pay the Selling Broker, from the compensation received, an amount in accordance with the terms and provisions specified by separate agreement. The parties agree and acknowledge that the Brokers involved in this transaction may receive compensation from more than one party. All parties to this Agreement agree and acknowledge that any real estate firm involved in this transaction shall be deemed a third party beneficiary only for the purposes of enforcing their commission rights, and as such, shall have the right to maintain an action on this Agreement for any and all compensations due and any reasonable attorney’s fees and court costs.”

This provision MAY (no guarantees) allow your firm to pursue your compensation from the seller as a third party beneficiary. This is by no means a silver bullet, but it could be successful. We would recommend that you speak with your firm’s attorney to determine the strength of such an action in your specific situation.

[SOURCE: TAR’s Legal & Ethics Hot Line Attorneys]


6. HOT LINE: Cancellation Fees for Release of a Listing?

QUESTION: My question has to do with cancellation fees for the mutual release of a listing. To avoid any lawsuits, do we have a minimum amount in the listing agreement at the time of the listing? Or do we itemize the expenses to the client with Form 82? I need to know how to handle this for the company policy and want to be on solid ground legally.

ANSWER: We would recommend that you have a reasonable number in mind for a cancellation fee. The TAR Listing Agreements have the following language in them:

“Should the Broker consent to release the Listing prior to the expiration of the term of this Agreement or any extensions, Seller agrees to pay all costs incurred by Broker to market Property or other amount as agreed to by the parties as a cancellation fee, in addition to any other sums that may be due to Broker.”

Therefore, we would recommend that the firm keep track of the expenses as closely as possible in order to justify a termination fee.

[SOURCE: TAR’s Legal & Ethics Hot Line Attorneys]


7. HOT LINE: Negotiating Repairs in “Good Faith”?

QUESTION: Line 231 of the TAR contract states that the parties will negotiate repairs to the property in “good faith”. What is the definition of “good faith”?

ANSWER: Good faith is a legal term. Tennessee has addressed the issue of the requirement to perform a contract in good faith; common law imposes a duty of good faith in the performance of contracts…. The law regarding the good faith performance of contracts was well stated by the Court of Appeals in TSC Industries, Inc. v. Tomlin, 743 S.W.2d 169, 173 (Tenn.App.1987):

“It is true that there is implied in every contract a duty of good faith and fair dealing in its performance and enforcement, and a person is presumed to know the law. See Restatement (2d) Contracts, 205 (1979). What this duty consists of, however, depends upon the individual contract in each case. In construing contracts, courts look to the language of the instrument and to the intention of the parties, and impose a construction which is fair and reasonable.”

The TAR Purchase and Sale Agreement states:

“a. Resolution Period. Seller and Buyer shall then have a period of ______ days following receipt of the above stated written list (“Resolution Period”) to reach a mutual agreement as to the items to be repaired or replaced with like quality or value by Seller, which shall be evidenced by the Buyer Inspection Contingency Removal/Notification, the Repair Counter Proposal form, or written equivalent(s). The parties agree to negotiate repairs in good faith during the Resolution Period. In the event Seller and Buyer do not reach a mutual written resolution during such Resolution Period or a mutually agreeable written extension thereof as evidenced in an Amendment to this Agreement signed by both parties within said period of time, this Agreement is hereby terminated. If terminated, Buyer is entitled to a refund of the Earnest Money.” Lines 277-285.

The Forms Committee intended that the parties were required to negotiate the repairs. This does not mean that the seller has to agree to any repairs, but they do have to respond. Neither party can simply just “stay quiet” and wait for the contract to terminate. There must be communication.

[SOURCE: TAR’s Legal & Ethics Hot Line Attorneys]


8. Check Your Own CE Hours, Etc.

To check your CE credits on file with TREC, go to: http://verify.tn.gov

To access current and past TAR DIGESTS: http://www.tardigest.com

Follow TAR on Twitter at: http://twitter.com/tnaor

TAR’s LinkedIn page: http://www.linkedin.com/groups?gid=852077&trk=hb_side_g

TAR’s page on Facebook: http://www.facebook.com/pages/Nashville-TN/Tennessee-Association-of-RealtorsR/15041383689

To ask a TAR Legal and Ethics Hot Line question: http://tnrealtors.com/services-support/legal-ethics-hotline/

For CE classroom courses around the state, go to: http://tnrealtors.com/education/realtor-courses/

For online CE courses, go to: http://tnrealtors.com/education/online-courses/

Tennessee Real Estate Commission: http://tn.gov/regboards/trec/