Although the database of Hotline answers is monitored by Tennessee REALTORS® staff, it is impossible to keep the content of the general inquiries and responses in the database current. New or amended state and federal laws and regulations, TREC rules and policies, and NAR Articles and Standards of Practice, as well as new case law, may render a response incorrect.
| Topic | Question | Answer |
|---|---|---|
| Closing an Office | We are going to permanently close our office and I need to know how to do this properly, i.e., what documents, etc. | First, I recommend that you consult with an attorney in order to properly close the business from the standpoint of a corporation or LLC. From the standpoint of TREC, you will need to do numerous things. To close the firm in Tennessee, the licensees will need to find new firms with whom to affiliate. You and the owner of the firm can then decide whether the agents can take their listings and/or current contracts with them when they leave. If yes, then the new firm will need to execute amendments to the listings and/or contracts to indicate the change in firm. If your firm is holding earnest money, the contracts will need to be amended to reflect the change in the holder. At that point, you would pay the earnest money to the new firm. The same would hold true for security deposits. Confirmation of agency status forms would also need to be completed. If you do not allow the agents to take their listings/contracts, then you will need to keep the firm open long enough for all the transactions to close. You cannot perform any real estate activity once the firm closes. Then, any remaining listing agreements would have to be terminated. Finally, you would need to notify TREC and the local board that you are closing the firm. |
| Commercial Sublease | I'm representing a client who is a sublessee. I'm looking for an agreement to give to the sublessor to pay the broker commission. | If it is a commercial property, you can attach CF604 (sublease listing addendum) to the commercial open listing agreement for lease. |
| Accepting Referral Fees | Is it legal to accept a $200 referral fee from ADT for referring a closed client for their services as long as disclosed to client? | Under RESPA, “No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” 12 USC 2607(a). A real estate settlement service defined as: any service provided in connection with a real estate settlement including, but not limited to, the following: title searches, title examinations, the provision of title certificates, title insurance, services rendered by an attorney, the preparation of documents, property surveys, the rendering of credit reports or appraisals, pest and fungus inspections, services rendered by a real estate agent or broker, the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans), and the handling of the processing, and closing or settlement. 12 U.S.C. 2602(3). So, for instance you can accept a referral fee from an alarm company or a car insurance company, but not a lender or title company. However, you will need to disclose any referral fee to your clients. Pursuant to Tenn. Code Ann. § 62-13-403(7)(B), a real estate agent owes a duty to all parties to: Not recommend to any party to the transaction the use of services of another individual, organization or business entity in which the licensee has an interest or from whom the licensee may receive a referral fee or other compensation for the referral, other than referrals to other licensees to provide real estate services under the Tennessee Real Estate Broker License Act of 1973, without timely disclosing to the party who receives the referral, the licensee’s interest in such referral or the fact that a referral fee may be received. You may use form RF 307, Referral for Service Disclosure for this purpose. |
| Client File Forms | Which forms are "required by TN" to be in a client file? | According to TREC, maintained records must contain, at a minimum, the following: listings; offers (even those that do not become contracts); contracts; closing statements; agreements; agency disclosure documents; property disclosure forms; correspondence; notes; and any other relevant information. This would include deals in which no other licensee was involved and no commission was paid as well as any deal where the licensee sold or purchased the property if such transaction was done through the brokerage. |
| Referral Form | My former broker wants a referral for a previous lead. I wanted to be sure the referral form was the correct form to use. | Yes, you can use the referral form for this purpose. |
| Living Proximity to Office | Does a broker have to live within a certain distance of their office? | No, there was previously a TREC rule which required agents to live within 50 miles of their brokerage. That rule was repealed years ago. |
| Team Members Signing an Agency Agreement | Do all the members of the team have to sign an agency agreement or can one unilateral person commit the entire team to agency and we practice designated agency? | If multiple team members are going to work on the transaction on behalf of either the buyer or seller, then the confirmation of agency needs to reflect that. I would also recommend including any licensee who will be working with the client on the listing agreement or buyer's rep agreement. You can add signature blocks to the necessary documents. It is not necessary for more than one licensee to sign forms such as the purchase and sale agreement since that area is for informational purposes only. |
| Closing Date Change | I have a question in regard to Lines 187-192 within the purchase and sale agreement. I need to confirm. If a buyer and seller close earlier than the closing date on the contract, Does the closing date need to be reflected on either RF657 Closing date/possession date amendment or by an amendment RF653, since it clearly states this in the purchase and sales agreement? | Technically, any time that the closing date is changed, whether it is before or after the original closing date, an amendment should be executed. The Agreement states: This transaction shall be closed ("Closed") (evidenced by delivery of warranty deed and payment of Purchase Price, the "Closing"), and this Agreement shall expire, at 11:59 local time on the ____ day of _______________, _______ ("Closing Date"), or on such earlier date as may be agreed to by the parties in writing. However, from a practical standpoint, if the transaction closes earlier, it is not necessary. The only time that you would need to get an amendment done is if you wanted to be able to terminate the contract if it did not close on the earlier date. Otherwise as long as it closed by the original closing date, no harm no foul. |
| Listings from Out-of-State Salespeople | Are Commercial Salespeople from other states allowed to list property in Tennessee as long as they have a broker of record listed on the commercial platform in Tennessee? If they have a property listed, list a broker of record in Tennessee, is it legal to present the offer and negotiate the offer or LOI with someone who does not have a TN real estate license? | No. Tennessee law requires an active Tennessee real estate license to list real property in Tennessee. |
| Spanish Forms | Do we have TAR form in Spanish? If so, where can I get these forms? Also, where do I sign these forms? | No. Tennessee REALTORS® does not offer forms in Spanish or any other language. |
| Principal Broker Contingency Plan | I have a two-person firm. I have my broker’s license and another agent with their affiliate broker’s license. It has been stated that if something happens to me, the affiliate broker has one year to get their broker’s license and can work during that time without a broker. Is this correct? | No. TREC rule 1260-01.38 pertains to the absence of a principal broker and states: (1) The Commission must be notified within 10 days of the death, resignation, termination, or incapacity of a principal broker. In the event of an unexplained extended absence of a principal broker, the Commission must be notified within a reasonable time period. At the time of notification, a plan must be submitted which addresses the continuation of operations without a principal broker. (2) The Commission may, in its discretion, based on the merits and circumstances of each case, permit a real estate firm to continue operating without a principal broker for a period of time not to exceed thirty days from the date of death, resignation, termination, or incapacity of a principal broker, subject to conditions imposed by the Commission. (3) If, within the aforementioned thirty-day period, a real estate firm contacts the Commission demonstrating compliance with their initial approved plan and circumstances which require additional time to continue operating without a principal broker, the executive director shall have the authority to grant a thirty-day extension to the period originally allowed by the Commission. In the event that a thirty-day extension is granted, a new principal broker must i\be in place no later than the 61st day from the date of death, resignation, termination, or incapacity of a principal broker. |
| Listing Expiration Date & Property Closing Date | I have a listing that has gone under contract. The listing expiration date will happen before the property closes. Do I need to get an extension on the listing or does the Purchase Contract take precedence over the listing contract once under contract. | Tennessee REALTORS® listing agreements automatically extend through the duration of the signed contract pursuant to the language below: If a contract to purchase, exchange, or lease is signed before this Agreement expires, the term hereof shall continue until final disposition of Purchase and Sales Agreement, exchange agreement, or lease agreement. |
| Transfering Listings | Is there a form to transfer a listing from my old brokerage to our new brokerage? | Your MLS may have a form for this; however, Tennessee REALTORS® does not. Secondly, the new company will need to execute an amendment to the listing agreement and any contract documenting the change in listing company and a new confirmation of agency status form will need to be signed. You can use the Amendment to the Listing Agreement form (RF 601). Another option would be for the original company to release the listing (using form RF 151) and the new company to execute a new listing agreement. However, this does not obligate the seller to resign a listing agreement with the second company. |
| Purchasing Your Own Home | If I purchase a house for myself without earning any commissions, do I still need to involve my broker? Do I still have to pay them a transaction fee? | You can engage in transactions outside of your firm if you do not use any firm resources to do so and your firm doesn’t have an agreement or policy in place stating otherwise. |
| Unlicensed Assistants Roles | What are unlicensed assistants allowed and not allowed to do specifically in a Property Management department? | TREC has issued the following guidelines as part of its official manual. These guidelines can also be found here. WHAT MAY AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY DO? 1. Answer the phone, forward calls and give information contained only on the listing agreement as limited by the broker; 2. Fill out and submit listings and changes to any multiple listing service; 3. Follow up on loan commitments after a contract has been negotiated and generally secure status reports on the loan progress; 4. Assemble documents for closing; 5. Secure public information from courthouses, utility districts, etc; 6. Have keys made for listings; 7. Place ads which have been approved by the Principal Broker; 8. Receive, record and deposit earnest money, security deposits and advance rents under the direct supervision of the Principal Broker; 9. Type contract forms for approval by licensee and Principal Broker; 10. Monitor licenses and personnel files; 11. Calculate, print or distribute commission checks; 12. Place signs on property; 13. Order repairs as directed by the licensee; 14. Prepare for distribution fliers and promotional information which have been approval by the Principal Broker; 15. Deliver documents and pick up keys; 16. Place routine telephone calls on late rent payments; 17. Gather information for a comparative market analysis (CMA); 18. Unlock property under the direction of a licensee; and 19. Disclose the current sales status of a listed property. AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY MAY NOT: 1. Make cold calls by telephone or in person to potential clients; 2. Show properties for sale and/or lease to prospective purchasers; 3. Host open houses, home show booths or fairs; 4. Discuss or explain listings, offers, contracts, or other similar matters with persons outside the firm; 5. Negotiate any terms of a real estate transaction; or 6. Negotiate or agree to any commission split or referral fee on behalf of a licensee; 7. Be paid any compensation which is dependent upon, or directly related to, a real estate transaction. |
| Real Estate Firm Maintaining Branch Offices | I have a question regarding the rules around a real estate office location. I have read 62-13-309 and am still unclear as to what the basic requirements are for a real estate office. Does a real estate firm have to maintain a "branch?" If so what all is required? | NO, a real estate firm does not have to maintain a branch office. If a branch office exists, the branch office must have a separate firm license. You should follow the requirements laid out in 62-13-309 as well as the TREC rule below: TREC Rule 1260-2-.03 OFFICES states: (1) Signs. Each licensed real estate firm shall conspicuously display on the outside of the firm’s place of business a sign which contains the name of the real estate firm as registered with the Commission. (2) Zoning. An application for a license or change of location shall be accompanied by a written certification (from the proper governmental authority) of compliance with zoning laws and ordinances. (3) Branch Offices. (a) For purposes of T. C. A. § 62-13-309(d), a licensee is deemed to maintain a “branch” if the licensee: 1. Advertises the office in any manner for the purpose of attracting the public; 2. Has a mail drop at the office which is registered with and served by the United States Postal Service; or 3. Invites or solicits telephone calls to the office (by such means as advertising or listing in a telephone directory). (b) Model Homes and Modular Units. A model home may be utilized in a subdivision or on a commercial lot and a modular unit may be utilized in subdivisions which are under construction for purposes of soliciting business and will not be required to be licensed as a branch office as long as the model home or modular unit meets the following requirements: 1. The model home or modular unit location and/or telephone number is only advertised in conjunction with advertising the main firm office and such advertising complies with the statutes, rules and regulations of the Commission; 2. The model home or modular unit does not have a mail drop; 3. The model home or modular unit is not the sole sales office for the firm; 4. The model home or modular unit is not utilized to allow unlicensed activity by individuals in performing any of the acts requiring licensure under T. C. A. § 62-13-101, et seq.; and 5. The principal broker of the main firm office shall adequately supervise licensees operating from model homes or modular units as required by T. C. A. § 62-13- 312 and any rules promulgated thereunder. |
| Timeline to Return Earnest Money | We were in contract for a home and our closing was contingent upon a home sale. We have submitted a mutual release to the seller’s agent. How many days is a broker allowed to return earnest money? | Pursuant to TREC Rule 1260-2-.09(9), “Absent a demonstration of a compelling reason, earnest money shall be disbursed, interpleaded, or turned over to an attorney with instructions to interplead the funds within twenty-one (21) calendar days from the date of receipt of a written request for disbursement.” |
| Impersonating a Licensed Agent | If there is someone that you know going around and listing homes to sell for a profit that is not a licensed agent and they are using contracts they have printed off the internet stating that they are not a licensed agent but they are wholesaling these properties for an assignment fee. What can be done when people are contacting customers and the public and misleading them and doing it illegally? What can be done about acting as a licensed agent without being licensed? | You can report that person to TREC who will send it to the District Attorney. |
| Detecting Scams | I recently had a deal where a person with an American name contacted me and said he wanted to make an offer on a property here, but he was in Hong Kong. I immediately suspected a scam so I told him that I would need EM from an American bank and he said no problem but sent me POF from a Hong Kong bank (that does exist). He wanted a contingency upon viewing and insisted on putting 10k EM down. I talked with my title attorney about it because again I suspected fraud. I wrote the offer because I was afraid if I didn’t that I could have a complaint filed against me but I did warn my seller that I believed it was a scam and would not likely go through. She signed the contract anyway. He sent a cashier’s check on HSBC Bank. It bounced but before he knew it bounced he sent an email with an excuse of why he needed to terminate and wanted the EM wired back. My title attorney emailed him and said no the check was no good. He contacted the FBI but they do not seem interested in it. What should I have done different or any advice on how to handle these situations? | Unfortunately, this is a growing concern among the industry. The Secret Service has some resources on its page HERE. Below are some helpful items from those resources: Report individual instances of cybercrime to the Internet Crime Complaint Center (IC3), which accepts Internet crime complaints from both victim and third parties. Ask a customer to meet via Zoom to discuss the offer and ask to see their government issued IDs Independently verify the customer’s identity Use trusted title companies |
| Snow Impacting Contract Deadlines | Does this week's snow affect a residential purchase and sale agreement? I'm trying to find force majeure in the contract. The purchase and sale agreement contains no such provision. Any deadlines that were unable to be met could have been extended via an amendment form. Does an agent have to disclose they are an agent to the renter IF the property is owned by an LLC that the agent owns? | I recommend disclosure of your interest in the LLC to prospective tenants. Under Tennessee law, if the property owners own the property in their individual capacity, then an owner/agent disclosure will have to be made. If the property is owned by an LLC, corporation or certain types of partnerships, then this is not necessary since the law looks at these types of businesses as separate legal entities. However, under the code of ethics as a REALTOR®, a REALTOR® is obligated to disclose ownership or "any interest" in the property. That would include any legal ownership or possible future ownership, such as through inheritance or ownership interest in a company. |
| Crediting the Buyer at Closing | Can a buyer's agent credit the buyer at closing a portion of their commission on a cash transaction? | No, this would be in violation of the cash rebate statute: "A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission's general rulemaking authority the commission may regulate the practices of real estate licensees in regard to gifts, prizes or rebates that are not otherwise prohibited by law." Tenn. Code Ann. § 62-13-302(b). The listing agent can forego their commission but cannot credit any portion of their commission to a buyer or seller. |
| Transactions Through a Power of Attorney | I have an upcoming listing which is different from any other I have had before. The owner is still living but is in a nursing home and is not able to complete the paperwork. Her niece has POA and is handling the transaction for her. The lady has not been out of her home for three years quite yet. It has been over two years. My questions are: Do I use RF 203, and if so, what number would the POA check on the form? | A power of attorney does not qualify a property for the exemption; a conservatorship (a court declaration that the children have control of mother's affairs) would qualify. This is because the POA simply stands in for the actual seller. If the Seller has lived in the house in the past three years, it is unlikely that the Seller would be exempt unless they qualified for a different exemption. The POA can complete the Disclaimer form – with buyer’s permission- with the statement that they will consider repairs or they can complete the Disclosure to the best of their ability. You can explain that the seller is not able to provide an adequate disclosure form (get the seller’s permission or the person holding the power of attorney before stating this to the buyer). This may make buyers more agreeable to accept the disclaimer, especially if they understand that they can make whatever inspections they wish and can terminate the contract if they are not happy with the outcome of the inspections. |
| Paying an Out-of-State Agent Not Licensed in Tennessee | Can a real estate firm pay an agent in New Jersey that is not licensed in Tennessee? If so, how would we need to proceed? | You can pay the agent essentially a referral fee pursuant to the statute below: Tenn. Code Ann. § 62-13-302(a) states: It is unlawful for any licensed broker to employ or compensate any person who is not a licensed broker or a licensed affiliate broker for performing any of the acts regulated by this chapter. A licensed broker may pay a commission to a licensed broker of another state if such nonresident broker does not conduct in this state any of the negotiations for which a commission is paid. So long as the broker in the other state does not conduct ANY activity which requires a Tennessee real estate license, you may pay a commission to that broker. |
| Terminating a Listing Agreement | What is the proper procedure for terminating a listing agreement? | You can use RF151, listing/buyer representation mutual release agreement form. |
| Incentives, Kickbacks, and Fees | Can't remember the RESPA? Rule or if there is one. The question is: as a realtor® when an overnight rental company offers an incentive to send clients to them- are we allowed to accept a monetary incentive? On the same line: a home warranty company offers us an incentive to sell their product- we can be given $100 or we can give the consumer a $100 off coupon? Thanks. New ideas come along and get me confused and I want to do the right thing. | Under RESPA, “No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” 12 USC 2607(a). A real estate settlement service is defined as: any service provided in connection with a real estate settlement including, but not limited to, the following: title searches, title examinations, the provision of title certificates, title insurance, services rendered by an attorney, the preparation of documents, property surveys, the rendering of credit reports or appraisals, pest and fungus inspections, services rendered by a real estate agent or broker, the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans), and the handling of the processing, and closing or settlement. 12 U.S.C. 2602(3). So, for instance, you can accept a referral fee from a home warranty or overnight rental company, but not a lender. However, you will need to disclose any referral fee to your clients. Pursuant to Tenn. Code Ann. § 62-13-403(7)(B), a real estate agent owes a duty to all parties to: Not recommend to any party to the transaction the use of services of another individual, organization or business entity in which the licensee has an interest or from whom the licensee may receive a referral fee or other compensation for the referral, other than referrals to other licensees to provide real estate services under the Tennessee Real Estate Broker License Act of 1973, without timely disclosing to the party who receives the referral, the licensee’s interest in such referral or the fact that a referral fee may be received. You may use form RF 307, Referral for Service Disclosure for this purpose. |
| Independent Contractor Agreement | I am looking for a form for my independent contractors to sign to work with my firm. | Tennessee REALTORS® does not provide an independent contractor agreement, as many brokers will desire different things in their agreements. Below is a list of key provisions to be included in such agreements issued by NAR: https://www.nar.realtor/sites/default/files/handouts-and-brochures/2016/2016-10-03-Key-Provisions-for-Independent-Contractor-Agreements.pdf I recommend contacting an attorney who specializes in employment law to help you draft an agreement. |
| Forms for Residential Property Transactions | I have recently seen agents attaching a Property Condition Exemption and a Property Condition Disclaimer in the MLS. It is my understanding there only needs to be one of the three signed. (disclosure, disclaimer or exemption). Does it make any sense to have a Property Condition Disclaimer and a Property Condition Exemption signed by the buyer and seller? I would think only one being signed is best. | You are correct. There are three forms that deal with the Tennessee Residential Property Disclosure Act. One (and only one) of these three forms should be completed in every transaction involving residential property. All of these should be completed by the seller and disclosed to potential buyers. They are: Form RF 201 (Tennessee Residential Property Condition Disclosure form), Form RF 203 (Tennessee Residential Exemption Notification form), and Form RF 204 (Tennessee Residential Property Disclaimer form). Form RF 201 is the one most commonly used. This is the one that is given to the seller where he discloses information about the property. Form RF 203 concerns those exemptions that the statute has provided for and a disclosure is not required. These include things such as seller has not lived on property at any time in the last three years, some bankruptcies, foreclosure sales, auctions, etc. (please see form for a complete list). In these instances, no form is required, but I recommend using the RF 203 so that your file has documentation in it clarifying that the seller is exempt. The third is RF 204. This is the form that you use when the seller wants to sell the property “as is”. The seller is stating that he is not going to make repairs and is not disclosing anything. However, in these circumstances, the buyer MUST agree to this disclaimer. If not, then the Condition Disclosure form must be completed if the sale is to proceed. If the buyer agrees to accept the disclaimer, the seller is not obligated to present the disclosure statement (and the buyer does not have to sign it). In certain situations (such as someone has a power of attorney for the seller), you can explain that the seller is not able to provide an adequate disclosure form (get the seller’s permission or the person holding the power of attorney before stating this to the buyer). This may make them more agreeable to accept the disclaimer, especially if they understand that they can make whatever inspections they wish and can terminate the contract if they are not happy with the outcome of the inspections. |
| Exemption from Disclaimer Forms | Form RF-205. When would you use this form.? The questions are stated in the exempt form and the disclaimer forms already. | You would use this form in the event a Seller did not wish to mark why they are exempt on the exemption form. As such is not required by state law. |
| What Can Unlicensed Employees Do? | I have several employees. Part of their responsibility includes showing property to prospective tenants and guests. Are my employees required to have a license if they show property for rent? I was under the belief that they did not need a license as long as I have a license and they work for me. | Yes, they will need a license to show the property. They can unlock it at your direction – but that would be it; they would not be able to conduct a showing. TREC has issued the following guidelines as part of its official manual. These guidelines can also be found here. WHAT MAY AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY DO? 1. Answer the phone, forward calls and give information contained only on the listing agreement as limited by the broker; 2. Fill out and submit listings and changes to any multiple listing service; 3. Follow up on loan commitments after a contract has been negotiated and generally secure status reports on the loan progress; 4. Assemble documents for closing; 5. Secure public information from courthouses, utility districts, etc; 6. Have keys made for listings; 7. Place ads which have been approved by the Principal Broker; 8. Receive, record and deposit earnest money, security deposits and advance rents under the direct supervision of the Principal Broker; 9. Type contract forms for approval by licensee and Principal Broker; 10. Monitor licenses and personnel files; 11. Calculate, print or distribute commission checks; 12. Place signs on property; 13. Order repairs as directed by the licensee; 14. Prepare for distribution fliers and promotional information which have been approval by the Principal Broker; 15. Deliver documents and pick up keys; 16. Place routine telephone calls on late rent payments; 17. Gather information for a comparative market analysis (CMA); 18. Unlock property under the direction of a licensee; and 19. Disclose the current sales status of a listed property. AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY MAY NOT: 1. Make cold calls by telephone or in person to potential clients; 2. Show properties for sale and/or lease to prospective purchasers; 3. Host open houses, home show booths or fairs; 4. Discuss or explain listings, offers, contracts, or other similar matters with persons outside the firm; 5. Negotiate any terms of a real estate transaction; or 6. Negotiate or agree to any commission split or referral fee on behalf of a licensee; 7. Be paid any compensation which is dependent upon, or directly related to, a real estate transaction. |
| E&O Insurance When Representing Family | In Tennessee, will E&O insurance cover an agent/broker if they directed their side of the commission go to a personal family member (think son or daughter) when representing them in the purchase of a house? | In Tennessee, such practice would be against the law. Tennessee has an anti cash rebate statute listed below. This statute prohibits a licensee from paying clients in a transaction or providing anything of value. There is no exception for family members. "A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission's general rulemaking authority, the commission may regulate the practices of real estate licensees in regard to gifts, prizes, or rebates that are not otherwise prohibited by law." Tenn. Code Ann. § 62-13-302(b). As for E&O coverage, that would be a specific question to direct to your carrier. However, given the practice is not legal; I could foresee coverage problems. |
| RF302 Confirmation of Agency Status Form | Can you please confirm if the below is the proper way to complete the RF302 Confirmation of Agency Status form? If a licensee (Licensee A) is working with a buyer customer and has not entered into a written agency agreement, and a different licensee (Licensee B) is working with a seller and they have a written agency agreement, then you would mark Licensee B on the Seller side as Agent or Designated Agent for the Seller (depending on whether you entered an agency or designated agency agreement), and then you would mark Licensee A on the buyer side as Transaction Broker/Facilitator. Is this correct? | Yes, that is correct. |
| Paying an Out-of-State Agent | Can a real estate firm pay an agent in New Jersey that is not licensed in Tennessee? If so, how would we need to proceed? | You can pay the agent essentially a referral fee pursuant to the statute below: Tenn. Code Ann. § 62-13-302(a) states: It is unlawful for any licensed broker to employ or compensate any person who is not a licensed broker or a licensed affiliate broker for performing any of the acts regulated by this chapter. A licensed broker may pay a commission to a licensed broker of another state if such nonresident broker does not conduct in this state any of the negotiations for which a commission is paid. So long as the broker in the other state does not conduct ANY activity which requires a Tennessee real estate license, you may pay a commission to that broker. |
| Cash Offers and Contracted Provisions | My client is making a cash offer on a lot/land property and wants to strike through any provisions in the contract related to a loan. Is this legal, and if so, how would I handle this situation? | The client can work with their attorney to draft an amendment to change any necessary language in the contract that may not be applicable to the transaction. Striking through a document is not recommended. |
| FSBO and a Seller Disclosure Form | I am working with an FSBO that I do not have listed. I have a buyer who might be interested in it but would like to see the Seller Disclosure form. The seller does not have one, so is there any reason why I cannot send the FSBO my Seller Disclosure out of TAR for him to fill out? | If you are involved in the transaction, you can share TR forms with non-TR members also involved in the transaction. The Seller will be unable to use that disclosure form for other transactions without violating TR’s copyright. |
| Builders Warranty | Is there a separate form we need to have signed for a builder’s warranty on a new construction transaction? My buyer is asking for one. | There is not a separate form provided by TN REALTORS for this. The warranty is addressed in the new construction purchase and sale agreement and states the seller shall provide a copy of their limited warranty specifying the terms, conditions and limitations of seller’s obligations. Buyer can choose to accept or terminate the agreement. |
| Topic | Question | Answer |
|---|---|---|
| When Earnest Money is Considered Received? | When a contract reads that the EM (Trust Money) will be received in “x” number of days, does this mean the money must be deposited into the holding company’s escrow account within that time frame, or that it simply must be received by the holding company within that time frame. For instance: A contract reads that EM will be received within 7 days after a contract is acknowledged. The EM is provided at the end of the 7th day – after the banks have closed. Is this EM considered to be received on time as it is in possession of the holding company (or agent) within the 7 days, or is it considered late as it couldn’t be deposited until the 8th (next day) or even the 10th day (if it was over a weekend or holiday)? | The Tennessee REALTORS® forms committee intended for the number of days on the purchase and sale agreement to refer to the date on which the earnest money is to be received from the buyer by the holder. The holder is then to deposit the money “promptly” after receipt. The “promptly” timeline does not start until receipt of the funds. |
| Buyers’ Right to Hire an Agent | If a buyer has a binding contract and signed a confirmation of agency as being an unrepresented buyer, can they change their mind and sign a buyers rep with an agent at a different firm? | Yes, a buyer has a right to hire an agent at any time. The listing firm may not have to compensate that agent. |
| Terminating a Listing Agreement Contract | If my seller sends me a written note stating they want to cancel their listing immediately and it’s signed and dated, do I still need to ask them to sign the state form to cancel? | The listing agreement is a contract for mutual benefit and requires the signature of both parties to be terminated. |
| Pet Deposit for Emotional Support Animal | On a residential lease agreement, if a tenant has an emotional support animal, am I allowed to charge a pet deposit? | You cannot charge a pet deposit; however, you can charge a security deposit to cover any potential damage. |
| Assigning a Contract Without the Seller’s Permission | I represent a seller on a listing. The original buyer wants to back out of the contract. The buyer’s agent wants to assign it to a builder (who happens to be her fiancé). The seller does not want to do this. If this is legal, there was a non-refundable deposit made by the original buyer. We do not believe this transfers. Your thoughts? Further, the compensation agreement was for the original buyer and their agent. We feel this is self-dealing and do not want to pay a commission to the agent if the contract is assigned by them (not the original buyer). How do we handle this situation? | All contracts for real estate in Tennessee are assignable (including TN REALTORS purchase and sale agreements) unless otherwise specified. The buyer can assign the contract without the Seller’s permission. They are still liable to the Seller to close on the property if the assignee does not. The buyer would contract with the assignee. Therefore, the seller would keep the non-refundable deposit from buyer and would carry on as though closing with the original buyer. IF you have already signed a compensation agreement and offered the compensation in the MLS, then you are likely still required to offer said compensation once a deal closes. IF the Seller has further questions regarding any assignment, they should speak with their own attorney. |
| Seller Disclosing Crucial Information | The situation: We represent the buyer. The property is set to close next week. New construction was listed on a 1-acre lot in TN. We were just informed yesterday by the lender that the new survey dividing the 26 acres it was built on down to these new building lots had not yet been approved by planning and zoning and that it would be approved last night at the November meeting. It was not approved. Seller didn’t disclose any of this prior to listing the home. Listing agent never told us any of this and is acting as if it’s not a big deal. Next planning and zoning meeting is at the end of January. This is obviously causing big issues for the buyer due to their dishonesty. The question: Legally should this have been disclosed prior to listing as well as should the listing agent of informed us as soon as they found out (2 weeks ago) versus us finding out on our own? | IF the buyers have questions regarding what should have been disclosed, they should speak to their own attorney. |
| Radon Inspection Contingency | Does a buyer agent need to put in special stips that contract is contingent upon buyer satisfaction with radon inspection or can radon inspection just be one of the inspections covered under the inspection period? Does radon need to be separated from general inspection period and if so, why? | There is a special stipulation for radon that I recommend be inserted if a buyer is concerned about radon. It specifies who will pay for remediation should the radon levels not be satisfactory. |
| Non-Allowable Payment of Commission | On form RF141, line 40, new verbiage. When it’s VA buyer and lender says the payment of commission by buyer to Broker is non-allowable, can we also put in special stips of this form, upon signing, that should the lender deem that a non-allowable, buyer to bring money via certified check to closing? Does this form waive the buyers right to pay anything at all if lender says they don’t have to or cannot? | So basically, the realtor would work for free (in the event buyer was paying the commission on a fsbo). No, the buyer will not be allowed to pay a commission pursuant to VA guidelines. Paying money outside of the closing statement could constitute mortgage fraud. If VA guidelines preclude a buyer from paying a commission, then yes, the requirement is waived in the representation agreement and the agent could work for free. |
| Radon Inspection Contingency | Does a buyer agent need to put in special stips that contract is contingent upon buyer satisfaction with radon inspection or can radon inspection just be one of the inspections covered under the inspection period? Does radon need to be separated from general inspection period and if so, why? | There is a special stipulation for radon that I recommend be inserted if a buyer is concerned about radon. It specifies who will pay for remediation should the radon levels not be satisfactory. |
| Non-Allowable Payment of Commission | On form RF141, line 40, new verbiage. When it’s VA buyer and lender says the payment of commission by buyer to Broker is non-allowable, can we also put in special stips of this form, upon signing, that should the lender deem that a non-allowable, buyer to bring money via certified check to closing? Does this form waive the buyers right to pay anything at all if lender says they don’t have to or cannot? | So basically, the realtor would work for free (in the event buyer was paying the commission on a fsbo). No, the buyer will not be allowed to pay a commission pursuant to VA guidelines. Paying money outside of the closing statement could constitute mortgage fraud. If VA guidelines preclude a buyer from paying a commission, then yes, the requirement is waived in the representation agreement and the agent could work for free. |
| Termination Based on Contingency | Received an offer on a property that ended in a Mutual Agreement to Terminate based on Buyers rights under inspection period. The Listing expired and I signed another agreement with owner to continue the listing. Received an offer. Accepted and submitted all required documents. The Broker has since not allowed approval/payout of commission 5 weeks later, based on the need for an additional signature on the terminated offer. What documents are required to properly terminate a transaction? | IF terminating based on a contingency provided for in the contract, only the notification form is required to terminate the agreement and that notification form only needs to be signed by buyer. It does make broker’s lives easier to have the parties sign RF481, Mutual Release of Purchase and Sale Agreement. |
| Giving Commission Checks to Buyers | I represented a buyer on a transaction which has closed. My commission check is at the closing company offices. I would like to give my commission check to the buyer. How would I need to do this? | You cannot give your commission check to the Buyer. This would be considered a cash rebate, which is illegal pursuant to state law. “A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission’s general rulemaking authority the commission may regulate the practices of real estate licensees in regard to gifts, prizes or rebates that are not otherwise prohibited by law.” Tenn. Code Ann. § 62-13-302(b). |
| Property Management and Security Deposit | I manage a property for an owner. The owner wants to take over the management themselves, but I still have a tenant in place. With regard to the security deposit, do we need to do an amendment to the lease agreement regarding same? If there is a problem between the tenant and owner regarding the security deposit, how would I handle that? | If the lease agreement specifies who holds the security deposit, you will need to get an amendment to the lease agreement signed by both parties stating the Owner will now be holding the security deposit. If the lease agreement does not specify, you will need to get something in writing signed by the tenant stating that they understood that the Owner is holding the security deposit. Once you have completed amendments, you can transfer the security deposit to the Owner. Depending on the issue between tenant and owner, it may not be your problem if your property management agreement is terminated. |
| Writing Personal Letters with an Offer | Is it again Fair Marking laws/regulations for a buyer to write a personal letter to accompany an offer on a property? Wouldn’t it be more of what was contained in the letter that might violate these laws/regulations and not necessarily the letter itself? | I think there is danger of violating the Fair Housing Act when presenting personal letters for a Seller’s consideration. Fair housing laws prevent discrimination based upon the basis of race, color, religion, sex, handicap, familial status, and national origin. This means that sellers, landlords, agents, etc. cannot discriminate based upon these classes. If a Seller has legitimate, nondiscriminatory reasons for choosing one buyer over the other (such as a higher purchase price), that is fine. However, if two offers were equal and a Seller chose a Buyer because they wrote a letter saying it was the perfect house for their son to grow up in and the other potential buyer was childless, there could be claims of discrimination under the fair housing act raised by the buyer who was not chosen. Below is guidance from NAR on the Issue: Before the next time you are faced with a buyer love letter, consider these best practices to protect yourselves and your clients from fair housing liability: • Educate your clients about the fair housing laws and the pitfalls of buyer love letters. • Inform your clients that you will not deliver buyer love letters, and advise others that no buyer love letters will be accepted as part of the MLS listing. • Remind your clients that their decision to accept or reject an offer should be based on objective criteria only. • If your client insists on drafting a buyer love letter, do not help your client draft or deliver it. • Avoid reading any love letter drafted or received by your client. Document all offers received and the seller’s objective reason for accepting an offer. |
| Paying Commission When Terminating an Agent | We need to terminate one of our agents, but want to pay them their commission on any pending transactions. Do we need to send in the TREC-1 or put his license in retirement? How should we handle this situation? | Either way is appropriate. TREC Rule 1260-2-.39 states: (1) The commissions earned by an affiliated licensee while working under a principal broker can still be paid after one (1) or more of the following circumstances occur: (a) the affiliated licensee transfers to a new broker; (b) the affiliated licensee retires his or her license; (c) the affiliated licensee is in broker release status; (d) the affiliated licensee allows his or her license to expire; or (e) the death of the affiliated licensee. TREC has determined that a commission is earned by a licensee when the contract to purchase (or lease) is signed by all parties. Therefore, if an agent is affiliated with a company at the time that the contract is signed, then the broker can pay that individual after closing, even if that agent is no longer affiliated with his/her company. |
| Forms for Selling Family Land | I have a family of 6 that is selling some family land. They already have a buyer but want me to handle this transaction side of the deal. There is not another agency involved. The seller is dealing directly with a buyer. What forms do I need to have with the seller? I just want to make sure I am following proper procedures. | If you are acting as a facilitator, TN REALTORS does not provide a form. You can complete an agreement to show property form to help you get paid on the transaction. If you will be representing the Seller as their agent, you would complete a listing agreement, confirmation of agency status forms, and provide the buyer with a working with a real estate professional form – among any other form that may be needed in the transaction. |
| Missed Deadlines & Earnest Money | One of our agent’s represents a buyer on a contract. The buyer missed a deadline in the contract and the seller wants the earnest money. After receiving the request, we realized the earnest money had never been deposited. How do we handle this situation? | Just because the earnest money was never collected, does not relieve the Buyer’s duty to pay the Seller the earnest money in the event it is owed under the terms of the contract. |
| Interplead Funds | A check was made in a personal name and they are demanding if I don’t make it out to the LP entity they are going to sue, however, I do not have nay documentation showing managing member. Also, the contact expired & the Release was done by the Buyers Broker that purchased the property on a 2010 TAR form without the Buyers Brokers signature. The Buyer Broker did send an updated TAR release form, but only his and the Buyers signature on it. I have tried to reach out to the Sellers and they have gone silent. Interpleader – is it only for buyer/seller disputes? or in a situation like this. | You may want to just go ahead and interplead the funds. An interpleader is the court action that the holders of earnest money can take to determine who is entitled to the funds in the event of a dispute between the buyer and seller. In the event you have to interplead the funds, you will likely need to file a Petition to Interplead Funds in the General Sessions Court of the County where the property is located. You may obtain a copy of said Petition by logging onto the Tennessee REALTORS website (www.tnrealtors.com) and downloading and or printing RF 706. Typically, once the petition is filed, copies will be served on the parties to the contract and a hearing date will be set. On the hearing date, you will appear before the judge and explain why the brokerage is seeking to interplead funds with the court. After the petition is granted, the judge will then determine, either that day or at a later hearing, which party (i.e. the buyer or the seller) is entitled to the funds. The parties will have the opportunity to present their arguments to the judge during that hearing. The procedure for interpleader actions differs from county to county and from general sessions court to chancery court. An interpleader action should be filed in general sessions court if the amount of earnest money is less than $25,000. If the amount is $25,000 or greater, the action should be filed in either circuit or chancery court. You may contact the court clerk to see if an action has been filed or encourage your client to do so. If you have to interplead the funds, the buyer and seller will be named as the defendants on the interpleader form. This sometimes upsets the parties to think that they are being sued. However, you should keep in mind that you are not suing them – you are simply turning the funds over to the court and asking the court to decide who is entitled to the funds. As far as for who is responsible for the court costs in an interpleader, it will depend upon what the earnest money agreement and/or contract states. Generally speaking, the losing party typically is responsible for paying the court costs. The firm will be the party listed as the plaintiff. Please bear in mind that if the firm is incorporated, an LLC, and certain types of partnerships, they must be represented by an attorney. An individual cannot represent the interests of an incorporated entity without a law license. You can always indicate to the parties that if they cannot reach a decision and/or split, that you will interplead the funds which will involve court costs and attorney fees which you will seek under the terms of the contract. This may encourage them to reach an agreement. With regard to the attorney’s fees and costs, you should include a specific request for attorney’s fees and costs. TREC Rule 1260-2-.09(7)(f) gives the authority for a principal broker to file an interpleader action. Bear in mind that according to TREC Rule 1260-2-.09(9) that this should be done within 21 days from the date it is first requested in writing absent a demonstration of a compelling reason. |
| Multi-State Advertising | Can a Tennessee Realtor that is also licensed in South Carolina have on her letterhead both brokerages as long as they adhere to Tennessee advertising rules? | I am not aware of anything which would prohibit this. |
| Out-of-State Buyer and Licensed REALTOR | A buyer on a property is a licensed realtor in Oregon. Do we do complete a personal interest disclosure? | No, since they are not a TN licensee, this is not necessary. |
| Dual Licensure | I have firms in both Tennessee and Georgia and I am licensed in both states. Are all of my agents in either firm required to be licensed in both states and members of the Realtors (i.e. I have an agent in Georgia that will work in Georgia, but does not want to be licensed in Tennessee). | No, there would be no requirement for dual licensure under Tennessee laws. You need to speak with the Georgia Real Estate Commission to see if their statutory scheme would require it and talk to your local association regarding membership. |
| Failure to Receive Earnest Money | If the earnest money required to be deposited within X number of days is not deposited, is the contract null and void? If so, can the seller request the earnest money be given to them? | No, the contract is not void – the Seller can make a demand of funds and should the buyer not comply with the demand, the Buyer will be in default and Seller may terminate. Below is the pertinent provision of the contract: Failure to Receive Earnest Money/Trust Money. In the event Earnest Money/Trust Money (if applicable) is not timely received by Holder or Earnest Money/Trust Money check or other instrument is not honored for any reason by the bank upon which it is drawn, Holder shall promptly notify Buyer and Seller of the Buyer’s failure to deposit the agreed upon Earnest Money/Trust Money. Buyer shall then have one (1) day to deliver Earnest Money/Trust Money in immediately available funds to Holder. In the event Buyer does not deliver such funds, Buyer is in default and Seller shall have the right to terminate this Agreement by delivering to Buyer or Buyer’s representative written notice via the Notification form or equivalent written notice. In the event Buyer delivers the Earnest Money/Trust Money in immediately available funds to Holder before Seller elects to terminate, Seller shall be deemed to have waived his right to terminate, and the Agreement shall remain in full force and effect. |
| Recovering Lost Commission | There is a signed compensation agreement between brokers. The title company accidentally paid the wrong amount to the buyer’s agent firm at closing. It was large excess mistakenly taken from listing firm’s commission – they were accidentally paid triple the agreed amount. The buyer’s agent firm is refusing to return the excess commission. What recourse does the listing firm have to recover the lost commission? | The listing firm can retain an attorney to enforce the Agreement or petition the closing company to correct their mistake and have them attempt to enforce the Agreement. |
| Buyer Representation Agreement Provision | In Section E. of the Exclusive Buyer Representation Agreement it states the amount the client agrees to pay the Broker in the event that the seller does not pay the compensation. If we are working with a VA Buyer who is unable to pay any commissions due to VA regulations what would be put in the section? Also if the buyer decided to go under contract on a home where the compensation was different than what was listed on the Buyer Representation Agreement, such as new construction where it is 2.5%, would we be obligated to amend the Buyer Representation Agreement? | The 2022 Buyer Representation Agreement will contain this provision: In the event the buyer broker compensation herein is considered a non-allowable pursuant to VA guidelines and thus cannot be paid by buyer, this obligation is waived by Broker. In the meantime, you can add this to the special stipulations section of your representation agreements when working with a VA Buyer. |
| Advertising Rentals Prior to Closing | I have an agent that has an investor who is purchasing new construction homes. My agent will be handling the rentals of these properties. Can these properties be advertised as rentals prior to them actually closing? Do they need to do a contingency on the listing agreement, and would the listing be between the investor and our company? The investor, builder and our company? | If the buyer has a pending contract on the home, then he may be able to list it for sale/lease under certain circumstances, although this is not encouraged. First, the buyer and your company will need to get the permission of the original seller to list the property prior to the closing. This needs to be in writing. Next, the agent will need to check with his local board/MLS to determine whether they will allow this listing. No matter how it is advertised, the agent MUST disclose that this listing is one pending closing so that this disclosure will be seen by anyone viewing the listing. |
| You Can’t Amend a Dead Contract | I currently have a deal going with another broker in my area. We had to do a closing date extension to the contract that was dated to close on November 23,2021. We had to push it out till Dec. 22, 2021. The document was sent on Nov. 19,2021 for the listing broker to have signed by the sellers. I did not receive that document back until Nov. 29, 2021. This was 6 days past the closing date. I told the listing broker that technically the contract was dead and we needed to write up a new one. He states that since the amendment was signed that we are good to go. To me this is trying to amend a dead contract. Am I correct in thinking this or since the closing date amendment was signed (6 days later) the deal is still good? I just want to make sure that everything is legal. Most agents say we are good until something goes wrong and we end up in court. Then it is too late to make sure everything is signed correctly. Thank you for your response. | You are correct that the agreement was dead, and you can’t amend a dead contract. You are also likely correct that everything is good until it’s not and you end up in court. If the parties close on the property, then likely no harm no foul. However, always make sure you are adhering to timelines because if any parts want out of the contract, then it would be fairly easy to do so. |
| Checking Boxes on a Counteroffer | The sellers have submitted a counteroffer to the buyers who made an offer on their home. The Buyer’s check the accept box on the counteroffer and sign the counteroffer. Everyone has signed the counteroffer. Does the seller need to also check the counter box on the purchase and sale agreement and sign the purchase and sale agreement? | The Seller should have selected “Counter” and signed at the time of submitting the counteroffer. However, I don’t believe the absence of a signature would negate an agreed upon contract. In the future, that is how it needs to be done though. |
| Return of Earnest Money on a Contract | I am writing regarding the return of earnest money on a contract. We entered a contract for purchase in May of 2021. We paid $30,000 immediate non-refundable monies to the seller upon execution of the contract. We had substantial delays in getting the survey done which we needed to get the site plan completed. We ran out of time in the contract to close so we did not take the option of extending contract by giving the seller an additional 10,000 for a 30-day extension We knew that we would not be able to get everything done in our due diligence to finalize the contract and close even with an additional 30 days. We sent a release of earnest money signed to the listing agent in November of 2021. The seller has not released the form. It appears to have been signed by her, but the listing agent is requesting documents regarding the survey. The buyer owes a balance of $10,000 to the surveyor. He offered to give the seller the survey if she would pay the balance owed. We offered her the preliminary site plan also. At this point she has contacted her agent to say she is getting legal advice. What is a reasonable time frame for return of earnest money? It has been 25 days at this point. What recourse does the buyer have or what action does he need to take to resolve this issue. | Pursuant to TREC Rule 1260-2-.09(9), “Absent a demonstration of a compelling reason, earnest money shall be disbursed, interpleaded, or turned over to an attorney with instructions to interplead the funds within twenty-one (21) calendar days from the date of receipt of a written request for disbursement.” |
| Agents Paying Other Agents | An issue is developing with Agents paying other agents directly, i.e. using paypal, venmo et.c for services such as showing agents where they take the Designated Agent’s Client and show them the list of homes that interest them. The non-assigned agent then receives a cash payment for their licensed real estate services immediately via electronic payment. It is part of our Standard Policy and Procedures that all income attributed to agent services ie, Referrals, Commissions and BPO’s are processed through the company accountant to ensure the proper recording and income reporting is accounted for. Should these showing agents also have their funds received for real estate service accounted for per company policy? In my opinion based on Tax reporting they should. Please advise. | Any money received for activity which requires a license, such as showing properties, has to go through the real estate firm. If an agent was to clean a property for another agent, that activity does not require a real estate license and therefore the agent could be compensated directly. |
| Paying Money outside of the Closing Statement | When it’s VA buyer and lender says the payment of commission by buyer to Broker is non-allowable, can we also put in special stips of this form, upon signing, that should the lender deem that a non-allowable, buyer to bring money via certified check to closing? Does this form waive the buyers right to pay anything at all if lender says they don’t have to or cannot? So basically, the realtor would work for free (in the event buyer was paying the commission on a fsbo). | No, the buyer will not be allowed to pay a commission pursuant to VA guidelines. Paying money outside of the closing statement could constitute mortgage fraud. If VA guidelines preclude a buyer from paying a commission, then yes, the requirement is waived in the representation agreement and the agent could work for free. |
| Special Stipulation for Radon | Does a buyer agent need to put in special stips that contract is contingent upon buyer satisfaction with radon inspection or can radon inspection just be one of the inspections covered under the inspection period? Does radon need to be separated from general inspection period and if so, why? | There is a special stipulation for radon that I recommend be inserted if a buyer is concerned about radon. It specifies who will pay for remediation should the radon levels not be satisfactory. |
| Purchasing Investment Properties | RF 634 – Investment Property Addendum 1/31/2021, what is the purpose of this form? What is the thought process behind it? I think it is to protect the consumer and agent when a consumer or agent is purchasing property that they are going to use as investment, so the seller has insight and knowledge that the purchaser is not going to live in the property but rather make money, is this correct? | This form is just to be used when purchasing investment properties. Typically, these transfers will be from investor to investor. This form includes some items you will typically run into during the purchase of investment properties – such as buyer wanting to review the rent rolls or the presence of tenants, which could delay the inspection. |
| Emotional Support Animals | On a residential lease agreement, if a tenant has an emotional support animal, am I allowed to charge a pet deposit? | You cannot charge a pet deposit; however, you can charge a security deposit to cover any potential damage. |
| Giving Commission Check to the Buyer | I represented a buyer on a transaction which has closed. My commission check is at the closing company offices. I would like to give my commission check to the buyer. How would I need to do this? | You cannot give your commission check to the Buyer. This would be considered a cash rebate, which is illegal pursuant to state law. “A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission’s general rulemaking authority the commission may regulate the practices of real estate licensees in regard to gifts, prizes or rebates that are not otherwise prohibited by law.” Tenn. Code Ann. § 62-13-302(b). |
| Agents Paying Agents | An issue is developing with Agents paying other agents directly, i.e. using paypal, venmo et.c for services such as showing agents where they take the Designated Agent’s Client and show them the list of homes that interest them. The non-assigned agent then receives a cash payment for their licensed real estate services immediately via electronic payment. It is part of our Standard Policy and Procedures that all income attributed to agent services ie, Referrals, Commissions and BPO’s are processed through the company accountant to ensure the proper recording and income reporting is accounted for. Should these showing agents also have their funds received for real estate service accounted for per company policy? Please advise. | Any money received for activity which requires a license, such as showing properties, has to go through the real estate firm. If an agent was to clean a property for another agent, that activity does not require a real estate license and therefore the agent could be compensated directly. |
| What Constitutes a Bedroom | What constitutes a bedroom for marketing purposes? | There is no standard answer to determine what constitutes a bedroom pursuant to state law. Therefore, you should check with your local codes department to determine whether they have a definition as to what a bedroom is. Appraisers often will look at things like whether there is a window and closet as well as whether the room is above grade level. However, these are not things you should determine. |
| Home Inspection Contingency | We represent a buyer on a contract with a home inspection contingency. The home inspection was not satisfactory to the buyer, and they want to back out of the contract. The seller refuses to sign the release until the buyer provides a copy of the home inspection. How do we handle this situation? | The purchase and sale agreement only says the Seller can ask for supporting documentation if repairs are requested. All that is required to terminate is a list of written specified objections. The home inspection report should not be shared. |
| Writing Personal Letters to the Buyer | Is it again Fair Marking laws/regulations for a buyer to write a personal letter to accompany an offer on a property? Wouldn’t it be more of what was contained in the letter that might violate these laws/regulations and not necessarily the letter itself? I think there is a danger of violating the Fair Housing Act when presenting personal letters for a Seller’s consideration. Fair Housing laws prevent discrimination based upon the basis of race, color, religion, sex, handicap, familial status, and national origin. This means that sellers, landlords, agents, etc. cannot discriminate based upon these classes. | If a Seller has legitimate, nondiscriminatory reasons for choosing one buyer over the other (such as a higher purchase price), that is fine. However, if two offers were equal and a Seller chose a Buyer because they wrote a letter saying it was the perfect house for their son to grow up in and the other potential buyer was childless, there could be claims of discrimination under the fair housing act raised by the buyer who was not chosen. Below is guidance from NAR on the Issue: Before the next time you are faced with a buyer love letter, consider these best practices to protect yourselves and your clients from fair housing liability: • Educate your clients about the fair housing laws and the pitfalls of buyer love letters. • Inform your clients that you will not deliver buyer love letters, and advise others that no buyer love letters will be accepted as part of the MLS listing. • Remind your clients that their decision to accept or reject an offer should be based on objective criteria only. • If your client insists on drafting a buyer love letter, do not help your client draft or deliver it. • Avoid reading any love letter drafted or received by your client. |
| Marketing Materials | You acknowledge that photographs, marketing materials, and digital media used in the marketing of the property may continue to remain in publication after Closing. You agree that Broker shall not be liable for any uses of photographs, marketing materials or digital media which the Broker is not in control. | The Buyer/Seller acknowledges that they have not relied upon the advice, casual comments, media representations or verbal representations of any real estate licensee relative to any of the matters itemized above or similar matters. The Buyer/Seller understands that it has been strongly recommended that they secure the services of appropriately credentialed experts and professionals of the buyer’s or seller’s choice for the advice and counsel about these and similar concerns. |
| Backup Offer an Backup Addendum | I have a listing on a property. We received multiple offers. After the first offer was chosen, my seller decided to take a backup offer. The buyer on the backup offer submitted an offer and a backup addendum. Does my seller need to sign the offer and the addendum, or just the addendum? | They would sign the offer and addendum. The addendum will not be effective if the offer to which it is attached is not effective. |
| “Never-Expiring” Offer | I have a buyer that doesn’t want to include a time limit of offer on a purchase and sales agreement and wants their offer to “never expire” On the sales agreement line 496: Time limit of offer – Are we able to add None, N/A or No Time Limit on the offer. | No, this would place your license in jeopardy. Pursuant to TCA §62-13-312(9), using or promoting the use of any real estate listing agreement form, real estate sales contract form or offer to purchase real estate form that fails to specify a definite termination date is a violation of the Broker’s act and the Commission can revoke a licensee’s license for using such agreement. |
| Using Outdated Forms | I received an offer today on a TAR 2015 Purchase & Sale Agreement. Is this an invalid offer due to the use of outdated forms? | The offer isn’t necessarily invalid, but you should report the agent using the form to Tennessee REALTORS as using outdated forms is a violation of the end user licensing agreement with TN REALTORS and makes me suspect they are not a REALTOR member, which would place them in violation of TN REALTORS copyright provisions. I recommend asking the offer to be resubmitted on a 2022 form so everyone can work in the best interest of their clients. |
| Directly Contacting a Buyer without Consent of the Buyer’s REALTOR® | When a Builder’s REALTOR® directly contacts the buyer without the consent of the buyer’s REALTOR® is that a violation of Article 16 of the Code of Ethics? Example: Builder’s REALTOR® contacts buyer directly to schedule an appointment, i.e. walkthrough without buyer’s REALTOR having knowledge of the appointment. Example: Builder’s REALTOR® contacts buyer to collect additional non-refundable deposit without the buyer’s REALTOR® consent or knowledge. | Yes, Article 16 states: Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other Realtors® have with clients. Standard of Practice 16-13 states in part: All dealings concerning property exclusively listed, or with buyer/tenants who are subject to an exclusive agreement shall be carried on with the client’s representative or broker, and not with the client, except with the consent of the client’s representative or broker or except where such dealings are initiated by the client. |
| Using Outdated Forms | I received an offer today on a TAR 2015 Purchase & Sale Agreement. Is this an invalid offer due to the use of outdated forms? | The offer isn’t necessarily invalid, but you should report the agent using the form to Tennessee REALTORS® as using outdated forms is a violation of the end user licensing agreement with TN REALTORS® and makes me suspect they are not a REALTOR® member, which would place them in violation of TN REALTORS® copyright provisions. I recommend asking the offer to be resubmitted on a 2022 form so everyone can work in the best interest of their clients. |
| Terminating a Buyer Rep Agreement | On form RF141, Exclusive buyer rep agreement, besides the end date on line 13, is there not a termination clause for buyers? I can’t seem to find any release and cancellation clause of any kind to allow a buyer out of this agreement. What if a buyer sends written notice that they wish to terminate the buyer’s representation agreement? | To terminate a buyer rep agreement, you can use RF151, listing/buyer representation mutual release agreement if the agent and buyer wish to no longer continue the relationship. |
| Opening An Office Away From A Firm’s Principal Office | I have an agent that is part of a team and wants to open up an office away from the firm’s principal office for their team. Are they allowed to do this legally? Can they use our name on exterior signage? Is there anything further we should know about if they follow through? | 1260-02-.41 LICENSEES WHO HOLD THEMSELVES OUT AS A TEAM, GROUP, OR SIMILAR ENTITY WITHIN A FIRM. (1) Licensees who hold themselves out as a team, group, or similar entity within a firm must be affiliated with the same licensed firm and shall not establish a physical location for said team, group, or similar entity within a firm that is separate from the physical location of record of the firm with which they are affiliated. (2) No licensees who hold themselves out as a team, group, or similar entity within a firm shall receive compensation from anyone other than their principal broker for the performance of any acts specified in T.C.A. Title 62, Chapter 13. (3) The principal broker shall not delegate his or her supervisory responsibilities to any licensees who hold themselves out as a team, group, or similar entity within a firm, as the principal broker remains ultimately responsible for oversight of all licensees within the principal broker’s firm. (4) No licensees who hold themselves out as a team, group, or similar entity within a firm shall represent themselves as a separate entity from the licensed firm. (5) No licensees who hold themselves out as a team, group, or similar entity within a firm shall designate members as designated firm agents, as this remains a responsibility of the licensed firm’s principal broker. TREC treats each branch office as a separate firm. Therefore, you could not have team members located in separate offices. |
| Violating the Code of Ethics | I represent the seller on a property. We had a buyer make an offer which was accepted. The buyer’s agent has totally circumvented me and has been dealing with the seller directly. Can I file an ethics complaint against this realtor? How should I handle this situation? | Yes, you can file an ethics complaint. Standard of practice 16-13 says, “All dealings concerning property exclusively listed shall be carried on with the client’s representative or broker, and not with the client, except with the consent of the client’s representative or broker or except where such dealings are initiated by the client.” Article 16 of the NAR Code of Ethics states “Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation agreements that other Realtors® have with clients.” |
| Listing Agreements for New Developments | I am going to be working with a new development of 10 townhomes. Do I need to have the owner sign 10 listing agreements or can I lump all of them together on one listing agreement? | I recommend doing a listing agreement for each townhome. The townhomes will sell at different times and may affect the validity of the agreements due to term. Separate listing agreements will make everything cleaner since separate contracts will be entered into. |
| Being Paid Through an LLC | One of my agents brought to my attention TN SB569 / HB605 asking me if they could open an LLC and get paid through this LLC. My recollection is that this hasn’t changed and been made law yet but only a bill presented. Is this legal now in TN? | Yes, this is now the law in Tennessee. The legislation did pass and became effective in April 2021. |
| Failure to Receive Earnest Money | If the earnest money required to be deposited within X number of days is not deposited, is the contract null and void? If so, can the seller request the earnest money be given to them? | No, the contract is not void – the Seller can make a demand of funds, and should the buyer not comply with the demand, the Buyer will be in default and the Seller may terminate. Below is the pertinent provision of the contract: Failure to Receive Earnest Money/Trust Money. In the event Earnest Money/Trust Money (if applicable) is not timely received by Holder or Earnest Money/Trust Money check or other instrument is not honored for any reason by the bank upon which it is drawn, Holder shall promptly notify Buyer and Seller of the Buyer’s failure to deposit the agreed upon Earnest Money/Trust Money. Buyer shall then have one (1) day to deliver Earnest Money/Trust Money in immediately available funds to Holder. In the event Buyer does not deliver such funds, Buyer is in default and Seller shall have the right to terminate this Agreement by delivering to Buyer or Buyer’s representative written notice via the Notification form or equivalent written notice. In the event Buyer delivers the Earnest Money/Trust Money in immediately available funds to Holder before Seller elects to terminate, Seller shall be deemed to have waived his right to terminate, and the Agreement shall remain in full force and effect. |
| Email Notice of Acceptance | If a signed Notification or an accepted, signed contract, is emailed to the original offering party would that be considered notice of acceptance is delivered, or does it need to be faxed? Does the original offering party need to notify the sender they have received it to have a binding contract? | An email is an acceptable form of notice pursuant to the Agreement: Notices. Except as otherwise provided herein, all notices and demands required or permitted hereunder shall be in writing and delivered either (1) in person; (2) by a prepaid overnight delivery service; (3) by facsimile transmission (FAX); (4) by the United States Postal Service, postage prepaid, registered or certified, return receipt requested; or (5) Email. NOTICE shall be deemed to have been given as of the date and time it is actually received. Receipt of notice by the real estate licensee or their Broker assisting a party as a client or customer shall be deemed to be noticed to that party for all purposes under this Agreement as may be amended unless otherwise provided in writing. The purchase and sale agreement becomes a binding agreement/ binding contract when one party submits an offer or counteroffer, the other party accepts. Then the original offering party receives notice of the other party’s acceptance. Once that happens, you have a contract. |
| Who May Place the “Sold” Sign | After a contract has closed, can the buyer’s agent put a sign in the yard advertising the home as “sold” when it was not their listing? Is this legal/ethical? | The issue of “sold” signs located on the property is addressed by the NAR Code of Ethics. Standard of Practice 12-7, which states: Only Realtors® who participated in the transaction as the listing broker or cooperating broker (selling broker) may claim to have “sold” the property. Prior to closing, a cooperating broker may post a “sold” sign only with the consent of the listing broker. You may advertise sold properties when you were the buyer’s agent. |
| Independent Contractor Agreement Form | I am looking for an independent contractor agreement form. | Tennessee REALTORS® does not provide an independent contractor agreement, as many brokers will desire different things in their agreements. Below is a list of key provisions to be included in such agreements issued by NAR: https://www.nar.realtor/sites/default/files/handouts-and-brochures/2016/2016-10-03-Key-Provisions-for-Independent-Contractor-Agreements.pdf I recommend contacting an attorney who specializes in employment law to help you draft an agreement, they can also provide you with advice on how best to put in a hold harmless provision. |
| Maintaining Unclosed Contracts | How does TREC handle this situation as listed below? Simply, would a contract written, however never closed, still be required/encouraged to be electronically stored for 3 years? What about a contract that is accepted, however, terminated, prior to closing? I’ve asked TREC for an explanation and have had no luck getting a clear answer. | 1260-02-.40 ELECTRONIC RECORDS. (1) Pursuant to T.C.A. § 62-13-312(b)(6), real estate licensees must preserve records relating to any real estate transaction for three (3) years following the consummation of said real estate transaction. Real estate licensees may utilize electronic recordkeeping methods to comply with this requirement, provided that the following conditions are met: (a) All documents required to be retained must be readily accessible in an organized format providing ease in document identification within twenty-four (24) hours of any request for inspection by representatives of the Commission. (b) In order to ensure proper document retention, the principal broker of all real estate firms that use electronic recordkeeping methods must develop and utilize a retention schedule that safeguards the security, authenticity, and accuracy of the records for the entire required retention period and that also provides for the use of technology and hardware that ensures the accessibility of records in a readable format. In my opinion, yes offers or contracts which do not close should be maintained for 3 years. TREC has previously opined that these records must contain, at a minimum, the following: listings; offers (even those that do not become contracts); contracts; closing statements; agency agreements; agency disclosure documents; property disclosure forms; correspondence; notes; and any other relevant information. Keep in mind, that the commission changes and their interpretation could change. However, it may be in your best interest to keep these records in case one of those parties choose to file a complaint against you. Any correspondence or records you have will help you defend such claims. |
| Retaining Old Files | I am wanting to purge my files. How many years back do I need to retain? | TCA 62-13-312 states that a licensee can be disciplined for failing to preserve for three years following its consummation records relating to any real estate transaction. It may be a good idea to keep records for at least six years, since that is the statute of limitations for a breach of contract action, in case you needed to defend yourself at any time. |
| Advertising Multiple Homes | I would like to advertise on social media and make a collage of homes in a neighborhood to market. Would I need to get permission from each homeowner of any property contained in the collage? | You need either the permission of the homeowner or the listing agent if those homes are on the market. Rule 1260-02-.12(3) (d) No licensee shall post a sign in any location advertising property for sale, purchase, exchange, rent, or lease, without written authorization from the owner of the advertised property or the owner’s agent. (e) No licensee shall advertise property listed by another licensee without written authorization from the listing agent or listing broker. |
| Loan Contingency on Purchase Contract | Is there a loan contingency on the purchase contract? Is there a specific day that loan contingency falls off? What if the loan is denied at no fault of the buyer 2 days before closing? If the loan is denied prior to closing is the buyer due back their deposit? | Yes, the Tennessee REALTORS purchase and sale agreement provides a financing contingency. That contingency can be waived. The financing contingency has no expiration date. IF a buyer is denied financing 2 days before closing, they can exercise the contingency and receive the earnest money back. |
| Tennessee Residential Property Condition Update | We are encountering agents that are requesting a Tennessee Residential Property Condition Update on properties that are listed with a Tennessee Residential Property Condition Exemption form. It is our understanding that you cannot update something that was an exemption. Can you please confirm? | Tenn. Code Ann. § 66-5-205 states: Liability for changed circumstances. – If information disclosed in accordance with this part is subsequently rendered or discovered to be inaccurate as a result of any act, occurrence, information received, circumstance or agreement subsequent to the delivery of the required disclosures, the inaccuracy resulting therefrom does not constitute a violation of this part; provided, however, that at or before closing, the owner shall be required to disclose any material change in the physical change in the physical condition of the property or certify to the purchaser at closing that the condition of the property is substantially the same as it was when the disclosure form was provided. If, at the time the disclosures are required to be made, an item of information required to be disclosed is unknown or not available to the owner, the owner may state that the information is unknown or may use an approximation of the information; provided, that the approximation is clearly identified as such, is reasonable, is based on the actual knowledge of the owner and it’s not used for the purpose of circumventing or evading this part. As you can see, the statute requires an update if the seller has previously been required to make the disclosures and that information has changed or is discovered to be inaccurate. He is also required to update the disclosure prior to closing to either disclose changes or state that nothing had changed. However, if there is no disclosure required because of an exemption, then there would be no update required. |
| Negotiations After an Inspection | I represent a buyer on a contract. After the inspection, the buyer wanted to negotiate with the seller about a reduction in the price due to the outcome of the inspection report. Is it okay to send the inspection report to the listing agent with this request? How should we handle this situation? | I would not send the inspection report. You could send over specific issues from the inspection report that your buyer is concerned with along with the amendment. |
| Seller Choosing Who To Sell To | When representing a seller, can a seller choose to only sell their own home to an owner occupant? Furthermore, can they only choose to sell their home to someone who already lives in the area? | Yes, they may choose to only sell to an owner occupant, so long as no discriminatory reason which would trigger fair housing is involved. I would not recommend only selling to someone who already lives in the area. I understand they may be doing this from the standpoint of not wanting to sell to someone who is moving here from another state, but what a person may interpret this restriction to mean is that they do not want to sell to someone immigrating from another country, which would trigger fair housing concerns. Fair housing laws prevent discrimination based upon the basis of race, color, religion, sex, handicap, familial status, and national origin. |
| Limited Function, Referral-Only Agent Status | Does the State of Tennessee have a limited function, referral only agent status meaning that an agent that holds a licensed can only or does only accept referrals or provide referrals for a fee? And if so, what requirements other than holding a real estate license and the requirements that come along with that are needed? What can and can’t they do? Also, do they have to live within so many miles of the brokerage? | No. Tennessee does not have any such license. |
| Signing a Counteroffer | If a buyer makes an offer and the seller makes a counteroffer, do both the original purchase and sales agreement AND the counteroffer need to be signed/dated by all parties or does the seller just mark counter and sign that agreement? | The Seller just marks and signs counter on the original agreement and the counteroffer is signed and dated by all parties. |
| Facilitating Both Buyer & Seller | If I am a facilitator to both the seller and buyer during a single transaction, I do not have a fiduciary responsibility to any party. What part(s) of the Realtor® Code of Ethics apply to this situation? | Keep in mind, TCA 62-13-403 lays out the duties a licensee owes to all parties, not just their clients: A licensee who provides real estate services in a real estate transaction shall owe all parties to the transaction the following duties, except as provided otherwise by 62-13-405, in addition to other duties specifically set forth in this chapter or the rules of the commission: 1) diligently exercise reasonable skill and care in providing services to all parties to the transaction; 2) disclose to each party to the transaction any adverse facts of which the licensee has actual notice or knowledge; 3) maintain for each party to a transaction the confidentiality of any information obtained by a licensee prior to disclosure to all parties of a written agency or subagency agreement entered into by the licensee to represent either or both of the parties in a transaction. This duty of confidentiality extends to any information that the party would reasonably expect to be held in confidence, except for information that the party has authorized for disclosure, information required to be disclosed under this part and information otherwise required to be disclosed pursuant to this chapter. This duty survives both the subsequent establishment of an agency relationship and the closing of the transaction; 4) provide services to each party to the transaction with honesty and good faith; 5) disclose to each party to the transaction timely and accurate information regarding market conditions that might affect the transaction only when the information is available through public records and when the information is requested by a party; 6) timely account for trust fund deposits and all other property received from any party to the transaction; and 7) a) not engage in any self-dealing nor act on behalf of licensee’s immediate family or on behalf of any other individual, organization or business entity in which the licensee has a personal interest without prior consent of all parties to the transaction; and b) not recommend to any party to the transaction the use of services of another individual, organization or business entity in which the licensee has an interest or from whom the licensee may receive a referral fee or other compensation for the referral, other than referrals to other licensees to provide real estate services under this chapter, without timely disclosing to the party who receives the referral the licensee’s interest in the referral or the fact that a referral fee may be received. The whole code of ethics applies. Article 1 and Article 11 are the articles that talks about duties owed to clients, but it also applies to customers as you can see below: Article 1 When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01) Article 11 The services which REALTORS® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, land brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate. REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/10) |
| Out-of-State Referral Checks | We have a referral check we need to write to an agent in Florida, but not sure what the rules are for them. How do we need to handle this situation? | Tenn. Code Ann. § 62-13-302(a) states: It is unlawful for any licensed broker to employ or compensate any person who is not a licensed broker or a licensed affiliate broker for performing any of the acts regulated by this chapter. A licensed broker may pay a commission to a licensed broker of another state if such nonresident broker does not conduct in this state any of the negotiations for which a commission is paid. So long as the broker in the other state does not conduct ANY activity which requires a Tennessee real estate license, you may pay a commission or referral check to that broker. IF Florida law allows, you can make the check directly to the agent. It is a Tennessee law that payment go through the brokerage. |
| Passing of an Agent | I have an agent that passed away yesterday. They have some transactions pending and some active. They were working on getting me some paperwork, but now I don’t know how to handle that. Also, when the pending transactions close, how do I pay the commission due them? Further, with regard to active listings, I am assuming they revert back to me. Is there anything else I need to be aware of or do? | The commissions earned by an affiliated licensee while working under a principal broker can still be paid after one (1) or more of the following circumstances occur: (a) the affiliated licensee transfers to a new broker; (b) the affiliated licensee retires his or her license; (c) the affiliated licensee is in broker release status; (d) the affiliated licensee allows his or her license to expire; or (e) the death of the affiliated licensee. TREC has determined that a commission is earned by a licensee when the contract to purchase (or lease) is signed by all parties. Therefore, if an agent is affiliated with a company at the time that the contract is signed, then the broker can pay that individual after closing, even if that agent is no longer affiliated with his/her company. However, it is the Broker’s decision as to whether to pay. The broker is allowed to pay a commission, but is not required. You can pay the estate for these commissions. Pursuant to Tenn. Code Ann. § 62-13-104(a), “A person acting as a receiver, trustee in bankruptcy, administrator, executor or guardian, trustee acting under a trust agreement, deed of trust or will, or while acting under a court order or instrument” is exempt from the Broker’s Act. Therefore, the licensing rules would not apply to them. You are only permitted to pay the administrator or executor of the estate. Once the estate has closed, the payments would stop. You can appoint a new designated agent on any active listings via an amendment form. |
| Signing a Counteroffer | If a buyer makes an offer and the seller makes a counteroffer, do both the original purchase and sales agreement AND the counteroffer need to be signed/dated by all parties or does the seller just mark counter and sign that agreement? | The Seller just marks and signs counter on the original agreement and the counteroffer is signed and dated by all parties. |
| Facilitating Both Buyer & Seller | If I am a facilitator to both the seller and buyer during a single transaction, I do not have a fiduciary responsibility to any party. What part(s) of the Realtor® Code of Ethics apply to this situation? | Keep in mind, TCA 62-13-403 lays out the duties a licensee owes to all parties, not just their clients: A licensee who provides real estate services in a real estate transaction shall owe all parties to the transaction the following duties, except as provided otherwise by 62-13-405, in addition to other duties specifically set forth in this chapter or the rules of the commission: 1) diligently exercise reasonable skill and care in providing services to all parties to the transaction; 2) disclose to each party to the transaction any adverse facts of which the licensee has actual notice or knowledge; 3) maintain for each party to a transaction the confidentiality of any information obtained by a licensee prior to disclosure to all parties of a written agency or subagency agreement entered into by the licensee to represent either or both of the parties in a transaction. This duty of confidentiality extends to any information that the party would reasonably expect to be held in confidence, except for information that the party has authorized for disclosure, information required to be disclosed under this part and information otherwise required to be disclosed pursuant to this chapter. This duty survives both the subsequent establishment of an agency relationship and the closing of the transaction; 4) provide services to each party to the transaction with honesty and good faith; 5) disclose to each party to the transaction timely and accurate information regarding market conditions that might affect the transaction only when the information is available through public records and when the information is requested by a party; 6) timely account for trust fund deposits and all other property received from any party to the transaction; and 7) a) not engage in any self-dealing nor act on behalf of licensee’s immediate family or on behalf of any other individual, organization or business entity in which the licensee has a personal interest without prior consent of all parties to the transaction; and b) not recommend to any party to the transaction the use of services of another individual, organization or business entity in which the licensee has an interest or from whom the licensee may receive a referral fee or other compensation for the referral, other than referrals to other licensees to provide real estate services under this chapter, without timely disclosing to the party who receives the referral the licensee’s interest in the referral or the fact that a referral fee may be received. The whole code of ethics applies. Article 1 and Article 11 are the articles that talks about duties owed to clients, but it also applies to customers as you can see below: Article 1 When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly. (Amended 1/01) Article 11 The services which REALTORS® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, land brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate. REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/10) |
| Home Inspections | I represent the seller on a listing. A buyer has a contract that is contingent upon an inspection. Can a buyer, under section 8(a) of the contract, perform their own inspection and withdraw from the contract due to the same? | Yes. The purchase and sales agreement states that if a Buyer wishes to have a home inspection done, they must contract with a licensed party under the relevant code. The purchase and sales agreement also allows an individual to perform their own home inspection – it does not grant them the right to have an unlicensed third party perform one. The Seller does have to treat a buyer’s home inspection report just like any other. If a buyer performs the home inspection, they may terminate under the inspection contingency and be entitled to their earnest money. |
| Submitting an Offer with a Response Time | If you submit an offer to a listing agent with a response time of 12:00 pm and they do not respond to you, can there be any legal action on this? How do you deal with realtors not responding? What if the listing agent never presented the offer to the seller in the time frame? | Pursuant to TREC Rule 1260-2-.08: A broker or affiliate broker promptly shall tender every written offer to purchase or sell obtained on a property until a contract is signed by all parties. Upon obtaining a proper acceptance of an offer to purchase, or any counteroffer, a broker or affiliate broker promptly shall deliver true executed copies of same, signed by the seller, to both the purchaser and the seller. Brokers and affiliate brokers shall make certain that all of the terms and conditions of the real estate transaction are included in the contract to purchase. In the event an offer is rejected, the broker or affiliate broker shall request the seller to note the rejection on the offer and return the same to the offeror or the offeror’s agent. (Emphasis added). Obviously, an agent cannot force their client/customer to note a rejection, but they need to ask that this be done. There is a code of ethics provision effective this year that REALTOR® members will need to be aware of: When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. Upon the written request of a cooperating broker who submits an offer to the listing broker, the listing broker shall provide a written affirmation to the cooperating broker stating that the offer has been submitted to the seller/landlord, or a written notification that the seller/ landlord has waived the obligation to have the offer presented. REALTORS® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease. (Amended 1/19) |
| Termites and Termination | I’ve been researching, as I thought I remembered that somewhere when termites were found, that the seller was legally obligated to have them treated? Is that correct? I understand that if the seller refuses, the buyer has the right to terminate the offer to purchase. | Lines 294 – 295 of the Tennessee REALTORS purchase and sale agreement state: If the Report indicates evidence of an active infestation, Seller agrees to treat infestation at Seller’s expense and provide documentation of the treatment to Buyer prior to Closing. Buyer could terminate at Closing if the active infestation had not been treated. |
| Firm Phone Number on Advertising | I just wanted to get clarification on something. It looks as if the firm phone number, as listed with the commission, is required on all advertising, but does not have to be the same size as the firm name or licensee name. Is that correct? | Yes, that is correct. (Rule 1260-02-.12, continued) 1. 3(b). All advertising shall be under the direct supervision of the principal broker and shall list the firm name and the firm telephone number as listed on file with the Commission. The firm name must appear in letters the same size or larger than those spelling out the name of a licensee or the name of any team, group or similar entity. |
| Holidays and Calendar Days | With regard to the Purchase and Sale Agreement and the number of days the buyer has to deliver the earnest money, are those days business days or all days? | The purchase and sale agreement defines “days” and how to calculate days within it. The contract provides definitions for the calculation of time. It states that all days will be calendar days, holidays, and weekends are not excluded. |
| Business Cards Rules | What are the current rules and regulations regarding business cards? | Rule 1260-02-.12 Advertising (1) All advertising, regardless of its nature and the medium in which it appears, which promotes either a licensee or the sale or lease of real property, shall conform to the requirements of this rule. The term “advertising,” for purposes of this rule, in addition to traditional print, radio, and television advertising, also includes, but is not limited to, sources of communication available to the public such as signs, flyers, letterheads, e-mail signatures, websites, social media communications, and video or audio recordings transmitted through internet or broadcast streaming. Advertising does not include promotional materials that advertise a licensee such as hats, pens, notepads, t-shirts, name tags, business cards, and the sponsorship of charitable and community events. (4) Advertising for Franchise or Cooperative Advertising Groups (a) Any licensee using a franchise trade name or advertising as a member of a cooperative group shall clearly and unmistakably indicate in the advertisement his name, firm name and firm telephone number (all as registered with the Tennessee Real Estate Commission) adjacent to any specific properties advertised for sale or lease in any media. (b) Any licensee using a franchise trade name on business cards, contracts, or other documents relating to real estate transactions shall clearly and unmistakably indicate his name, firm name,and firm telephone number (all as registered with the Commission). |
| What an Unlicensed Employee May and May Not Do | I would like to know how much information an unlicensed employee of a real estate firm can give a customer calling to inquire about a listing? We have differing information that says you can give certain information out and other information saying you cannot disclose any information if not a licensed agent and you must refer the caller to a licensed agent. Could you please clarify? | TREC has issued the following guidelines as part of its official manual. WHAT MAY AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY DO? 1. Answer the phone, forward calls and give information contained only on the listing agreement as limited by the broker; 2. Fill out and submit listings and changes to any multiple listing service; 3. Follow up on loan commitments after a contract has been negotiated and generally secure status reports on the loan progress; 4. Assemble documents for closing; 5. Secure public information from courthouses, utility districts, etc; 6. Have keys made for listings; 7. Place ads which have been approved by the Principal Broker; 8. Receive, record and deposit earnest money, security deposits and advance rents under the direct supervision of the Principal Broker; 9. Type contract forms for approval by licensee and Principal Broker; 10. Monitor licenses and personnel files; 11. Calculate, print or distribute commission checks; 12. Place signs on property; 13. Order repairs as directed by the licensee; 14. Prepare for distribution fliers and promotional information which have been approval by the Principal Broker; 15. Deliver documents and pick up keys; 16. Place routine telephone calls on late rent payments; 17. Gather information for a comparative market analysis (CMA); 18. Unlock property under the direction of a licensee; and 19. Disclose the current sales status of a listed property. AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY MAY NOT: 1. Make cold calls by telephone or in person to potential clients; 2. Show properties for sale and/or lease to prospective purchasers; 3. Host open houses, home show booths or fairs; 4. Discuss or explain listings, offers, contracts, or other similar matters with persons outside the firm; 5. Negotiate any terms of a real estate transaction; or 6. Negotiate or agree to any commission split or referral fee on behalf of a licensee; 7. Be paid any compensation which is dependent upon, or directly related to, a real estate transaction. |
| Waiving Appraisal Contingency | If a buyer is getting a 20% conventional loan on a contract and waives the appraisal contingency and the appraisal comes back below the purchase price, does that affect financing? | IF a buyer waives the appraisal contingency, they cannot then use failure to appraise as basis for loan denial and exercise the financing contingency. So, in practicality, the buyer would then be responsible to cover the amount the lender will not finance or be in default of the contract. |
| Minimum Appraisal Value Contingency | With regard to the minimum appraisal value contingency addendum – if the home appraises for the amount contained in line 9 of the contract, does that mean the buyer has to come up with the amount over the appraised value, and if they cannot, does that mean the seller keeps the earnest money? | Yes, the buyer would be responsible for covering the portion of funds that the bank will not loan them and the purchase price (presumably, the difference between the appraised value and purchase price). The minimum appraised value contingency addendum states failure to appraise shall not be used as the basis for loan denial or termination of contract. This means if the buyer cannot close on the contract, they would be in breach of contract. |
| Earnest Money Dispute | The buyer and seller on a contract are having a dispute over the earnest money. How do we handle this situation? | Below, you will find information on the broker’s duties relating to the earnest money. If you are the holder of the funds, you can make a reasonable interpretation of the contract or interplead the funds as outlined below. A principal broker is required under the Broker’s Act to distribute the funds in your escrow account “within a reasonable time.” Tenn. Code Ann. § 62-13-312(b)(5). TREC has just issued a new rule which defines what constitutes a reasonable time. Pursuant to TREC Rule 1260-2-.09(7), “Funds in escrow or trustee accounts shall be disbursed in a proper manner without unreasonable delay. Funds should be disbursed or interplead within twenty-one (21) calendar days from the date of receipt of a written request for disbursement of earnest money.” The principal broker holding the funds has several options available to you as to how you can remit the funds in the event that the deal does not close. I am not able to tell you who is entitled to the earnest money. If your client has questions regarding whether he is entitled to the earnest money and/or whether he can back out of a contract, he should speak with his own attorney. TREC Rule 1260-2-.09(6) outlines how a broker may distribute earnest money funds. It states as follows: “A broker may properly disburse funds from an escrow or trustee account: (a) upon a reasonable interpretation of the contract which authorizes him to hold such funds; (b) upon securing a written agreement which is signed by all parties having an interest in such funds, and is separate from the contract which authorizes him to hold such funds; (c) at the closing of the transaction; (d) upon the rejection of an offer to purchase, sell, rent, lease, exchange, or option real estate; (e) upon the withdrawal of an offer not yet accepted to purchase, sell, rent, lease, exchange, or option real estate; (f) upon an interpleader action in a court of competent jurisdiction; or (g) upon the order of a court of competent jurisdiction.” Just bear in mind that according to TREC Rule 1260-2-.09(7) that this should be done within 21 days from the date it is first requested in writing. If you have a valid contract, then you will likely only have four options available. The holder of the earnest money can choose whichever option they wish. You can try to get the parties to agree on the distribution. You may use form RF 481, the Earnest Money Disbursement and Release Form for this purpose. This option requires the signature of BOTH the buyer and the seller. Please bear in mind that this form also states that both sides are giving up their right to sue on the contract. If the parties want to reserve the right to file a lawsuit, then I would recommend having an attorney assist you in drafting an agreement for the release of the funds. If you cannot get an agreement by the parties, you, as the holder of the funds, will need to review the contract to determine if you can make a reasonable interpretation. Please bear in mind that if the party who does not receive the funds could file suit against you and the party receiving the funds. However, there is language in the PSA which will give you some protection in the event that this occurs. The PSA states “No party shall seek damages from Holder (nor shall Holder be liable for the same) for any matter arising out of or related to the performance of Holder’s duties under this Earnest Money paragraph.” If not, then you can interplead the funds. The final option is a court order (this is seldom used). An interpleader is a safer option than making an interpretation of the contract as the judge will determine who receives the funds. If you make a reasonable interpretation, there is the possibility that the party not receiving the funds could sue you. If you decide to interplead the funds, I have included information on how this process works. An interpleader is the court action that the holders of earnest money can take to determine who is entitled to the funds in the event of a dispute between the buyer and seller. In the event you have to interplead the funds, you will need to file a Petition to Interplead Funds in the General Sessions Court of the County where the property is located. You may obtain a copy of said Petition by logging onto the website (www.tnrealtors.com) and downloading and or printing Form RF 481. Typically, once the petition is filed, copies will be served on the parties to the contract and a hearing date will be set. On the hearing date, you will appear before the judge and explain why the brokerage is seeking to interplead funds with the court. After the petition is granted, the judge will then determine, either that day or at a later hearing, which party (i.e. the buyer or the seller) is entitled to the funds. The parties will have the opportunity to present their arguments to the judge during that hearing. The person who is holding the funds is the one who determines whether to file an interpleader. The seller can request that one be filed, but it is up to the holder of the funds to make that decision. The procedure for interpleader actions differs from county to county and from general sessions court to chancery court. An interpleader action should be filed in general sessions court if the amount of earnest money is less than $25,000. If the amount is $25,000 or greater, the action should be filed in either circuit or chancery court. If you have to interplead the funds, the buyer and seller will be named as the defendants on the interpleader form. This sometimes upsets the parties to think that they are being sued. However, you should keep in mind that you are not suing them – you are simply turning the funds over to the court and asking the court to decide who is entitled to the funds. As far as for who is responsible for the court costs in an interpleader, it will depend upon what the earnest money agreement and/or contract states. Generally speaking, the losing party typically is responsible for paying the court costs. |
| Managing Properties Through Your Company | I am a realtor and own a few rental properties which I manage on my own and not through my company. I just wanted to know if there is any rule that would prevent me from putting all of my properties into a Corporation. Thanks in advance and please let me know if you have any questions. | IF you want to self-manage outside of your firm, you could not put into a corporation. A Corporation must use a real estate licensee and that activity must go through the firm. |
| Changing Listing Agent During an Extended Leave of Absence | We have an agent in our office that is taking an extended leave of absence. My broker has turned all of their listing over to me and I have contacted the homeowners to let them know of this change. My question is how do we change the listing agent in the MLS? | You will need to do appropriate amendments to listing agreements but contact your local MLS for how to change it in their system. |
| The VA Addendum and Lender-Required Repairs | I am representing a veteran and he is making an offer on a home using the offer agreement along with the VA addendum. If there are lender-required repairs, I do not see in either of these forms who would address those, nor do I see a form to add for something like this. The buyer is protected if it does not appraise, and he gives notice within 3 days or he can cover any type of appraisal gap. I just want a better understanding of how to move forward if there are lender-required repairs and the expectation is for the seller to remedy those. | A seller does not have to agree to make or pay for lender-required repairs. Likely, if the Seller does not agree to the repairs, then the lender won’t loan the money since the repairs were not made and the buyer will be released under the financing contingency. |
| Power of Attorney and Exempt Property Status | I have a new listing coming up and am unclear about choosing between RF 201 and RF 205. There are two Sellers who are a mother and daughter. The daughter has never lived in the house. The mother has moved to an assisted living facility and has signed over the Power of Attorney to the daughter. I have included that for your review. The daughter will sign the listing agreement and all other forms using the POA for her mother and as the second Seller as herself. Does this situation qualify for the exempt property status? | A power of attorney does not qualify a property for the exemption; a conservatorship (a court declaration that the children have control of the mother’s affairs) would qualify. This is because the poa simply stands in for the actual seller. If the Seller has lived in the house in the past three years, it is unlikely that the Seller would be exempt unless they qualified for a different exemption. The POA can complete the Disclaimer form with the statement that they will consider repairs or they can complete the Disclosure to the best of their ability. You can explain that the seller is not able to provide an adequate disclosure form (get the seller’s permission or the person holding the power of attorney before stating this to the buyer). This may make buyers more agreeable to accepting the disclaimer, especially if they understand that they can make whatever inspections they wish and can terminate the contract if they are not happy with the outcome of the inspections. |
| Questioning and Negotiating MLS-Posted Cooperative Commission Amounts | Are listing agents and selling agents prohibited from discussing, questioning, or negotiating the MLS-posted cooperative commission amount? Thank you for your time. | No. Under the National Association of Realtors® Code of Ethics Standard of Practice 3-2, any change in compensation offered for cooperative services must be communicated to the other Realtor® prior to the time that Realtor® submits an offer to purchase/lease the property. After a Realtor® has submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify the offered compensation with respect to that cooperative transaction. The COE just states the compensation rate can’t be unilaterally changed by the listing agent after an offer has been submitted. Nothing prohibits the party from negotiating a different rate. |
| Bad Appraisal & the Amendment Form | I represent the buyer on a contract. We had a really bad appraisal come back and both the listing agent and I are contesting this appraisal together. I am putting together an amendment to the contract which extends the date to 3 days after the receipt of the revised appraisal. Do I need to use an amendment form or some other form? | The amendment form will be appropriate. |
| Abolished Radius Rule | What is the rule/law regarding working within so many miles of your home office? | The 50-mile radius rule was abolished a few years ago. Currently, there are no parameters regarding the distance between a licensee’s home and the firm they are affiliated with or the distance to a transaction – so long as this is all within the State of Tennessee. |
| Advertising Rules | I am hearing radio ads with agents advertising themselves / teams and have no mention of what brokerage they are affiliated with. Is this legal? | No, this would be in violation of the advertising rule: Rule 1260-02-.12 Advertising (1) All advertising, regardless of its nature and the medium in which it appears, which promotes either a licensee or the sale or lease of real property, shall conform to the requirements of this rule. The term “advertising,” for purposes of this rule, in addition to traditional print, radio, and television advertising, also includes, but is not limited to, sources of communication available to the public such as signs, flyers, letterheads, e-mail signatures, websites, social media communications, and video or audio recordings transmitted through internet or broadcast streaming. Advertising does not include promotional materials that advertise a licensee such as hats, pens, notepads, t-shirts, name tags, business cards, and the sponsorship of charitable and community events. (3) General Principles (b) All advertising shall be under the direct supervision of the principal broker and shall list the firm name and the firm telephone number as listed on file with the Commission. The firm name must appear in letters the same size or larger than those spelling out the name of a licensee or the name of any team, group or similar entity. |
| Purchase Contract Contingent on Sale of Another House | If a buyer is under contract with the purchase contingent on the sale of another house, is there a form to notify the Listing Agent that the home being sold (contingent) is under contract so the purchase can move forward? Would it be the Notification Form (RF-656)? | You can check “other” on the notification form or send an email. However, the special stipulation provided on RF707 for sale of home contingencies does not require notice to be provided if the home in question is under contract: Is Contingent on Sale of Property. This Agreement is contingent upon the sale and closing of the property located at (“Buyer’s Property”) on or before the Closing Date of this Agreement. If Buyer’s Property does not close on or before the Closing Date of this Agreement, Buyer may terminate this Agreement with written notice to Seller with a refund of Earnest Money/Trust Money to Buyer. |
| Providing a Builder’s Warranty at Closing | Can you provide an answer to the question of “Is there a law in TN that states that builders MUST provide a one-year Builder’s Warranty at closing?” | There is no state statute that unilaterally requires a builder/contractor to provide a 1 year warranty to new home buyers. There is a statute that provides for an implied warranty of merchantability. This warranty can be disclaimed by the builder in the contract. In addition, the doctrine of an “implied warranty of good workmanship and materials” was adopted in 1982 by the Supreme Court of Tennessee. The warranty is implied only when the written contract is silent. Builder/vendors are free to contract in writing for a warranty upon different terms and/or conditions or to expressly disclaim any warranty. Case law indicates that in order to have a valid disclaimer of the implied warranty it must be in clear and unambiguous language. In other words, the buyer must be aware of the implied warranty protections that he/she is waiving by signing the contract. |
| Love Letter: Return To Sender | If I have my seller sign off that they will not receive a love letter, is that okay? | Below is guidance from NAR regarding love letters: Before the next time you are faced with a buyer love letter, consider these best practices to protect yourselves and your clients from fair housing liability: • Educate your clients about the fair housing laws and the pitfalls of buyer love letters. • Inform your clients that you will not deliver buyer love letters and advise others that no buyer love letters will be accepted as part of the MLS listing. • Remind your clients that their decision to accept or reject an offer should be based on objective criteria only. • If your client insists on drafting a buyer love letter, do not help your client draft or deliver it. • Avoid reading any love letter drafted or received by your client. Document all offers received and the seller’s objective reason for accepting an offer. |
| Hosting an Open House for Another Brokerage | I signed up to do an open house for another brokerage. In my marketing, do I use my firm’s or the other firm’s information on signs, etc.? | This is not recommended for several reasons. If a licensee has open houses for other firms, he is likely violating several provisions of the Broker’s Act. First, it likely constitutes misrepresentation since that licensee does not work for that agency. Second, the licensee does not represent that seller; by holding the open house, it appears to the public that the licensee on property is the listing agent. Third, this may violate the licensee’s independent contractor’s agreement with the agent’s firm or against company policy. Fourth and finally, that licensee will be taking on liability, which is not advisable. If you are going to market the open house, you must use your firm’s information as that is who you work for. You will need appropriate permission from the listing agent to do so and you will need to make it clear the listing belongs to the other firm. |
| Unlicensed Assistant Duties | What can/cannot be handled by a real estate assistant that is not licensed? | TREC has issued the following guidelines as part of its official manual. These guidelines can also be found HERE. WHAT MAY AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY DO? What May an Unlicensed Employee, Assistant or Secretary Do? 1. Answer the phone, forward calls and give information contained only on the listing agreement as limited by the broker; 2. Fill out and submit listings and changes to any multiple listing service; 3. Follow up on loan commitments after a contract has been negotiated and generally secure status reports on the loan progress; 4. Assemble documents for closing; 5. Secure public information from courthouses, utility districts, etc; 6. Have keys made for listings; 7. Place ads which have been approved by the Principal Broker; 8. Receive, record and deposit earnest money, security deposits and advance rents under the direct supervision of the Principal Broker; 9. Type contract forms for approval by licensee and Principal Broker; 10. Monitor licenses and personnel files; 11. Calculate, print or distribute commission checks; 12. Place signs on property; 13. Order repairs as directed by the licensee; 14. Prepare for distribution fliers and promotional information which have been approval by the Principal Broker; 15. Deliver documents and pick up keys; 16. Place routine telephone calls on late rent payments; 17. Gather information for a comparative market analysis (CMA); 18. Unlock property under the direction of a licensee; and 19. Disclose the current sales status of a listed property. AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY MAY NOT: 1. Make cold calls by telephone or in person to potential clients; 2. Show properties for sale and/or lease to prospective purchasers; 3. Host open houses, home show booths or fairs; 4. Discuss or explain listings, offers, contracts, or other similar matters with persons outside the firm; 5. Negotiate any terms of a real estate transaction; or 6. Negotiate or agree to any commission split or referral fee on behalf of a licensee; 7. Be paid any compensation which is dependent upon, or directly related to, a real estate transaction. |
| Excluding a Brokerage from Showing a Property | Can an owner demand that a listing agent exclude a brokerage from showing their property? | Yes, so long as the exclusion is not discriminatory in violation of the fair housing act. |
| Unlicensed Assistant Duties | I have worked with an agent that works for a property management company but hangs their license with a separate real estate firm. I had been told in the past that you cannot hang your license with a firm that is not associated with the property management company. Is this still the case? | A licensee can have both an affiliate or broker license with a firm and a designated agent license with a VLS firm. |
| The Binding Agreement Date Count | Does the binding agreement date count as day 1? Ex: Home Inspection is due 5 days after the binding agreement (06/01) so the due date is 06/05 or is the due date 06/06? | The binding agreement date counts as Day 0. The due date in the example you provided would be 06/06. |
| Listing Agreements & Deceased Ownersf | Currently, our Brokerage has a Listing Agreement with an Owner that has recently deceased without a will. Our question is, does our listing agreement survive the owner’s death or not. In essence would the heirs to the property be subject to the listing agreement signed by the now deceased owner. | The Tennessee REALTORS® listing agreement does survive death and is binding on the owner’s heirs. The listing agreement contains the following language: This Agreement shall be for the benefit of, and be binding upon, the parties hereto, their heirs, successors, legal representatives and permitted assigns. |
| Required Recorded Records | Do I need to have a stamped copy of the recorded deed in my file before I close it out? | According to TREC, maintained records must contain, at a minimum, the following: listings; offers (even those that do not become contracts); contracts; closing statements; agreements; agency disclosure documents; property disclosure forms; correspondence; notes; and any other relevant information. I do not believe a copy of the recorded deed is necessary. |
| Buyer Assuming Seller’s Loan | One of my agents has a seller that currently has a VA loan on a property. This seller is wanting to advertise that he is willing to have a buyer assume his loan thinking that this may bring him a faster sale due to his very low rate. If the current lender agrees to have a qualified buyer assume the current loan. The agent will want to make this fact part of the public remarks in the MLS. What legally will this agent have to advertise about the loan? And will he have to specify that the assumable loan is only assumable if the buyer has VA eligibility? | This issue seems like it’s crossing over into advertising a loan rate, so I wanted to make sure we are crossing all the t’s here. I am not aware of anything which would prohibit this advertising. You just need to get permission from the lender, and he would need to advertise all specifics about assuming the loan. |
| End User Licensing Agreement | In one of your responses published in the May 2022 Q/A, a reference was made to the end user licensing agreement with TN Realtors. I may have forgotten about this when I signed up with TAR, but can you please provide me a copy of this agreement? Thanks! | Of course. Here is the link where you can find the End User Licensing Agreement: https://tnrealtors.com/eula/ |
| Acting as a Facilitator | An agent is providing real estate services to a SELLER and is NOT representing either the buyer or seller. Is the agent allowed to receive compensation in any or all of the following forms from the SELLER? • Flat Fee • Commission • Or any other compensation If so or if not, can you please direct me to where I might find that information from TREC or elsewhere in written form? Also, if so, can you recommend the forms and addendums that I might use for a: • Flat Fee for services with no representation • Commission for services with no representation | Yes, absent a written agency agreement, a real estate licensee working with a customer in a real estate transaction is acting as a facilitator. The licensee can receive payment for those services, rather that is a flat fee, commission percentage, or other compensation. The Broker’s Act defines a facilitator as a licensee: (A) Who assists one (1) or more parties to a transaction who has not entered into a specific written agency agreement representing one (1) or more of the parties; or (B) Whose specific written agency agreement provides that if the licensee or someone associated with the licensee also represents another party to the same transaction, such licensee shall be deemed to be a facilitator and not a dual agent; provided, that notice of assumption of facilitator status is provided to the buyer and seller immediately upon such assumption of facilitator status, to be confirmed in writing prior to the execution of the contract. A facilitator may advise either or both of the parties to a transaction but cannot be considered a representative or advocate of either party. Tenn. Code Ann. §62-13-102(9) Tennessee REALTORS does not provide facilitator agreements. You may work with your own attorney to draft these agreements. |
| Licensees Holding Open Houses for Another Agent | If an agent at one brokerage has a listing, can a different agent at another brokerage hold an open house? If so, what are the guidelines for that? | This is not recommended for several reasons. If a licensee has open houses for other firms, he is likely violating several provisions of the Broker’s Act. First, it likely constitutes misrepresentation since that licensee does not work for that agency. Second, the licensee does not represent that seller; by holding the open house, it appears to the public that the licensee on property is the listing agent. Third, this may violate the licensee’s independent contractor’s agreement with the agent’s firm or against company policy. Fourth and finally, that licensee will be taking on liability, which is not advisable. |
| Legality of Advertising Retirement Communities | If there is a community that is a retirement community for 55+ people, is it legal to advertise it’s a 55+ community or is that discrimination? Thanks. | The Fair Housing Act specifically exempts three types of housing for older persons from liability for familial status discrimination. Such exempt housing facilities or communities can lawfully refuse to sell or rent dwellings to families with minor children only if they qualify for the exemption. In order to qualify for the “housing for older persons” exemption, a facility or community must comply with all the requirements of the exemption. The Housing for Older Persons exemptions apply to the following housing: Provided under any state or federal program that the Secretary of HUD has determined to be specifically designed and operated to assist elderly persons (as defined in the state or federal program); Intended for, and solely occupied by persons 62 years of age or older; or Intended and operated for occupancy by persons 55 years of age or older. The 55 or older exemption is the most common of the three. https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_act_housing_older_persons |
| Gifts and Prizes from an Agent | Can an agent give away concert tickets for the first executed contract for a listing? Do they need to have some sort of Disclosure wording? | Yes, they can give away concert tickets. They would have to follow the gifts and prizes rule below: TREC Rule 1260-2-.33: (1) A licensee may offer a gift, prize, or other valuable consideration as an inducement to the purchase, listing, or lease of real estate only if the offer is made: (a) Under the sponsorship and with the approval of the firm with whom the licensee is affiliated; and (b) In writing, signed by the licensee, with disclosure of all pertinent details, including but not limited to: 1. accurate specifications of the gift, prize, or other valuable consideration offered; 2. fair market value; 3. the time and place of delivery; and 4. any requirements which must be satisfied by the prospective purchaser or lessor. Please be aware that under state law, these gifts may not take the form of cash or be converted into cash in any way (in other words, they cannot trade it in for cash or get cash back). The statute states: “A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission’s general rulemaking authority the commission may regulate the practices of real estate licensees in regard to gifts, prizes or rebates that are not otherwise prohibited by law.” Tenn. Code Ann. § 62-13-302(b). In addition, you should be aware of new rules regarding advertising, which includes advertising offers or gifts. TREC Rule 1260-2-.12(6) states: (5) Guarantees, Claims, and Offers (a) Unsubstantiated selling claims and misleading statements or inferences are strictly prohibited. (b) Any offer, guaranty, warranty or the like, made to induce an individual to enter into an agency relationship or contract, must be made in writing and must disclose all pertinent details on the face of such offer or advertisement. |
| Emails as Written Notices for Financing and Appraisal Contingencies | My question is regarding line 95 of the contract where it references the financing contingency and the appraisal contingency. As part of that, it says that the seller may make written demand for compliance via the notification form or equivalent written notice. My question is, is email an equivalent written notice if it does, specifically, ask for confirmation of an appraisal? | Email is appropriate notice under the contract. See the paragraph from the purchase and sale agreement below: Notices. Except as otherwise provided herein, all notices and demands required or permitted hereunder shall be in writing and delivered either (1) in person; (2) by a prepaid overnight delivery service; (3) by facsimile transmission (FAX); (4) by the United States Postal Service, postage prepaid, registered or certified, return receipt requested; or (5) Email. NOTICE shall be deemed to have been given as of the date and time it is actually received. Receipt of notice by the real estate licensee or their Broker assisting a party as a client or customer shall be deemed to be notice to that party for all purposes under this Agreement as may be amended, unless otherwise provided in writing. |
| Marketing Materials vs. Advertisements | What is considered marketing materials vs advertisements? | Rule 1260-02-.12 Advertising (1) All advertising, regardless of its nature and the medium in which it appears, which promotes either a licensee or the sale or lease of real property, shall conform to the requirements of this rule. The term “advertising,” for purposes of this rule, in addition to traditional print, radio, and television advertising, also includes, but is not limited to, sources of communication available to the public such as signs, flyers, letterheads, e-mail signatures, websites, social media communications, and video or audio recordings transmitted through internet or broadcast streaming. Advertising does not include promotional materials that advertise a licensee such as hats, pens, notepads, t-shirts, name tags, business cards, and the sponsorship of charitable and community events. |
| Acknowledgement Signature in the Purchase and Sales Agreement | On the Purchase and sales agreement (RF401), line 521 Acknowledgement Signature clarification needed. Should the agent that receives the last signed copy of the agreement by both parties sign or can either agent sign? For clarification, is it acceptable for the agent whose client signed accepting an offer to sign acknowledging when the buyer’s agent has not received receipt that it has been accepted. Selling agents are having their seller sign accepting offer and immediately signing acknowledging before sending to buyer’s agent. They are using line 415 as justification for doing that. | The agent representing the party that receives notice of acceptance should complete the Acknowledgment of Receipt Section. Line 415 means the above stated person may be either the seller’s agent or the buyer’s agent. |
| Topic | Question | Answer |
|---|---|---|
| Counteroffer Delay and Another Offer? | My buyer made an offer on a property. The seller made a counteroffer yesterday and signed it at 12:56 pm. The agent said she was busy and would send it ASAP. At approximately 8 pm last night, I contacted the listing agent. She said she was showing property but would get the counteroffer to me in an hour. After 10 pm, the listing agent contacted me and said they got another offer, and we would need to increase our offer by $5,000. If the counteroffer was “signed” at 12:56 pm yesterday, shouldn’t we have a valid contract regardless of when another offer came in afterward? How should I handle this situation? | The Purchase and Sale Agreement becomes a binding agreement/binding contract when one party submits an offer or counteroffer, the other party accepts, and then the original offering party receives notice of the other party’s acceptance. Once that happens, you have a contract. Further, the counteroffer states, “Until notice of acceptance is delivered, the subject Property is still on the market for sale, and this offer may be revoked at any time with notice, and the Property may be sold to any other party.” |
| Closing Date Required for Valid Contract? | Can you tell me if a residential sales contract needs to have a closing date in order to be valid? I am working a builder contract that says, “Closing date will be within 5 days of receiving the certificate of occupancy,” but no specific date is stated. | Pursuant to TCA §62-13-312(9), using or promoting the use of any real estate listing agreement form, real estate sales contract form or offer to purchase real estate form that fails to specify a definite termination date is a violation of the Broker’s Act. The Tennessee Real Estate Commission can revoke a licensee’s license for using such an agreement. New construction contract often won’t have a definite closing date, but they will have a termination date of the contract. As long as there is a termination provision, they are likely within the law. A lack of termination date does not necessarily mean the contract is invalid, just that the broker using the contract is in violation of the Broker’s Act by using such an agreement. |
| Confirmation of Agency & Buyer’s Rep? | If a buyer signed a contract with a Confirmation of Agency showing a designated agent for the buyer, does she also have to sign an Exclusive Buyer’s Representation Agreement? If the same buyer also wants to exclude the buyer’s rep during the transaction, do they have to sign a new Confirmation of Agency Agreement showing that they are now unrepresented? | A confirmation of Agency Status Agreement is not an agency agreement. The box for “designated agent” should not be checked unless an agency agreement has been entered into. Absent a representation agreement, the buyer is unrepresented and is free to check “unrepresented” on the confirmation of agency status form. If a agency agreement was entered into and subsequently terminated, then the buyer could submit a new confirmation of agency status form and check “unrepresented”. |
| Required to Disclose Another Offer? | I’m the listing broker representing the seller on a transaction. We received an offer that my seller countered, increasing the purchase price and other conditions. The buyer’s agent sent back a counteroffer with a lesser purchase price, other conditions, and a time limit of 2:00 pm the next day. In the meantime, a new offer (full price/cash) came in from a buyer’s agent with another firm, and I presented the new offer to the seller. The seller informed me he is rejecting the current counteroffer and accepting the new buyer’s offer, as written. I’m having him to mark “rejected” and sign the current counteroffer. I will submit the rejected and signed counter to the buyer’s agent and let her know. Am I required to provide any other type of notification, or to disclose that the seller has received another offer that he is going to accept? The seller is requesting that I do not. He feels they should have accepted his counter, not countered back and not risked losing the opportunity to buy the house. | The NAR REALTOR® Code of Ethics does address multiple offers and only requires you to disclose the existence of multiple offers when asked. Standard of Practice 1-15 states: Realtors®, in response to inquiries from buyers and cooperating brokers shall, with the sellers’ approval, disclose the existence of offers on the property. Where disclosure is authorized, Realtors® shall also disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. |
| Backup Offer Requirements for P&S Agreement? | I have submitted a backup offer on a property on behalf of my buyer. The listing agent sent a Backup Agreement Contingency Addendum, and all parties have signed it. Do all parties need to sign the backup offer as well, or is it signed only if and when the current contract is withdrawn or falls through? | All parties would need to sign the Purchase and Sale Agreement submitted by your buyer with the backup agreement contingency addendum. Without signing the original offer, no agreement is in place. The addendum is only effective if attached to an executed agreement. |
| Can Team Be Paid Through an LLC? | With regard to teams and forming LLC’s, can the team be paid through the LLC? | No, a team cannot be paid a commission through the company. The firm can only pay commissions to the holder of a real estate license. The only time that a company can hold a license is if it is a firm license. A company cannot be issued an individual license. |
| Is a Personal Appeal to the Seller OK? | Is it a legal violation, in a multiple-offer situation, when a potential buyer has written as personal letter to the seller, forwarded by their agent? Many buyers try to appeal to their common ground in hopes to be the winner based on similarities. | This is not a violation of anything; however, we believe there is a danger of violating the Fair Housing Act when presenting personal letters for a seller’s consideration. Fair-housing laws prevent discrimination based on the basis of race, color, religion, sex, handicap, familial status, and national origin. This means that sellers, landlords, agents, etc., cannot make decisions based upon these protected classes. If a seller has legitimate, nondiscriminatory reasons for choosing one buyer over the other – such as a higher purchase price – that is fine. However, if two offers were equal and a seller chose a buyer because they wrote a letter saying it was the perfect house for their son to grow up in and the other potential buyer was childless, there could be claims of discrimination under the Fair Housing Act raised by the buyer who was not chosen. |
| Buyer’s Agreements For Different Counties? | Can a buyer enter into a buyer agreement with an agent specifically for one county and enter into another agreement with another agent for another county? | Yes, this is legal. |
| Canceling due to Inspection Contingency | In order to terminate a contract under the inspection contingency, does the inspection have to be completed by a licensed home inspector? | The Purchase and Sale Agreement states that if a buyer wishes to have a home inspection done, they must contract with a licensed party under the relevant code. The P&S agreement also allows an individual to perform their own home inspection-it does not grant them the right to have an unlicensed third party perform one. The seller does have to treat a buyer’s home inspection report just like any other. If a buyer performs the home inspection, they may terminate under the inspection contingency and be entitled to their earnest money. |
| Agency Status: “Unrepresented”? | I am looking for a form that a party signs states that I am not representing them. | You can have the party sign a Confirmation of Agency status form, ed. Form RF301, Working with a Real Estate Professional, may also be helpful. It explains to an unrepresented party the duties a licensee owes to their clients and has an explanation of terms commonly used. |
| Commission Structure & Team Members? | Can a team member create a commission structure document and force other team members to sign it if they are not the principal broker of the firm? | Yes, so long as the principal broker did not have any issue with it. The principal broker remains the principal broker of the firm and is responsible for all commission disbursements. |
| When Required to Present Assignment Offer? | Under what circumstances am I obligated as the buyer’s agent to present an assignment offer? We have received an offer and my buyer has stated, in writing, they are not interested in assigning their contract; however, this other agent and buyer will not stop sending communications in an effort to get the buyer to agree. | Since your buyer has stated in writing they do not wish to assign the contract, you have no obligation to present subsequent offers. This is a lawful instruction of your client. The Broker’s Act and Code of Ethics address this issue. The Broker’s Act states. “Unless the following duties are specifically and individually waived, in writing by a client, a licensee shall assist the client by receiving all offers and counter-offers and forwarding them promptly to the client.” Tenn. Code Ann. §62-13-404(3)(A)(ii). Code of Ethics Standard of Practice (SOP) 1-7 states, in pertinent part, “When acting as listing brokers, Realtors® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller has waived this obligation in writing.” There is a relatively new provision added to SOP 1-7. It does state listing brokers, but we believe it could be applied to this situation. Therefore, if the agent assisting the interested buyer asks in writing what happened to their offer, you can provide written notification that your buyer has waived the obligation to have the offer presented. Upon written request of a cooperating broker who submits an offer to the listing broker, the listing broker shall provide a written affirmation to the cooperating broker stating that the offer has been submitted to the seller/landlord, or a written notification that the seller/landlord has waived the obligation to have the offer presented. |
| Closing Date Missing: Is Contract Binding? | If a buyer and sellers sign a contract and it is bound, but then it is realized that the contract does not have a closing date listed, if that still a binding agreement? | Yes, the agreement is still valid between the parties. An amendment will just need to be executed to insert a closing date. Pursuant to TCA §62-13-312(9), using or promoting the use of any real estate listing agreement form, real estate sales contract form or offer to purchase real estate form that fails to specify a definite termination date is a violation of the Broker’s Act, and the Commission [TREC] can revoke a licensee’s license for using such agreement. |
| Disclosure: Can Former Broker Hold My Commission? | Can my former broker hold my commission based on a Closing Disclosure not being provided by a title company? | Yes, based on the Broker’s Act. A former broker does not have to pay affiliate brokers who are no longer with the company, regardless of the reasoning. However, you may have had an independent contractor agreement with that broker that states otherwise. |
| Inspection Report: Timeline to Share? | If the contract has a 10-day inspection period, can I send the inspection report before the 10-day period? | You may send the repair/replacement proposal to the seller prior to the end of the inspection period. However, once you send over a proposal, the inspection period is over and the resolution period begins. You should not send copies f the home inspection report to the seller. This places the listing agent in a bad position and could carry possible copyright violations. The contract only requires a list of requested repairs and states that the seller may request supporting documentation for any repair. |
| Gifts to Past Clients Who Refer Business? | Is there a limit on how much we can give past clients who refer us to new business, such as a gift card? | That would in effect be a referral fee. Only licensed real estate agents can receive referral fees. Pursuant to Tenn. Code Ann. §62-13-302(a): It is unlawful for any licensed broker to employ or compensate any person who is not a licensed broker or a licensed affiliate broker for any of the acts regulated by this chapter. A licensed nonresident broker may pay a commission to a licensed broker or another state if such nonresident broker does not conduct in this state any of the negotiations for which a commission is paid. A licensee can offer gifts to induce people to use their services, but not their friends and family. See the applicable rules below. TREC Rule 1260-2-.33: (1) A licensee may offer a gift, prize, or other valuable consideration as an inducement to the purchase, listing, or lease of real estate only is the offer is made: (a) Under the sponsorship and with the approval of the firm with whom the licensee is affiliated; and (b) In writing, signed by the licensee, with disclosure of all pertinent details, including but not limited to: 1. accurate specifications of the gift, prize, or other valuable consideration offered; 2. fair market value; 3. the time and place of delivery; and 4. any requirements which must be satisfied by the prospective purchaser or lessor. Under state law, these gifts may not take the form of cash or be converted into cash in any way. The statute states: “A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission’s general rulemaking authority the commission may regulate the practices of real estate licensees in regard to gifts, prizes or rebates that are not otherwise prohibited by law.” Tenn. Code Ann. §62-13-302(b). In addition, you should be aware of new rules regarding advertising, which includes advertising offers or gitfs. TREC Rule 1260-2-.12(6) states: (5) Guarantees, Claims, and Offers (a) Unsubstantiated selling claims and misleading statements or inferences are strictly prohibited. (b) Any offer, guaranty, warranty or the like, made to induce an individual to enter into an agency relationship or contract, must be made in writing and must disclose all pertinent details on the face of such offer or advertisement. |
| Broker Sign Compensation Agreement? | As the managing broker, am I required to sign a compensation agreement with another firm in our MLS on a property that is under contract? | Compensation Agreements are recommended. That is what the closing company will reference when determining compensation splits at closing. |
| Attach Disclosure Form to P&S Contract? | I recently had an agent from another firm submit an offer on a listing I had. In the TN Purchase & Sale Agreement on lines 464, 465, and 466, she included the Property Condition Disclosure, Disclaimer Notice, and Confirmation of Agency Status as part of the contract. My sellers countered saying they are removing those forms from the contract. We still signed and presented the forms back with the counter (the disclosures were available before), but I reasoned that they do not need to be included in the contract. My understanding is they have different statutes of limitations, and by including them they are now equal to the contract, whereas before they were not. Is this correct? | Correct. These forms should not be attached to the contract. The statute of limitations for misrepresentation on the Property Condition Disclosure form is generally one year. However, if you attach that form to the contract, it could increase to six years—which is the typical statute of limitations for a breach of contract claim. |
| Can I Send My Buyer’s Offer to the Seller? | A full-price offer was presented to a seller’s agent with a 48-hour response time. After waiting two days, one hour prior to the expiration, I sent an email to the seller’s agent and they said they had not been able to get in touch with their client. Is it legal if I send a copy of the offer to the seller for their records? I feel like the seller never even saw the offer. | No, this would be in violation of the REALTOR® Code of Ethics. Standard of Practice 16-13 says, “All dealings concerning property exclusively listed shall be carried on with the client’s representative or broker, and not with the client, except with the consent of the client’s representative or broker or except where such dealings are initiated by the client.” Article 16 of the Code of Ethics states, “Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation agreements that other Realtors® have with clients.” If the seller never saw the offer, you can ask the listing agent to provide you a response that the offer was submitted, or that the seller did not want the offer submitted, pursuant to this CEO provision: When acting as listing brokers, Realtors® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. Upon the written request of a cooperating broker who submits an offer to the listing broker, the listing broker shall provide a written affirmation to the cooperating broker stating that the offer has been submitted to the seller/landlord, or a written notification that the seller/landlord that the seller/landlord has waived the obligation to have the offer presented. Realtors® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. Realtors® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease. |
| Can My Former Broker Hold My Commission? | My previous broker is requiring a closing disclosure from the lender prior to releasing my commission. I have provided the documents from the closing, but my previous broker is refusing to pay me. Can they do this? | TREC Rule 1260-2-.39 states: 1. The commissions earned by an affiliated licensee while working under a principal broker can still be paid after one (1) or more of the following circumstances occur: a. The affiliated licensee transfers to a new broker; b. The affiliated licensee retires his or her license; c. The affiliated licensee is in broker release status; d. The affiliated licensee allows his or her license to expire; or e. The death of the affiliated licensee. TREC has determined that a commission is earned by a licensee when the contract to purchase (or lease) is signed by all parties. Therefore, if an agent is affiliated with a company at the time that the contract is signed, then the broker can pay that individual after closing, even if that agent is no longer affiliated with his/her company. However, it is the broker’s decision whether to pay. The broker is allowed to pay a commission, but is not required. The broker can pay this directly to the affiliate without payment having to go through their new firm. |
| What if Inspection Period Ends on Saturday? | Do I have to submit the repair list during the seven-day inspection time? I received the inspection report on the sixth day (Friday) and told the listing owner-agent I would send the repair list. Saturday was the 7th day. I submitted the list on Sunday. He said it had expired and refused to make the repairs. | The Inspection period is the time a buyer has to complete all inspections and furnish a list of repairs to the seller. Should the buyer fail to do both within this timeframe, the Purchase and Sale Agreement states that the buyer forfeits their rights under the inspection contingency and agrees to accept the property “as is.” The P&S agreement defines “days” and how to calculate them. The contract provides definitions for the calculation of time. Section 14E states that all days will be calendar days. However, if the deadline is on a Saturday, Sunday or legal holiday, it will roll over to the next business day. Therefore, weekend days and holidays do count in calculating the days provided for in the inspection period, but if the inspection date deadline ends on Saturday, Sunday or legal holiday, it would roll over to the next business day. |
| Compensation Agreement for Commission Split? | As a broker, am I required to sign an agreement for compensation between the selling firm for my listing that is listed in the MLS? | It is recommended that a Compensation Agreement form be used. This will make it easier for the closing company to determine the commission split at closing. |
| Physical Address Required on Business Cards? | As licensed Tennessee REALTORS®, are we required by law to have a physical address of our office location on our business cards? | Business cards are considered promotional materials, not advertisement. However, the principal broker is free to make their own rules concerning business cards in their office. The only time business cards are regulated by the Tennessee Real Estate Commission (TREC) is if you are with a franchise. If so, any licensee using a franchise trade name on business cards shall clearly and unmistakably indicate their name, the firm name, and firm telephone number. The TREC rule is 1260-02-.12 Advertising: (4) Advertising for Franchise or Cooperative Advertising Groups (a) Any licensee using a franchise trade name or advertising as a member of a cooperative group shall clearly and unmistakably indicate in the advertisement his name, firm name and firm telephone number (all as registered with the Tennessee Real Estate Commission) adjacent to any specific properties advertised for sale or lease in any media. (b) Any licensee using a franchise trade name on business cards, contracts, or other documents relating to real estate transactions shall clearly and unmistakably indicate his name, firm name, and firm telephone number (all as registered with the Commission). |
| Buyer Signature Required on Repair Form? | Regarding the inspection and repair section of the Purchase and Sale Agreement, when furnishing a list of items that are concern to the buyer and may need repair, is a signature by the buyer required? | It has become more frequent that the buyer uses a form offered by the inspection company to make a repair request. The form is not filled out by the buyer’s agent, and a Repair Proposal form may not necessarily be used. The timeline of the repair request is confirmed by the date of the email to the seller or seller’s agent. The purchase and sale agreement only requires the buyer to furnish a written list of items to repaired. While it is recommended to use Tennessee REALTORS® forms, it is not required. |
| Inspections, Repairs and the Resolution Period | I am looking for the form to reject a repair/replacement proposal. My client does not wish to accept the proposal or counter, just withdraw from the contract. | If the buyer decided to submit a list of repairs, then the buyer and seller have a certain number of days to negotiate repairs from the date that the list of repairs is provided. Neither party can terminate the contract at this point. However, if an agreement is not reached, then the contract is terminated. Please note that the parties are required to negotiate. They cannot simply not respond during the Resolution Period. The contract states, “The parties agree to negotiate repairs in good faith during the Resolution Period.” |
| Inspections, Repairs and the Resolution Period | If the contract has a 7-day inspection period, but we receive the inspection report prior to the expiration of the 7 days, does the Resolution Period start when we receive the report or after the 7 days? Does this include calendar or business days? | The timeframe for the inspection period is the amount of time a buyer has to perform an inspection and provide written notice to the seller. This can be completed in the timeframe stated on the line or in a shorter amount of time. The Resolution Period starts when the seller receives the written list of items that the buyer requests to be repaired. Once the seller receives a request for repairs, the inspection timeline is no longer relevant; you will start the Resolution Period. The Purchase and Sale Agreement defines “days” and how to calculate days within it. The contract provides definitions for the calculation of time. In Section 14E, it states that all days will be calendar days. However, if the deadline is on a Saturday, Sunday or legal holiday, it will roll over to the next business day. If the last day is a weekend day, it will roll to the nest business day (not necessarily Monday if Monday is a legal holiday). There are several exceptions to the rollover. If the deadline is a closing date, date of possession, offer expiration date, or repair completion date, it will not roll over to the next business day. |
| Pay for Repairs up Front, Repaid at Closing? | I see agents offering to pay for repairs and/or upgrades that may not be necessary or desired to sell a house for the most money up front and collecting the money back at closing. How is this legal and not considered an inducement to use their services? | A licensee may advance the funds for repairs and then be paid back at closing. If you do decide to do this, please see the Tennessee Real Estate Commission (TREC) rule below. This money can be refunded outside of your commission. TREC Rule 1260-2-.33: Gifts and Prizes (1) A licensee may offer a gift, prize, or other valuable consideration as an inducement to the purchase, listing, or lease of real estate only if the offer is made: (a) Under the sponsorship and with the approval of the firm with whom the licensee is affiliated; and (b) In writing, signed by the licensee, with disclosure of all pertinent details, including but not limited to: 1. accurate specifications of the gift, prize, or other valuable consideration offered; 2. fair market value 3. the time and place of delivery; and 4. any requirements which must be satisfied by the prospective purchaser or lessor |
| Steps Required to Close My Firm, Retire License? | I want to close my business and be sure I can still receive commissions/referral fees if my license is retired. My license is currently active and has been for the signing of these contracts. Also, who do I contact about closing my firm? | First, it is recommended that you consult with an attorney to properly close the business from the standpoint of a corporation or LLC. From the standpoint of TREC, you will need to do numerous things. First, to close the firm in Tennessee, the licensees will need to find new firms with whom to affiliate. You and the owner for the firm can decide whether the agents can take their listings and/or current contracts with them when the leave. If yes, then the new firm will need to execute amendments to the listings and/or contracts to indicate the firm change. If your firm is holding earnest money, the contracts will need to be amended to reflect the change in the holder. At that point, you would pay the earnest money to the new firm. The same would hold true for security deposits. Confirmation of Agency status forms would also need to be completed. If you do noy allow the agents to take their listings/contracts, then you will need to keep the firm open long enough for all the transactions to close. You cannot perform any real estate activity once the firm closes. Then, any remaining listing agreements would have to be terminated. Finally, you would need to notify TREC and the local board that you are closing the firm. You can receive a commission/referral fee once your license is retired if someone with an active license sees the contract to the end. TREC Rule 1260-2-.39 states: 1. The commissions earned by an affiliated licensee while working under a principal broker can still be paid after one (1) or more of the following circumstances occur: 2. The affiliated licensee transfers to a new broker; 3. The affiliated licensee retired his or her license; 4. The affiliated licensee is in broker release status; 5. The affiliated licensee allows his or her license to expire; or 6. The death of the affiliated licensee. TREC has determined that a commission is earned by a licensee when the contract to purchase (or lease) is signed by all parties. |
| More Than One Designated Agent? | Can there be more than one Designated Agent appointed for either the seller or buyer? We were not sure since the formation of teams. | Yes, you would just enter both agents as the Designated Agent on the representation agreement, and both agents would appear on Confirmation of Agency Status forms, etc. |
| Change Commission % in MLS? | I have a commercial listing. The seller does not want to pay 3% to the buyer’s agent. Our firm did not put that on the MLS; instead it shows the seller paying 3%. We have a buyer’s agent making an offer. Can we change this on the MLS? Can we put the zero % commissions to buyers agent in a counter, legally, and ethically? | Under the NAR REALTOR® Code of Ethics, Standard of Practice 3-2, any change in compensation offered for cooperative services must be communicated to the other REALTOR® prior to the time that the REALTOR® submits an offer to purchase/lease the property. After a REALTOR® has submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify the offered compensation with respect to that cooperating transaction. You can agree to a different commission split than what is advertised via the compensation agreement. It is not advisable to put the commission split into the contract, as neither you nor the buyer’s agent is a party to the contract. |
| Unlicensed Meeting Place Across State Lines? | : Can you have an unlicensed office/meeting place in Tennessee for agents licensed in both Tennessee and Mississippi, but no broker or registered firm? Also, do you have to have a physical address on your business cards when working out of an office in Mississippi even if you are licensed in Tennessee? | It does not sound like the office you are describing would conform the office requirements laid out in the Broker’s Act. As set forth in Tenn. Code Ann. §62-13-309: (a) (1) (A) Each office shall have a real estate firm license, a principal broker, and a fixed location with adequate facilities for affiliated licensees, located to conform with zoning laws and ordinances. (B) Each branch location shall comply with the requirements of subdivision (a) (1) (A). (2) The license of a broker and each affiliate broker under contract to such broker shall be prominently displayed in the broker’s principal place of business. (3) Within ten (10) days after any change of location of such office, all licensees registered at that office shall notify the commission in writing of their new business address, and shall pay the fee established in §62-13-308. (b) (1) Each licensed broker shall maintain a sign on the outside of the broker’s office of such size and content as local ordinances and the commission shall prescribe, which shall clearly state that the broker is engaged in the real estate business. (2) In making application for a license or for a change of location, the licensee shall verify, in writing, that the licensee’s office conforms with zooming laws and ordinances. (3) The maintenance of the broker’s office in the broker’s home shall not relieve the broker from the requirement of having a sign outside of such house as required herein. (4) Affiliate brokers are not required to display signs at the office of their brokers. (c) The requirements of subsections (a) and (b) may be waived in cases of certain unusual geographical circumstances. If the firm in Mississippi holds the appropriate nonresident firm license, and you have a nonresident Tennessee license, then a physical office in Tennessee is not required. |
| Conditional Disclosure Required by TREC? | Is the TN Residential Condition Disclosure Update form required by the Tennessee Real Estate Commission? | State law, in Tenn. Code Ann. §66-5-205, says: “Liability for changed circumstances. – If information disclosed in accordance with this part is subsequently rendered or discovered to be inaccurate as a result of any act, occurrence, information received, circumstance or agreement subsequent to the delivery of the required disclosures, the inaccuracy resulting therefrom does not constitute a violation of this part; provided, however, that at or before closing, the owner shall be required to disclose any material change in the physical change in the physical condition of the property of the property or to certify to the purchaser at closing that the condition of the property is substantially the same as it was when the disclosure form was provided. If, at the time the disclosures are required to be disclosed is unknown or not available to the owner, the owner may state that the information is unknown or may use an approximation is clearly identified as such, is reasonable, is based on the actual knowledge of the owner and it’s not used for the purpose of circumventing or evading this part.” As you can see, the statute required an update if the seller has previously been required to make the disclosures and that information has changed or is discovered to be inaccurate. He is also required to update the disclosure prior to closing to either disclose changes or state that nothing had changed. However, if there is no disclosure required because of an exemption, then there would be no update required. Tennessee form RF202 acts as a supplement to the TN Residential Property Condition Disclosure form. It is required by law and should be completed at or shortly before closing as one of the first items before money and keys pass between parties. Keep in mind, it does not have to be this form specifically, so long as the Seller signs something at closing stating there have been no changes since the completion of the property condition disclosure. |
| Is Personal Interest Only For Immediate Family? | How far down the family tree it is required to have a personal interest disclosure signed by all parties? Is it immediate family (brother, sister, parent) or does it extend to cousins, aunts, uncles? | The Personal Interest Disclosure form covers immediate family members. This includes spouses, children, parents, and grandparents-as well as step-versions of these. |
| Can a Law Firm Offer Property Management? | Regarding Property Management in Tennessee, can a law firm and/or title company owned entirely by attorneys offer property management as a service? Or does PM strictly have to be done through a real estate office with a general broker? | Property Management activities such as leasing, advertising for lease, and collecting rents require a real estate license. Any activity requiring a real estate license must go through a real estate firm with a principal broker. |
| Escrow Form for Title Company? | I recently saw a form that is an agreement between the broker and the title company/title attorney. Will you please remind which specific form this is? | Our Tennessee forms library includes RF482, Escrow Agreement, which can be completed if the title company is holding the earnest money in a transaction. |
| Documents Needed to Lease Property? | What documents are needed in a file to ensure compliance for an agent representing a landlord offering a property for lease? In this case, the agent will be placing it in the MLS for rental. | All transactions will be somewhat different. To start, you will need RF172, Right to Market Property for Lease. Forms on the Fly on our website (member login required) has some suggestions for what should be included in a lease package. According to TREC, maintained records must contain, at a minimum, the following: listing; offers (even those that do not become contracts); contracts; closing statements; agreements; agency disclosure documents; property disclosure forms; correspondence; notes; and any other relevant information. This would include deals in which no other licensee was involved and no commission was paid as well as any deal where the licensee sold or purchased the property if such transaction was done through the brokerage. |
| Documents for Rental-Property Transaction? | What documents are needed to have a complete file in representing a client to locate a rental property? | Each transaction will be different. You will need a buyer representation agreement, which covers parties wishing to lease properties in addition to buyers; and a confirmation of agency status form. It is advisable to have the client sign the disclaimer notice. |
| Transferring Co-Listings to One Agent? | My husband and I are a team, and we have properties co-listed. What form do we need to use to transfer the co-listings to just myself? | You can use an amendment to the listing agreement, RF601. |
| Couple on Listing, One Passes Away? | I have a listing on a property with a husband and wife. The husband passed suddenly last Sunday. How do we handle this listing now? The Will leaves everything to the wife. | Your listings agreement is still valid. However, the wife will need to connect with the attorney handling probate to make sure there is no issue with selling the property during this time. |
| Independent Contractor Agreement? | Where can I find an Independent Contractor Agreement? | Tennessee REALTORS® does not provide an independent contractor agreement, as many brokers will desire different things in their agreements. HERE is a list of key provisions to be included in such agreements issued by NAR. It is advisable for you to contact an attorney who specializes in employment law to help you draft an agreement. |
| Options for a Lease-Purchase Situation? | What is the best way to do a lease/purchase on a property? Use a residential contract along with a residential lease? | If your clients definitely desire a lease-purchase agreement, it is advisable that they consult their own attorney to assist them in drafting an agreement that meets their individual needs. It has become increasingly difficult to draft a one-size-fits-all form to address such different, complex situations. Therefore, the best plan is to have the buyer and seller consult their attorney for a specialized form. This will protect not only the buyers and sellers, but also the agents assisting them with the process. Another option could be to have the seller agree to lease the property (RF 421) and then enter into a regular Purchase and Sale Agreement (RF 401) closer to the time that the lease would end. This may alleviate one of the main problems in a lease-purchase agreement-i.e., that the property does not close. By entering into a lease agreement, the seller receive income that will assist in covering the mortgage, and the buyers have an opportunity to get their finances in order. However, you will need to be very careful about the inspections section once the Purchase and Sale Agreement is completed. There will need to be some changes made so that the seller is not required to fix damages done to the home by the buyers. If you are contemplating this, it is wise to have an attorney assist in drafting language for the special stipulations section of the Purchase and Sale Agreement to protect the sellers. Be sure the sellers are not responsible for repairs that were not required under the lease. A third option would be to put an option agreement on the property. You can use form RF 483 for this purpose. |
| Required to Disclose Mold Issues (Adverse Fact)? | I have a seller who had a contract fall through due to mold. Now the seller does not want me to disclose this issue, but I have them once I know, I must disclose. Am I correct? | Yes. Per Tenn. Code Ann. §62-13-403(2), a real estate agent is required to “[d]isclose to each party to the transaction any adverse facts of which the licensee has actual notice or knowledge.” Tenn. Code Ann. §62-13-202(2) defines an adverse facts as “conditions or occurrences generally recognized by competent licensees that have a negative impact on the value of the real estate, significantly reduce the structural integrity of improvements to real property or present a significant health risk to occupants of the property.” |
| New Law: Commission Payments to an LLC | I am the Principal Broker, and the calls have started with changing to paying commissions to LLC’s. I believe the new law says it has to be a one-person LLC. But what is we have a husband and wife team with two different licenses? Do they need to have an LLC in each license? | Yes, the LLC can only be owned by one licensee; a husband and wife team would have to create separate LLCs. For more details about the new law, click HERE. |
| Lead-Based pain: Home Build Prior to 1978 | I recently had an agent refuse to give a Lead-Based Paint Disclosure on a transaction in which the home was built in 1978. I realize the wording on the disclosure states “Built PRIOR to 1978”; however, the EPA’s website states that LBP was eliminated in 1978. I realize this is also a federal issue and not one mandated or covered by the state. What is the recommendation of TREC on homes built in 1978? | Lead-Based Paint Disclosure is required on homes built prior to 1978. If a home was built in 1978, such disclosure is not needed. 24 CFR 25.86 states, “Target housing means any housing constructed prior to 1978, except housing for the elderly or persons with disabilities (unless any child who is less than 6 years of age resides or is expected to reside in such housing) or any 0-bedroom dwelling.” |
| Competing Buyers Offering Incentive to Seller? | I have an offer submitted on a house, and I was told by the listing agent that a competing offer includes the buyer being willing to pay for the seller’s week away at the beach. Is this legal? | We are not aware of anything that would prohibit this. |
| Designated Agency vs. Agency Agreement? | What is the difference between having a designated agency agreement with a client and an agency agreement? | The designated agency form creates an employment agreement between the seller and the broker (listing firm) and authorizes the broker to be the exclusive broker for the seller and does not allow the seller to sell the property himself. The Managing Broker appoints the listing licensee as the Designated Agent for the seller to the exclusion of all other licensees within that firm/company. The Seller Agency form can be used when one specific agent is not appointed to a seller, but the firm in its entirety will work with the seller. |
| OK to Store My Real Estate Files Virtually? | I understand that I am allowed to store physical files at my broker’s office, and I understand the time period required for that. What about virtual/online document storage-does TransactionDesk meet this legal requirement? My supervising broker has access, and I can upload all of the emails, texts, and notes for each transaction. | TREC rule 1260-02-.40 states, “…Real estate licensees must preserve records relating to any real estate transaction for three years following the consummation of said real estate transaction. Real estate licensees may utilize electronic recordkeeping methods to comply with this requirement…” Online storage is permissible. As long as TransactionDesk has a mechanism for keeping these records, that should be compliant. |
| Requirements/Options for an Appraisal? | Is the appraisal part of the inspection/due diligence process? My client submitted a cash offer, but the seller will not allow us to get an appraisal. I do not see anything in the contract that would prohibit one. | The answer depends on the whether the buyer checked the agreement is or is not contingent on an appraisal under 2.C. of the agreement. An appraisal is its own contingency and is not included within the inspection contingency. |
| Should Client Leave Check Undated? | If an offer is written and signed electronically, and the contract states that the check is to be received within 7 days of binding agreement, and we receive on the 6th day, is it legal if we record and deposit the check even though the date was 6-7 days ago? We are concerned that in an audit it may appear we held check longer than the allowed time due to the check having been written and dated so early. Should we advise the client to leave the check undated? | We do not believe there is any concern with depositing the check. We definitely would not advise your clients to leave the checks undated. You can take a picture of the envelope the check cam in to show the postmark as further documentation. |
| Legal Definition of a Bedroom? | What constitutes a bedroom? | There is no standard answer to determine what constitutes a bedroom pursuant to Tennessee law. Therefore, you should check with your local codes department to determine whether they have a definition of a bedroom. Appraisers often will look at whether there is a window and closet as well as whether the room is above grade level. However, these are not legal determinants based on state law. |
| Earnest Money – Transaction to Transaction? | With this challenging market, we are constantly getting contracts and seeing some fall through the cracks. We have earnest money related to a contract, and I normally would disburse by the terms of the contract. Buyers are often from out of state, and by the time we send them their earnest money back, it’s time for them to write another check. I see this as an accounting nightmare if I transfer earnest money from one transaction to another. Is there a recommendation and/or a specific document that we should use? | There is a way to transfer the earnest money to apply to a different transaction. First, you should make certain that all of the documents have been properly drawn up, demonstrating that the earnest money from the initial transaction is to be distributed to the buyer. Then, have the buyer instruct you in writing to retain the funds within your earnest money account until they enter into another Purchase and Sale Agreement, until the end of the buyer’s representation agreement, or until instructed otherwise in writing by the buyer. |
| Qualifying Form for Prospective Tenant? | I was wondering if there is a form provided that would suffice as an application for a prospective tenant to fill out for a landlord to qualify for an apartment. Also, if there are residential leases available. | Yes, you may use Tennessee form RF631 for a tenant application and RF422 for a lease agreement. |
| Agent Sign Acknowledgment of Receipt? | I represent a seller on a vacant piece of land. An offer was submitted and also a counteroffer. With regard to the Acknowledgement of Receipt, do I sign this or does my seller? | The contract authorizes a licensee to enter in the binding agreement date in the acknowledgement of receipt section. Therefore, you can fill out that section. |
| Plumbing Surprise: Any Recourse? | I have a buyer-client who purchased a home a year ago. On the disclosure provided by the seller, the home was said to be on city sewer. It also says that it is on city sewer on CRS, and both the seller and my buyer have been paying a sewer bill. My buyer started having plumbing issues last week and found out that it's actually on a septic. It is going to cost her about $6-$8k to get connected to the city sewer. Does she have any recourse with the sellers? | Below is the pertinent statute. The buyer should consult with their own attorney regarding their options. § 66-5-208. Purchaser's remedies Currentness (a) The purchaser's remedies for an owner's misrepresentation on a residential property disclosure statement shall be either: (1) An action for actual damages suffered as a result of defects existing in the property as of the date of execution of the real estate purchase contract; provided, that the owner has actually presented to a purchaser the disclosure statement required by this part, and of which the purchaser was not aware at the earlier of closing or occupancy by the purchaser, in the event of a sale, or occupancy in the event of a lease with the option to purchase. Any action brought under this subsection (a) shall be commenced within one (1) year from the date the purchaser received the disclosure statement or the date of closing, or occupancy if a lease situation, whichever occurs first; (2) In the event of a misrepresentation in any residential property disclosure statement required by this part, termination of the contract prior to closing, subject to § 66-5-204; or (3) Such other remedies at law or equity otherwise available against an owner in the event of an owner's intentional or willful misrepresentation of the condition of the subject property. (b) No cause of action may be instituted against an owner of residential real property subject to this part for the owner's failure to provide the disclosure or disclaimer statement required by this part. However, such owner would be subject to any other cause of action available in law or equity against an owner for misrepresentation or failure to disclose material facts regarding the subject property that exists on July 1, 1994. (c) No cause of action may be instituted against a closing agent or closing attorney for the failure of an owner to provide the disclaimer or disclosure required by this part or for any misrepresentations made by a seller on the disclosure form supplied to the purchaser pursuant to this part. (d)(1) No cause of action may be instituted against a real estate licensee for information contained in any reports or opinions prepared by an engineer, land surveyor, geologist, wood destroying inspection control expert, termite inspector, mortgage broker, home inspector, or other home inspection expert. A real estate licensee may not be the subject of any action and no action may be instituted against a real estate licensee for any information contained in the form prescribed by § 66-5-210, unless the real estate licensee is signatory to such. (2) Nothing in this subsection (d) shall be construed to exempt or excuse a real estate licensee from making any of the disclosures required by § 62-13-403, § 62-13-405 or § 66-5-206, nor shall it be construed to remove, limit or otherwise affect any remedy provided by law for such a failure to disclose. (e) The failure of an owner to provide a purchaser the disclosure or disclaimer required by this part shall not have any effect on title to property subject to this part and the presence or absence of such disclosure or disclaimer is not a cloud on title and has no effect on title to such property. |
| What Unlicensed Staff Can and Can’t Do? | Our brokerage handles some property management. The property management company is at the same address but is handled separately from other real estate activity. The question has come up as to what the unlicensed employees at the front desk can and cannot do; specifically, can those without a license show an available rental to potential tenants? | Unlicensed individuals cannot show rental property to prospective tenants. TREC has issued the following guidelines as part of its official manual. WHAT MAY AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY DO? 1. Answer the phone, forward calls and give information contained only on the listing agreement as limited by the broker; 2. Fill out and submit listings and changes to any multiple listing service; 3. Follow up on loan commitments after a contract has been negotiated and generally secure status reports on the loan progress; 4. Assemble documents for closing; 5. Secure public information from courthouses, utility districts, etc; 6. Have keys made for listings; 7. Place ads which have been approved by the Principal Broker; 8. Receive, record and deposit earnest money, security deposits and advance rents under the direct supervision of the Principal Broker; 9. Type contract forms for approval by licensee and Principal Broker; 10. Monitor licenses and personnel files; 11. Calculate, print or distribute commission checks; 12. Place signs on property; 13. Order repairs as directed by the licensee; 14. Prepare for distribution fliers and promotional information which have been approval by the Principal Broker; 15. Deliver documents and pick up keys; 16. Place routine telephone calls on late rent payments; 17. Gather information for a comparative market analysis (CMA); 18. Unlock property under the direction of a licensee; and 19. Disclose the current sales status of a listed property. AN UNLICENSED EMPLOYEE, ASSISTANT OR SECRETARY MAY NOT: 1. Make cold calls by telephone or in person to potential clients; 2. Show properties for sale and/or lease to prospective purchasers; 3. Host open houses, home show booths or fairs; 4. Discuss or explain listings, offers, contracts, or other similar matters with persons outside the firm; 5. Negotiate any terms of a real estate transaction; or 6. Negotiate or agree to any commission split or referral fee on behalf of a licensee; 7. Be paid any compensation which is dependent upon, or directly related to, a real estate transaction. |
| Topic | Question | Answer |
|---|---|---|
| How to Document Payment on a FSBO? | I represent a buyer on a FSBO. We have a signed buyer's rep agreement. I need to know how to document the payment of my commission from the buyer. | It would be advisable to use the Exclusive Buyer Representation Agreement, form RF 141. On line 38 of that form, there is an opportunity for you, as an agent, to have the buyer agree to compensate you if the seller does not offer or pray you for your services. If you have already executed the exclusive buyer representation agreement and that portion was not filled out so the buyer would compensate you, you may consider an amendment to the Buyer's Rep. Agreement, which can be accomplished using form RF 641. |
| Legal to Offer Rebate on Commission? | I would like to entice future listings by offering a rebate on my commission. Is this legal? | No. "A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission's general rule making authority, the commission may regulate the practices of real estate licensees in regard to gifts, prizes, or rebates that are not otherwise prohibited by law." Tenn. Code Ann. §62-13-302(b). Therefore, this type of advertising would violate state law. You could agree to reduce your commissions, but not pay them back. |
| Referral Fee to Out-of-State Agent? | I have a client who has an out-of-state realty identifying property for them. This REALTOR® is not licensed in Tennessee. Can I pay them a commission or finder's fee? | TCA §62-13-302(a) states: It is unlawful for any licensed broker to employ or compensate any person who is not a licensed broker or a licensed affiliate broker for performing any of the acts regulated by this chapter. A licensed broker may pay a commission to a licensed broker of another state if such nonresident broker does not conduct in this state any of the negotiations for which a commission is paid. Therefore, you may compensate an out of state REALTOR® if he or she did not conduct any of the negotiations in Tennessee. If the REALTOR® performed any activities in the state of Tennessee which require a real estate license, they may not be compensated. The same rule applies to referral fees. All fees would have to be paid to the agent's broker for distribution. |
| Referral Fee to Retired Agent? | Can I pay one of my retired agents a referral fee if the agent referred the client prior to retiring her license? | If the agent was licensed at the time that the contract under which he is owed a commission of a referral fee was executed when he was licensed, then he may be entitled to receive a commission or referral fee even though the agent's license is retired or the license in inactive. TREC Rule 1260-2-.29 states: (1) The commissions earned by an affiliated licensee while working under a principal broker can still be paid after (1) or more of the following circumstances occur: (a) the affiliated licensee transfer to a new broker; (b) the affiliated licensee retires his or her license; (c) the affiliated licensee is in broker release status; (d) the affiliated licensee allows his or her license to expire; or (e) the death of the affiliated licensee. The same principle applies if the licensee's license has expired. |
| Referral Fee to Former Client/Friend | With regard to referrals by non-agents, what are the guidelines if I receive a referral from a former client or friend? Can I pay them a referral fee? | Only licensed real estate agents can receive referral fees. As stated in Tenn. Code Ann. §62-13-302(a): It is unlawful for any licensed broker to employ or compensate any person who is not a licensed broker of a licensed affiliate broker for any of the acts regulated by this chapter. A licensed nonresident broker may pay a commission to a licensed broker or another state if such nonresident broker does not conduct in this state any of the negotiations for which a commission if paid. |
| Lot/Land Disclosure Form Needed? | I am listing a property (60 acres of land) and the owners have never lived on the property. Does my seller have to fill out a lot/land form? | The law does not require that the RF 206 Lot/Land Seller's Disclosure Form be completed when selling vacant land. The Residential Property Condition Disclosure Act applies only to transfers of residential real property consisting of not less than one nor more than four dwelling units. Clarification The lot/land disclosure form (RF 206) was removed from the forms library in recent years because disclosure reports are not required by law for vacant land. There is no replacement form. However, the Residential Forms Committee did add all items listed on the disclosure under Section 8, "Buyer's additional due diligence options" in form RF 404. |
| Update Needed for Exempt Sellers? | If a seller signs a property condition exemption, are they also exempt from doing an update prior to closing? | The statute requires an update if the seller has previously been required to make the disclosures, and that information has changed or is discovered to be inaccurate. The seller is also required to update the disclosure prior to closing to either disclose changes or to state that nothing had changed. However, if there is no disclosure required because of an exemption, then there would be not update required. |
| Earnest-Money Matters (Part 1) | We have a contract on a property that I have listed. I have requested a copy of the earnest-money check from the buyer's agent. The agent responded that they did not have to send it. Is this correct? | There is not statutory requirement to provide a copy of the earnest-money check, and there are security concerns with sharing a copy. The other broker becomes liable for the information. If you insists on seeing a copy of the check, you can ask the broker to take a piece of paper and cover the bottom lines of the check, including the account number, routing number, and signature line, before copying and sending. It is also safer option to mail a copy of the check, rather than email. If a lender requests a copy of the earnest money check, it is best to have your buyer share a copy of their cancelled check with the lender directly. |
| Earnest-Money (Part 2): Title Company | Can I let a title company hold the earnest money? | Buyers and sellers can choose to do this, but know the title companies and closing attorneys are not under the same obligations and guidelines as a real estate broker with respect to handling funds. Real estate brokers are bound by TREC Rules, which sets out those guidelines-title companies are not. And even though the contract reiterates TREC Rules on earnest money, the title company is not of the contract, so they are not bound by it. Only the parties to the contract are bound by the contract: the buyer and seller. Most title companies will interplay the funds should a dispute arise to protect themselves from liability. Some brokers enter agreements with the title company outlying the title company's obligations by accepting the earnest money. This is an option available to you if you choose to take this route and may help alleviate any liability. |
| Incapacitated Sellers/Power of Attorney | I have a property I am trying to list. The owners are both mentally incapacitated, and their daughter has a power of attorney for their afford. With regard to the Property Condition Disclosure, the daughter has never lived in the property. Which form do we use for this disclosure? | A power of attorney (POA) does not qualify a property for the exemption. A conservatorship-a court declaration that daughter has control of mother's affairs-would qualify. This is because the POA simply stands in for actual seller. The daughter can complete the Disclaimer form with the statement that she will consider repairs, or she can complete the Disclosure to the best of her ability. You can explain that the seller is not able to provide an adequate Disclosure form. (Get the permission of the seller, or the person holding the power of attorney, before stating this to the buyer.) This may make buyers more agreeable to accept the Disclaimer, especially if they understand that they can make whatever inspections they wish and can terminate the contract if they are not happy with the outcome of the inspections. |
| Cemetery on Property: An 'Adverse Fact' | There is an old grave behind the house of a property I have listed. Do I need to disclose that? | A grave/cemetery can be considered an adverse fact under the law, not necessarily from the standpoint that there is something damaged about the property, but that there are certain responsibilities associated with having a cemetery on the property. The families of those buried in the cemetery have certain rights of access to the cemetery itself; they are entitled to be able to visit and pay their respects to the relatives. In addition, there are restrictions to what can legally be done with the property of the cemetery itself. This could potentially have a negative impact on the value of that part of the property. Therefore, if the seller does not disclose this, the licensee should. |
| Haunted or Homicide: | Do I have to disclose if my seller thinks the house is haunted or if a data occurred in the home? | Pursuant to Tenn. Code Ann. §66-5-207, a licensee is not required to volunteer whether or not a house is thought to be haunted or if a death occurred on the property: "Notwithstanding any of the provisions of the part, or any other statute of regulations, no cause of action shall rise against an owner or a real estate licensee for failure to disclose... that the real property was the site of: 1. An act or occurrence which had not effect on the physical structure of the real property, its physical environment of the improvements located thereon; or 2. A homicide, felony or suicide." Whether the home is thought to be haunted has not effect on the physical structure of the property, and the statute is clear that a homicide, felony or suicide does not have to be disclosed. However, if you are asked directly about whether a death has occurred on the property, you must be honest and answer the question truthfully to avoid being accused of misrepresentation. |
| COVID-19: Impact on TN Contract/Forms? | How is the Coronavirus affecting real estate agreements and other forms, and will any provisions be updated because of the virus? | The Tennessee REALTORS® Residential Forms Committee is looking at any contract and other form additions needed in Tennessee. We are very fortunate in that we are already covered by so much legally (unlike many states) because of our electronic abilities in place, which as notary, signatures, etc. The committee is addressing other items out of our control such as shutdowns, etc. |
| COVID-19 Amendment Form: When Extensions begins? | If I enter "14 days" on line 17 of the COVID-19 Amendment, when does that 14-day extension begin? Does it begin the day the notification is received, or does it give you 14 days after specific performance deadline expires on the purchase and sales agreement? | It would extend all performance deadlines by 14 days, meaning 14 days beyond the deadline expiration. So, if you received the notification on April 1, but the inspection timeframe didn't expire until April 6, the inspection timeframe would be extended 14 days from April 6. The same applies to all other performances deadlines in the contract. |
| COVID-19 Amendment Form: One extension or multiple? | Can the buyer ask for 14 days and then the seller also (later) ask for 14 days due to an event? Or is it one extension per contract regardless of who invokes it? | The intention is for the extension to be used once and only once. |
| COVID-19 Amendment Form: All deadlines extended? | Does the extension apply to just the roadblock that causes you to ask for it, or does it apply to all deadlines that come after that? | All performance deadlines. If you only need to extend one deadline and don't dressy any others being affected, use an amendment to extend just that deadline. |
| COVID-19 Amendment Form: Closing date roll over? | What if you extend 14 days and it turns out the closing date then falls on a weekend-do you get an extension until Monday or must you close Friday? | The closing date is a deadline which does not roll over; therefore, in this case, you would need to close on the Friday beforehand. |
| COVID-19 Amendment Form: Proof required? | What sort of proof can you ask for when an extension is requested? | The form itself does not address asking for documentation. The other party can always as to see something, but the form does not require proof to be sent with the notification. |
| COVID-19 Amendment Form: COVID-19 layoff | If a loan is denied because of a layoff due to COVID-19, how can we resolve this issue? | If a buyer is unable to obtain financing because of a recent layoff due to COVID-19, then the financing contingency would kick in. The buyer could terminate the contract due to loan denial, and they would be entitled to a refund of the earnest money. |
| Auctioned Properties & Adverse Facts | If a property is put up for auction, does the owner have any legal obligations to disclose adverse facts with the home or property? | Properties sold at auction are exempt from the property condition disclosure law, which means exempt from making any disclosures to potential buyers. Under TCA §66-5-209, the following are specifically excluded from disclosure: (1) Transfers pursuant to court order order including, but not limited to, transfers ordered by a court in the administration of an estate, transfers pursuant to a writ or execution, transfers by foreclosure sale, transfers by a trustee in bankruptcy, transfers by eminent domain and transfers resulting from a decree of specific performance. (2) Transfers to a beneficiary of a deed of trust by a trustee or successor in interest who is in default; transfers by a trustee under a deed of trust pursuant to a foreclosure sale, or transfers by a beneficiary under a deed of trust who has acquired the real property at a sale conducted pursuant to a (3) Transfers by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship or trust; (4) Transfers from one (1) or more co-owners solely to one (1) or more co-owners. This subdivision (4) is intended to apply and only does apply in situations where ownership is by tenancy by the entirety, a joint tenancy of a tenancy is common and transfer will be made from one (1) or more of the owners to another owner or co-owner holding property either as a joint tenancy, tenancy in common or tenancy by the entirety; (5) Transfers made solely to any combination of a spouse or a person or persons in the lineal line of consanguinity of one (1) or more the transferors; (6) Transfers between spouses resulting from a decree of divorce or a property settlement stipulation; (7) Transfers made by virtue of the record owner's failure to pay any federal, state or local taxes; (8) Transfers to or from any governmental entity of public of quasi-public housing authority or agency; (8) Transfers involving the first sale of a dwelling provided that the builder offers a written warranty; (10) Any property sold at public auction; (11) Any transfer or property where the owner has not resided on the property at any time within three (3) years prior to the date of transfer; and (12) Any transfer from a debtor in chapter 7 or a chapter 13 bankruptcy to a creditor or third party by a deed in lieu of foreclosure or by a quitclaim deed. |
| Renting to Multiple Family Members? | I handle rental property for an owner. This property has four bedrooms and a bonus room. Is there any rule/regulation that states we cannot deny renting to a family of 12? Or can we charge extra rent? | This is a matter you will likely need to speak with your attorney about. Fair-Housing laws prevent discrimination on the basis of race, color, religion, sex, handicap, familial status [in this case], and national origin. This means that sellers, landlords, agents, etc. If you have legitimate, nondiscriminatory reasons for not renting the property, doing so would likely be permissible-for example, if the property has a septic tank and cannot hold the water for 12 people. Again, it is advisable to seek out the advisable of your own counsel. |
| Status for Unrepresented Buyer? | If a buyer comes directly to the listing agent to buy the listing, should the agent mark the confirmation of agency status as "facilitator" for both the buyer and seller, or mark the buyer as unrepresented? | Either option is permissible. If the buyer continues to go unrepresented, the listing agent may provide the buyer with the appropriate forms, but the listing agent shall do no other work on behalf of the buyer. Note of Clarification It is permissible for a licensee to be a facilitator in a transaction where they represent the Seller and the Buyer also wished to be represented by the listing agent. However, you would not just mark "facilitator" on confirmation of agency without appropriate agency paperwork. if the Buyer wished to remain unrepresented, the appropriate status on the confirmation of agency status form is to mar the Buyer as unrepresented. See the definition of "facilitator" from the Broker's Act below: (A) Who assists one (1) or more parties to a transaction who has not entered into a specific written agency agreement representing one (1) or more of the parties; or (B) Whose specific written agency agreement provides that if the licensee or someone associated with the licensee also represents another party to the same transaction, such licensee shall be deemed to be a facilitator and not a dual agent; provided, that notice of assumption of facilitator status is provided to the buyer and seller immediately upon such assumption of facilitator status, to be confirmed in writing prior to the execution of the contract. A facilitator may advise either or both of the parties to a transaction but cannot be considered a representative or advocate of either party. |
| Home Inspection/Earnest Money Back? | Per the Tennessee REALTORS® purchase and sale agreement, a buyer can do their own home inspection, correct? If the inspection period has not expired, the buyer can terminate the agreement and get their earnest money back, right? They do not have to hire a professional homes inspector to get their earnest money back. | Correct. The purchase and sale agreement states that if a buyer wishes Mohave a home inspection done, they must contract with a licensed party under the relevant code. The agreement also allows an individual to perform their own home inspection-it does not grant them the right to have an unlicensed third party perform one. The seller does have to read a buyer's home inspection report just like any other. If a buyer performs the home inspection, they may terminate under the inspection contingency and be entitled to their earnest money. |
| Listing Agent as Facilitator? | If a buyer buys a house directly from a listing agent and the listing agent becomes a facilitator to both parties, does the agent need to have buyer representation agreement signed by the buyer? | No, a facilitator means you have no agency agreement with either party, so you would not want a buyer to complete an agency agreement. You would simply complete a Notification of Change in Agency Status (RF 303). You could also complete a Confirmation of Agency Status form (RF 302) with the new status. |
| No Sign for Listing: Ethics Violation? | Is it an ethics violation or against MLS guidelines for a property to be listed, whether residential, commercial or land, and a sign not appear on the property? | It is not an ethics violation, as long as not placing a sign on the property was at the instruction of the seller. You will need to contact your local MLS to determine if they have any rules in place regarding signage. |
| Standard/Enhanced Title Insurance in Contract? | With regard the Tennessee REALTORS® contract and title insurance, is the insurance provided for in the contract contemplated as standard or enhanced? If my buyer wishes to have enhanced title insurance, do I need to put that in special stipulations? | The Purchase and Sale Agreement does not specify what type of title insurance is to be provided. The portion of the contract which you are referencing is included to define the type of title the seller has to convey to the buyer-that of good and marketable title. However, the contract does not speak to the type of policy which to accompany the purchase of the property. That, along with who is to provide the title insurance, it negotiable between the parties. If you are working with a buyer who desires enhanced title insurance, it is advisable to include this in under subsection 3, "Title Expenses" or the lines immediately following allowing for modifications. |
| Broker Hold License of Departing Agents? | I have two agents who have utilized a commission advance, which I approved, and their closing did not happen. They are both moving to a different brokerage. Can I hold their license until payment is received? What is the correct procedure when they is an outstanding balance? | No, you cannot hold their license. TREC Rule 1260-02.02 states: (5) upon demand by a licensee for his release from a firm, it shall be promptly granted by the principal broker and the principal broker shall return the license to the licensee. If the licensee cannot be located then the principal broker may return the license to the Commission, (8) The Commission will not intervene in the settlement of debts, loans, draws, or commission disputes between firms, brokers and/or affiliates. |
| Can I list this "Bedroom" in the MLS? | I am listing a home that has a room currently used as a bedroom. It has two windows, but no closet. Can I list that as a bedroom in the MLS? | There is no standard to determine what constitutes a bedroom pursuant to Tennessee law. Therefore, you should check with your local codes department to determine whether they have a definition of a bedroom. Appraisers often look at factors such a whether the room includes a window and closet, as well as whether the room is above grade level. However, these are not reasons you should use to determine how to list the room. |
| How to List Office Number on Business Cards? | With regard to business cards and the rules of advertising, does the office number need to be displayed first, or can my personal number be displayed first and the the office number? | Business cards are considered promotional materials, not advertisements. However, the principal broker is free to make his or her own rules concerning business cards for that office. The only time business cards are regulated by the Tennessee Real Estate Commission (TREC) is if you are with a franchise. If so, any licensee using a franchise trade name on business cards shall clearly and unmistakably indicate their name, the firm name, and firm telephone number. See the pertinent portions of the Advertising Rule 1260-02-.12 |
| Rule for Licensee Purchasing Property? | If I send out postcards advertising that I wish to purchase property, do I need to disclose that I am a real estate agent? | Yes. This scenario is covered under the Tennessee Real Estate Commission's (TREC) Advertising Rule, 1260-02-.12, which includes: "(a) No licensee shall advertise to sell, purchase, exchange, rent, or lease property in a manner indicating that the licensee is not engaged in the real estate business." |
| Confirmation of Agency: One or Two? | We have been asked by the seller's agency for a Confirmation of Agency on our letterhead. We have already provided them with on their letterhead, signed by the buyer and seller. But they are saying two are needed. Is that correct? Or is only one (regardless of what letterhead it originates from) with buyer and seller signatures required? | They are not correct. Only one Confirmation of Agency Status form signed by all parties is required. |
| Agent Submit All Docs to Principal Broker? | Are agents required to submit all real estate documents/transactions to their Firm/Principal Broker? | This would depend on the firms intra-office policy. However, it is advisable for all principal brokers to require this, since the principal broker is liable for all transactions and the firms owns all documents. |
| Who Signs Property Condition Disclosure? | Does the Property Condition Disclosure update need to be signed by buyers and seller, or only signed by the party we represent in the transaction? | The disclosure should be signed by all parties-the buyer and the seller. |
| Power of Attorney's Role in RF 203? | With regard to RF 203, Tennessee Residential Property Condition Exemption Notification, I have a seller who has a Power of Attorney (POA) that is signing for her. I don't see a box on page 2 for her to check regarding her being the POA. Am I missing something? | A power of attorney does not qualify a property for the exemption; a conservatorship (a court declaration that the children have control of mother's affairs) would qualify. This is because the POA simply stands in for the actual seller. If the seller has lived in the house in the past three years, it is unlikely that the seller would be exempt unless they qualified for a different exemption. The POA can complete the disclaimer form with the statement that they will consider repairs, or they can complete the disclosure to the best of their ability. You can explain that the seller is not able to provide an adequate disclosure form (get the seller's permission or the person holding the power of attorney before stating this to the buyer). This may make buyers more agreeable to accept the disclaimer, especially if they understand that they can make whatever inspections they wish and can terminate the contract if they are not happy with the outcome of the inspections. |
| How to List Bedrooms Permitted for Septic? | How should I list an older (1974) 5 BR home that is showing the septic permit for a 3 BR home. Does it need to be listed as 3 BR but mention that there are 2 additional "sleeping" areas, or listed as 5 BR with a disclaimer that the septic was installed for a 3 BR? | In Tennessee, an agent and seller should only advertise a home for money many bedrooms it is permitted. You may advertise the home as having 3 BR and 2 bonus rooms/offices/etc. in order to avoid a possible misrepresentation claim. Although the following statute speaks to new construction, it may be beneficial to you in this situation as well. Tenn. Code Ann. §47-18-204 states in pertinent part: (b) The following unfair or deceptive acts or practices affecting the conduct of any trade or commerce are declared to be unlawful and in violation of this part: (42)(A) Knowingly advertising or marketing for sale a newly constructed residence as having more bedrooms than are permitted by the newly constructed residence's subsurface sewage disposal system permit, as define in Section 68-221-402, unless prior to the execution of any sales agreement the permitted number of bedrooms is discussed in writing to the buyer. The real estate licensee representing the owners may rely upon information furnished by the owner. (B) If a newly constructed residence is marketed for sale as having more bedrooms than are permitted by the subsurface sewage disposal system permit and no disclosure of the actual number of bedrooms permitted occurs prior to the execution of a sales agreement, then the buyer shall have the right to rescind the sales agreement and may recover treble damages as provided in Section 47-18-109. (C) A subsurface sewage disposal system permit issued in the name of the owner of a newly constructed residence shall serve as constructive notice to that owner of the newly constructed residence for the purpose of establishing knowledge as to the number of bedrooms of the newly constructed residence for the purpose of finding a violation of this subdivision. A real estate licensee to be involution of this subdivision, There is a general prohibition in the Tennessee Consumer Protection Act which states that "[u]nfair or deceptive acts or practices and are Class B misdemeanors." Tenn. Code Ann. §47-18-104(a). It goes on to state that it is violation to "[e]ngag[e] in any other act or practice which is deceptive to the consumer or to any other person." Tenn. Code Ann. §47-18-104(b)(27). This is a general catch-all clause. This type of action can be brought by the attorney general. The next issue is the Broker's Act. The Broker's Act has several provisions within it that prohibit an agent from misleading the public in their advertising. Pursuant to Tenn. Code Ann. §62-13-312(b), it is violation of "Make[e] any substantial or willful misrepresentation"; to "Pursu[e] a continues and flagrant course of misrepresentation or make false promises through affiliate brokers, other persons, or any medium of advertising, or otherwise" and to engage in "misleading or untruthful advertising." Tenn. Code Ann. §62-13-312(b)(1),(3) and (4). A court could find that knowingly advertising a house as having more bedrooms that it is permitted to have would violate all three of these provisions. In addition, TREC could also penalize an agent for these actions under these same portions of the Act. Another possible area of concern is disclosure of adverse facts. Tenn. Code Ann. §62-13-403(2) says a real estate agent is required to "[d]isclosure to each party to the transaction any adverse facts of which the licensee has actual notice or knowledge." Tennessee law defines an adverse fact as "conditions or occurrences general recognized by competent licensees that have negative impact on the value of the real estate, significantly reduce the structural integrity of the improvements to real property or present a significant health risk to occupants of the property." Tenn. Code Ann. §62-13-102(2). A reduction in the number of rooms that would legally constitute a bedroom would be an adverse fact since it would reduce the value of the home. Finally, you would be in violation of Article 12 of the NAR Code of Ethics. Article 12 states that "Realtors® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations." To knowingly mislead the public into believing that a property has more bedrooms than it is permitted to have would violate this provision. A local board could penalize a Realtor® if they found that the Realtor® knew what the permit said and yet continued to advertise more bedrooms that were reflected on that permit. |
| Reactivate Listing w/o Notification Form? | I have a listing on a property that was under contract with a home inspection contingency. The buyer withdrew from the contract due to the home inspection and sent the notification form to the seller. The seller has not get signed that document, but we make the listing active again due to this situation. Is this okay to do since we know the other contract will be voided? | A property can be resisted so long as it is properly terminated. The notification form is a unilateral form that can allow a buyer to terminate the contract under a contingency provided for in the Agreement. A seller does not have to sign the notification form in order for the contract to be terminated. There are certain contingencies wherein the buyer is permitted to terminate the contract and receive the earnest money. Under the terms of the contract, the buyer is permitted to do this. He does not need the approval of the seller to do so. Therefore, the Notification is adequate to convey that the buyer is exercising his contingency and terminating the contract. It also contains language which requests return of the earnest money pursuant to the terms of the contract. The Earnest Money/Trust Money Disbursement and Release from (RF 481) is not technically required in that situation since the contract states that the buyer has the right to terminated and if she does so, he is entitled to the earnest money. However, some brokers want a document in which both parties agree to the distribution of the funds. This is because they may not be comfortable in making a reasonable interpretation of the contract, which would be done in the vent that the earnest money is returned without the signature of RF 481. If you are the holder of the funds and returning the money to the Buyer, it will make your life easier and lessen your liability if you secure the signature of the Seller on the release form. If the seller is unwilling to sign the form, the principal broker is permitted to make a reasonable interpretation of the contract and release the funds. |
| Seller Cancel Listing w/ Another REALTOR®? | Can a seller cancel their listing with another REALTOR®? How does that need to be handled? | A seller can ask to be released from a listing agreement, but the agent would have to agree to the release since the contract is of mutual benefit. You, however, cannot instruct a seller on how to do this. Pursuant to Tenn. Code Ann. §62-13-312(b)(10), an agent can be punished for "Inducing any party to a contract, sale or lease to break such contract for the purpose of substitution in lieu thereof of a new contract, where such substitution is malicious or is motivated by the personal gain of a the licensee." And pursuant to Tenn. Code Ann. §62-13-604, "It is unlawful for a real estate licensee... to counsel a client of another real estate licensee on how to terminate or amend an existing agency contract." Article 16 of the NAR Code of Ethics states "REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation agreements that other REALTORS® have with clients." |
| Pay Bonus to Unlicensed Assistant? | Are there still rules against paying bonuses to an unlicensed assistant? | You are permitted to give an unlicensed assistant a bonus; however, the payment may not be tried to a real estate transaction. For instance, you cannot give your assistant $50 every time you close a sale. |
| Inspection-Report Sharing Reminder | When a buyer does an inspection and sends a repairs proposal to the seller, should the agent also send a full inspection report to the listing agent? If yes or no, what are the reasons for it? | No. The contract specifically says that supporting information from the inspection report for repairs is only to be provided in the event that the seller requests it. The Tennessee REALTORS® Forms Committee included this language into the form because string inspection reports places a huge burden and responsibility on the agent. Agents would then have to read and assess an entire report constituted an adverse fact. Therefore, it should only be provided in the event that the seller requested it. And at that time, only send the pertinent information for the repairs requested, never the full report. There could also be copyright issues with sharing the report since the report was made for the buyer, and typically the buyer signs saying they will not share the report. |
| Repair Proposal and Disclosures? | When a repair proposal is sent to the seller, do they have to update the Tennessee property condition disclosures? Or when would they have to update it after the buyer's inspection? | If a seller became aware of anything throughout the inspection process and that deal fell through, the seller would need to complete a new disclosure based on actual knowledge. A seller should talk to their attorney about this if they have questions on what they need to disclose. |
| Escalation Clauses | Are "Escalation Clauses" illegal in Tennessee? | No, escalation clauses are perfectly legal; however, it can be dangerous for a listing agent to do correctly. This can encourage a bidding war and an agent runs the very risk of one of the offers claiming that he "played favorites" with one over the others. As an agent, you have a duty to "diligently exercise reasonable skill and care in providing services to all parties to the transaction" (Tenn. Code Ann. §62-13-403(1)) and to "provide services to each party to the transaction with honesty and good faith." (Tenn. Code Ann. §52-13-403(4)) |
| Escalation Clauses | If an agent submits an offer containing an escalation clause, can I refuse to submit it to my seller? | No. The Broker's Act states, "Unless the following duties are specifically and individually waived, in writing by a client, a licensee shall assist the client by receiving all offers and counter-offers and forwarding them promptly to the client." Tenn. Code Ann. §62-13-404(3)(A)(ii). TREC Rule 1260-2-.08 states, "A broker or affiliate broker promptly shall tender every written offer to purchase or sell obtained on a property until a contract is signed by all parties." Therefore, an agent must present all offers to the client unless they have instructed them not to do so in writing and signed by the seller. Further, under Standard of Practice 1-6, "Realtors® shall submit offers and counter-offers objectively and as quick as possible." Standard of Practice 1-7 states in pertinent part, "When acting as listing brokers, Realtors® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller has waived this obligation in writing." |
| Amendment Needed for Earlier Closing? | Do we need an amendment if a file closes earlier than what is in the original PSA? | Technically, any time that the closing date is changed, whether it is before or after the original closing date, an amendment should be executed. The Agreement states: This transaction shall be closed ("Closed")(evidenced by deliverers of warranty deed and payment of Purchase Price, the "Closing"), and this Agreement shall expire, at 11:59 local time on the ________ day of ______________, __________ ("Closing Date"), or such earlier date as may be agreed to by the parties in writing. However, from a practical standpoint, if the transaction closes earlier, it is not necessary. The only time that you would need to get an amendment done is if you wanted to be able to terminate the contract if it did not close on the earlier date. Otherwise, as long as it closed by the original closing date, no harm no foul. |
| Lenders Offering Rebates to Consumers? | You may have seen some financial institutions offering rebates in the form of gift cards to consumers if the consumer uses a lender preferred real estate licensee. Tennessee has a well-established, however, was whether a gift card constituted cash. | For calcification, Tennessee REALTORS® sent THIS LETTER to the Tennessee Real Estate Commission (TREC) asking for a formal opinion. TREC discussed the matter at its most recent meeting on October 8, 2020. The following motion was made and received unanimous approval: It is the interpretation of the Tennessee Real Estate Commission at this time that gift cards are cash and are illegal to give as an inducement." This means that moving forward, any licensee participating in a program where the consumer is receiving a gift card which was paid for with money from the licensee will be subject to penalties from TREC for violating the Broker's Act. |
| Laws & Rules for Team Names? | What are the guidelines for team name? | Team names must be in compliance with TREC Rule 1260-2-.12(3): (f) No licensee advertising in a false, misleading, or deceptive manner. False, misleading, and/or deceptive advertising includes, but is not limited to, the following: 1. Any licensee advertising that includes only the franchise name without including the firm name; 2. Licensees who hold themselves out as a team, group, or similar entity within a firm who advertise themselves utilizing terms such as "Real Estate", "Real Estate Brokerage", "Realty", "Company", "Corporation", "LLC", "Corp.", "Inc.", "Associates", or similar terms that would lead the public to believe that those licensees are offering real estate brokerage services independent of the form and principal broker; 3. Any webpage that contains a link to an unlicensed entity's website where said entity is engaged in activities which require licensure by the Commission. |
| Broker Responsible for 'Personal' Sales? | If an agent under my office does not take commission nor pay any share to the company from that proposed commission, as the Broker, am I responsible for those files and actions/sales when they are a personal interest and not run through the firm? | If an agent owns the property as an individual, not a member of an LLC, then they can sell the property without using firm resources and, in theory, with no liability on the firm. Ultimately, any liability would be determined on a case-by-case basis. However, if the property is listed in the MLS, then firm resources will have been used-i.e. the firm name in the post. The affiliate will have to run the property through the firm, and the Broker will have liability for the actions of the affiliate. |
| Who Signs Acknowledgement of P&S Agreement? | I would like some calcification concerning lines 504-506 of the Purchase and Sale Agreement. It seems every agent and many brokers have different opinions as to who is supposed to sign and date the acknowledgement of receipt. I was just told by a broker that only the buyer or seller can sign that spot. I have also been told only brokers can sign it or the last agent whose client signed it. I have always been under the impression that the agent who receives it after it has been accepted and signed by the other agent's client is the one to date and sign. | Licensees fill in the acknowledgement of receipt section, not buyers or sellers. Nothing prohibits a party to contract from completing this section; however, it is designed for the licensees to enter the date. Example: Buyer made an offer to seller on Dec. 1 at Noon. Seller countered the offer to buyer on Dec. 3 at Noon. Buyer accepted seller’s counter on Dec. 5 at Noon. Seller’s agent received notice (i.e., the signed contract) from buyer on Dec. 5 at 2:00 p.m. The binding agreement Date (BAD) would be Dec. 5 at 2:00 p.m. and would be inserted by the seller’s agent in the above scenario, since he is the one receiving the notice of an accepted contract. A copy of the agreement with the BAD should then be sent to the other party. The BAD can be inserted by the licensee receiving notice of acceptance: “The parties hereby authorize either licensee to insert the time and date of receipt of the notice of acceptance of the final offer and further agree to be bound by such as the Binding Agreement Date following the signatory section of this Agreement, or Counter Offer, if applicable.” |
| Proposed New TREC Rules Move Forward | The hotline often receives questions related to rules from the Tennessee Real Estate Commission (TREC). At TREC's rule making hearing on Nov. 12, 2020, the commission voted to move forward with two rule changes. | 1.) Advertising listing of another licensee; required permission[Complete rule filing HERE] 2.) Changes in response to the Fresh Start Act[Complete rule filing HERE] Read more details about both changes on our website HERE. Tennessee REALTORS® voted to support these changes and presented letters as public comment during the hearing. The rules will now go to the Attorney General's office for review/approval. Once approved, they will go to the Secretary of State's office and be posted for 90 days for any additional public comment. |
| Help on Credit-Repair Services? | As a licensed real estate agent, is there anything I need to know prior to offering credit-repair services, i.e., conflicts, rules, etc.? | It is likely your Errors & Omissions (E&O) insurance will not cover any claims brought by clients based on your credit-repair activities. As long as you are upfront and clear on everything, we are not aware of anything which would make this illegal. |
| Can a Non-TN Licensee be Co-Listed? | With regard to a multiple-state team agreement that I have, the team leader is an agent in California and not licensed in Tennessee. He is demanding that he be a co-listing agent on any and all deals. What are the rules regarding co-listing agents? Can a non-Tennessee licensed agent be co-listed on a property in Tennessee? | Tennessee's regulatory scheme does not allow for co-lists with an agent from another state. A Tennessee real estate license is required to enter into a listing agreement to sell real property located in Tennessee. The team leader can be compensated for these transactions but cannot appear on any documentation, not can they do any activity which requires a Tennessee real estate license: Tenn. Code Ann. §62-13-302(a) states: It is unlawful for any licensed broker to employ or compensate any person who is not a licensed broker or a licensed affiliate broker for performing any of the acts regulated by this chapter. A licensed broker may pay a commission to a licensed broker of another state if such nonresident broker does not conduct in this state any of the negotiations for which a commission is paid. |
| Flat Fee for Entering FSBO in the MLS? | I have a seller who wants to do a FSBO and pay me a flat fee to put it on the MLS. Is this legal? | Yes, this called a limited services listing. You need to check your local MLS to determine is they allow such listings. State law in Tenn. Code Ann. §62-13-404 states: Any licensee who acts as an agent in a transactions regulated by the Tennessee Real Estate Broker License Act of 1973 owes to such licensee's client in that transaction the following duties, to: (1) Obey all lawful instructions of the client when such instructions are within the scope of the agency agreement between licensee and licensee's client; (2) Be loyal to the interests of the client. A licensee must place the interests of the client before all others in negotiations of a transaction and in other activities, except where such loyalty duty would violate licensee's duties to a customer under §62-13-402 or a licensee's duties to another client in a dual agency; and (3) (A) Unless the following duties are specifically and individually waived, in writing by a client, a licensee shall assist the client by: (i) Scheduling all property showing on behalf of the client; (ii) Receiving all offers and counter offers and forwarding them promptly to the client; (iii) Answering any questions that the client may have in negotiation of a successful purchase agreement within the scope of the licensee's expertise; and (iv) Advising the client as to whatever forms, procedures and steps are needed after execution of the purchase agreement for a successful closing of the transaction. (B) Upon waiver of any duties in subdivision (3)(A), a consumer shall be advised in writing by the consumer's agent that the consumer may not expect or seek assistance from any other licensees in the transaction for the performance of the duties in subdivision (3)(A). |
| Am I allowed to give Gift Cards to clients? | Can you calcify if it is acceptable for a REALTOR® to give gift cards to clients, and if so the amount that is allowed? | The Tennessee Real Estate Commission (TREC) recently declared that gift cards give as an inducement are in violation of the Broker's Act. TREC did clarify in that conversation that gift cards given as closing gifts are acceptable, so long as those cannot be converted to cash. There is not a capped amount on these closing gifts. |
| Topic | Question | Answer |
|---|---|---|
| Leasing-Agreement Form? | I am looking for a residential listing agreement to exclusively list a property for lease. Can you help? | As of January 1, 2019, Tennessee REALTORS® offers an Exclusive Right to Market for Lease Agreement, RF171. This is not a property management agreement but is to be used when a property owner wants a licensee to market his property for lease. That is all this form is designed for. If you will be managing the property, you should use the form described in the next item below. |
| Property-Management Form? | Which form can I use to manage an owner’s property? | You may use RF172, Property Management Agreement. This form is strictly for managing property. If the Owner wants you to market and manage the property, you will need to use RF171 in conjunction with this agreement. |
| Wire-Fraud Form: Every Transaction? (YES) | In regard to the new Wire Fraud Warning form, should I use it in every transaction? | Yes. In November 2018, Tennessee REALTORS® made available a Wire Fraud Warning Form, RF308. This form was created in response to a widespread cyber-criminal activity directed at real estate transactions. It is recommended that this form be signed by every buyer and seller to help spread awareness of the issue and lessen the liability on REALTORS®. |
| Acknowledge of Receipt | Is a contract “bound” if the binding agreement date gas not been filled in? | A contract is created when both parties have executed the contract and the offeror receives notification of the offeree’s acceptance. The binding agreement date in the contract does not necessarily determine when the contract is formed. It merely acts as a date from which deadlines are calculated. A contract still exists between two parties even if the binding agreement date has not been entered by a licensee. Licensees cannot bind a contract; they are only authorized to insert the time and date of receipt of the notice of acceptance of the final offer, “the binding agreement date.” The Residual Forms Committee voted to change the title of the section on the Purchase and Sale Agreement where the binding agreement date is entered to help clarify this. The section title is now “Acknowledgement of Receipt.” |
| Lot/Land Disclosure? | I am doing a listing agreement for vacant land and noticed RF206 (property condition) has been deleted. Which form replaces it? | RF206 was removed because disclosure reports are not required by law for vacant land. There is no replacement form; however, the forms committee did add all items listed on the disclosure under section 8, “Buyer’s additional due diligence options” in form RF404. |
| Property-Condition Disclosure Changes? | Why were some items, such as the question asking whether heating or air conditioning was supplied to all rooms, deleted from the Property Condition Disclosure? | Certain items were removed from the 2019 Property Condition Disclosure Form because they are not required by the Tennessee Residential Property Condition Disclosure Statute. Currently, the only item on the Property Condition Disclosure Form not required by statute is item 13, “is the property serviced by a fire department? if yes, in what fire department’s service area is the property located? Is the property owner subject to charges or fees for fire protection, such as subscriptions, association dues or utility fees?” Find more details HERE. |
| Office-Sign Law | Our firm is looking to move offices into a co-op building where there are several businesses. There is no outside sign or advertising on this building, only in the lobby. Is it okay for a real estate firm to be located in an office like this? | We have included the pertinent Tennessee laws and rules below. Based on your circumstances, you may need to contact the Tennessee Real Estate Commission (TREC) at 615-741-2273 and explain to them the setup. The law says that signage requirements may be waived in cases of certain unusual geographical circumstances. As set forth in Tenn. Code Ann. § 62-13-309: (a) (1) (A) Each office shall have a real estate firm license, a principal broker, and a fixed location with adequate facilities for affiliated licensees, located to conform with zoning laws and ordinances. (B) Each branch location shall comply with the requirements of subdivision (a)(1)(A). (2) The license of a broker and of each affiliate broker under contract to such broker shall be prominently displayed in the broker’s principal place of business. (3) Within ten (10) days after any change of location of such office, all licensees registered at that office shall notify the commission in writing of their new business address, and shall pay the fee established in § 62-13-308. (b) (1) Each licensed broker shall maintain a sign on the outside of the broker’s office of such size and content as local ordinances and the commission shall prescribe, which shall clearly state that the broker is engaged in the real estate business. (2) In making an application for a license or for a change of location, the licensee shall verify, in writing, that the licensee’s office confirms with zoning laws and ordinances. (3) The maintenance of the broker’s office in the broker’s home shall not relieve the broker from the requirement of having a sign outside of such house as required herein. (4) Affiliate brokers are not required to display signs at the office of their brokers. (c) The requirements of subsections (a) and (b) may be waived in cases of certain unusual geographical circumstances. (d) (1) If the applicant for a broker’s license maintains more than one (1) place of business within the state, the applicant shall apply for and obtain an additional firm license for each such branch office; (2) Every such application shall state the location of such branch office and the name of the person in charge of it; and (3) Each branch office shall be under the direction and supervision of a broker licensed at that address. (e) No more than one (1) license shall be issued to any broker or affiliate broker to be in effect at one (1) time. (f) Upon original application for a firm license and each renewal thereof, the firm shall provide proof of the establishment of the firm’s escrow account satisfactory to the commission. In addition, TREC Rule 1260-2-.03 OFFICES states: (1) Signs. Each licensed real estate firm shall conspicuously display on the outside of the firm’s place of business a sign which contains the name of the real estate firm as registered with the Commission. |
| One-Click Rule on Social Media | If I post on social media the opportunity to receive a complimentary travel voucher in exchange for requesting a home-value report, is that acceptable as long as I put the requirements of the recipient and the travel information in a document one click away? | The one-click rule, cited below, only applies to the requisite firm information, not all required information. TREC rule 1260-2-.12: (6) Social Media Advertising (a) For the purpose of this rule, “social media” means internet-based applications or platforms that allow the public to create and share content and information. Examples include, but are not limited to; Facebook, Twitter, Instagram, and LinkedIn. (b) With regards to social media advertising by licensees, the firm name and firm telephone number listed on file with the Commission must be no more than one click away from the viewable page. (c) Listing information must be kept current and accurate. This requirement shall apply to “First Generation” advertising as it is placed by the licensee and does not refer to such advertising that may be syndicated or aggregated advertising of the original by third parties outside of the licensee’s control and ability to monitor. For gifts and pries, the following rules apply. TREC Rule 1260-2-.33: (1) A licensee may offer a gift. the prize, or other valuable consideration as an inducement to the purchase, listing, or lease of real estate only if the offer is made: (a) Under the sponsorship and with the approval of the firm with whom the licensee is affiliated; and (b) In writing, signed by the licensee, with disclosure, of all pertinent details, including but not limited to: accurate specifications of the gift, prize, or other valuable consideration offered; fair market value; the time and place of delivery; and any requirements which must be satisfied by the prospective purchaser or lessor. Also please be aware that under state law, these gifts may not take the form of cash or be converted into cash in any way (in other words, they cannot trade it info cash or get cash back). The statute states: “A real estate licensee shall not give or pay cash rebates, cash gifts, or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission’s general rulemaking authority, the commission may regulate the practices of real estate licensees in regards to gifts, prizes, or rebates that are not otherwise prohibited by law.” Tenn. Code Ann. § 62-13-302(b). In addition, you should be aware of new rules regarding advertising, which includes advertising offers or gifts. TREC Rule 1260-2-.12(6): (5) Gurantees, Claims, and Offers (a) Unsubstantiated selling claims and misleading statements of inferences are strictly prohibited. (b) Any offer, guranty, warranty, or the like, made to induce an individual to enter into an agency relationship or contract, must be made in writing and must disclose all pertinent details on the face of such offer or advertisement. |
| File Earnest-Money Checks? | In reviewing our file requirements, we are trying to determine if a copy of an earnest-money check should be retained in our company and/or agent files. | According to the Tennessee Real Estate Commission (TREC), maintained records must contain, at a minimum, the following: listings; offers (even those do not become contracts); contracts; closing statements; agreements; agency-disclosure documents; property-disclosure forms; correspondence; notes; and any other relevant information. This would include deals in which no other licensee was involved and no commission was paid, as well as any deal where the licensee sold or purchased the property if such transaction was done through the brokerage. This does not state that it is necessary to keep copies of checks, and there could be privacy concerns with keeping copies of checks in your files, as they contain sensitive account information. |
| OK to File Records Electronically vs. Paper? | Can we store our records electronically? | Yes, TREC rule 1260-02-.40 states, “… Real estate licensees must preserve records relating to any real estate transaction for three years following the consummation of said real estate transaction. Real estate licensees may utilize electronic recordkeeping methods to comply with this requirement…” |
| How Long to Retain Records on File? | How long are we required to keep our files on transactions? | Per Tennessee law (TCA 62-13-312), a licensee can be disciplined for failing to preserve for three years following its consummation records relating to any real estate transaction. It may be wise to keep records for at least six years, since that is the statute of limitations for a breach of contract action, in case you needed to defend yourself at any time. |
| Required to Live in TN 45 Days Before License? | Does an applicant have to live here for 45 days in order to get a Real Estate License? | Yes, they do need to live in Tennessee that long. Specifically: § 62-13-303. Licenses; requirements (e) An application for an affiliate broker’s license shall be accompanied by: (1) The fee specified in § 62-13-308; (2) Satisfactory proof that the applicant: (A) Is at least eighteen (18) years of age; and (B) Has been a resident of this state for at least forty-five (45) days; and (f) An application for a broker’s license shall be accompanied by: (1) The fee specified in § 62-13-308; and (2) Satisfactory proof that the applicant: (A) Is at least eighteen (18) years of age; and (B) Has been a resident of this state for at least forty-five (45) days. *Clarification* on 45-Day Residency Tennessee no longer enforces the 45-day residency requirement before licensure, in light of a 2010 decision in which the Attorney General opined that the requirement violated the Privileges and Immunities clause of the Constitution. |
| Provide Actual Desk Phone for Agents? | We are updating the systems at our office. Is it required that the office provide an actual phone on the desk for each agent, or can a “Softphone” be used, which is an app that sends calls to the agent? | Tenn. Code Ann. § 62-13-309 states in part: (a) (1) (A) Each office shall have a real estate firm license, a principal broker, and a fixed location with adaquate facilities for affiliated licensees, located to conform with zoning laws and ordinances. You are required to provide “adequate facilities” for the agents. You are not required to provide them with specifically with a landline phone, as long as they have another phone on which they may conduct business. |
| Must Live Within 50 Miles of Office? | With regard to the residency of an agent, do they still have to live within fifty (50) miles of their office or has that changed? | No, the 50-mile rule was revoked by the Tennessee Real Estate Commission (TREC), and the revocation became effective April 24, 2017. |
| Can Seller Require Pre-qual. Letter from Buyer? | Can a seller require a buyer to submit a pre-qualification letter before the Seller will review the offer? | A licensee has a duty to follow all lawful instructions of the seller. Requiring pre-qualification letters or other proof of funds is a lawful instruction. It is recommended that a listing agent include this in their remarks – not really as a legal matter, but so buyers can know what is expected on the front end and have their ducks in a row to make the process better for the seller. |
| RESPA / Prequalification and Paying Closing Costs | Can a seller require that a pre-qualification letter be from a specific lender? | A seller may require that a buyer obtain a pre-approval letter from a particular lender prior to entering into a contract with them, even if they have been pre-approved by someone else. However, they may not require that buyer to use that particular lender for the mortgage under the Real Estate Settlement Procedures Act (RESPA). This must be a request/requirement of the seller, not the agent. If the agent is working on behalf of the local lenders, this could present issues. It would have to be disclosed, and even then, it could be a violation of RESPA. Q: Can a seller offer to pay a portion of the buyer’s closing costs if the buyer uses a specific lender? A: Sellers are permitted to offer incentives (such as contributing toward closing costs) to buyers to use their preferred lenders. However, they ARE NOT allowed to require buyers to use those lenders. |
| What can an Unlicensed Employee Do? | What may an unlicensed employee, assistant, or secretary do? | 1. Answer the phone, forward calls and give information contained only on the listing agreement as limited by the broker; 2. Fill out and submit listings and changes to any multiple listing services; 3. Follow up on loan commitments after a contract has been negotiated and generally secure status reports on the loan progress; 4. Assemble documents for closing; 5. Secure public information from courthouses, utility districts, etc; 6. Have keys made for listings; 7. Place ads which have been approved by the Principal Broker; 8. Receive, record, and deposit earnest money, security deposits and advance rents under the direct supervision of the Principal Broker; 9. Type contract forms for approval by licensee and Principal Broker; 10. Monitor licenses and personnel files; 11. Calculate, print or distribute commission checks; 12. Place signs on property; 13. Order repairs as directed by the licensee; 14. Prepare for distribution fliers and promotional information which have been approved by the Principal Broker 15. Deliver documents and pick up keys; 16. Place routine telephone calls on late rent payments 17. Gather information for a comparative market analysis (CMA); 18. Unlock property under the direction of a licensee; 19. Disclose the current sales status of a listed property. |
| What CAN’T an Unlicensed Employee Do? | What is an unlicensed employee, assistant, or secretary NOT permitted to do? | 1. Make cold calls by telephone or in person to potential clients; 2. Show properties for sale and/or lease to prospective purchasers; 3. Host open houses, home show booths or fairs; 4. Discuss or explain listings, offers, contracts, or other similar matters with persons outside the firm; 5. Negotiate any terms of a real estate transaction; 6. Negotiate or agree to any commission split or referral fee on behalf of a licensee; or 7. Be paid any compensation which is dependent upon, or directly related to, a real estate transaction. |
| Unlicensed Employees | Does a sitter/hostess for model homes need to be a licensed REALTOR®? | An unlicensed person may sit in a model home, but only provide information contained in the listing agreement. They cannot show the home, solicit the property, or negotiate in any way. There is no exception for model homes, as noted in TREC Rule 1260-2-.03 OFFICES: (b) Model Homes and Modular Units. A model home may be utilized in a subdivision or on a commercial lot and a modular unit may be utilized in subdivisions which are under construction for purposes of soliciting business and will not be required to be licensed as a branch office as long as the model home or modular unit meets the following requirements: The model home or modular unit location and/or telephone number is only advertised in conjunction with advertising the main firm office and such advertising complies with the statutes, rules, and regulations of the Commission; The model home or modular unit does not have a mail drop; The model home or modular unit is not the sole sales office for the firm; The model home or modular unit is not utilized to allow unlicensed activity by individuals in performing any of the acts requiring licensure under T. C. A. § 62-13-101, et seq.; and The principal broker of the main firm office shall adequately supervise licensees operating from model homes or modular units as required by T. C. A. § 62-13- 312 and any rules promulgated thereunder. Q: A new trend is hiring Virutal ISAs (Inside Sales Agents) to set up listing appointments. Does the ISA have to be licensed? A: The TREC guidelines above do not state an unlicensed person may not set up a listing appointment. It is likely that this would be acceptable under the Broker’s Act, as long as they did not solicit or show properties. Q: Can an agent compensate a licensed assistant for work that does not require a license, or does that money need to come through the principal broker? A: If the agent is doing any activities which require a real estate license, they must be paid through the firm. Payment for activities which do not require a real estate license may continue to be paid by the agent overseeing the assistant outside of the company. Be sure to create a proper paper trail and indicate which activities are being compensated for outside of the company. |
| TREC Disciplinary Actions Reports | Where can I locate reports of discipline taken against real estate licensees, such as ethics, rules and law violations? Are they publicly available? | Yes, such reports are available to the public. The Tennessee Department of Commerce & Insurance posts them on the Regulatory Board of Disciplinary Actions section of its website HERE. The reports are organized by year and month. Once you select a specific month, scroll down the table to the “Real Estate Commission” heading on the far left (if that heading appears in the given month), and you can view TREC disciplinary actions by Name/Location/Issues/Penalty/Date. |
| Who Signs the Contract(s) on a Co-Listed Property? | When two agents are co-listing a property, do both the primary agent and the co-list agent have to sign contracts? | Both firms/companies would likely need to sign the same listing agreement. There would need to be an explanation within the contract concerning the commission split between the two companies. Both companies would have to sign the listing agreement, and both agents would have to sign the Confirmation of Agency Status form. It is not necessary to both sign the contract, as that section is for informational purposes only and lets lenders and other involved parties know whom to contact with any questions. |
| Rebate on Commission Toward Closing Costs, etc.? | I thought Tennessee was a non-rebate state. Is it legal for a REALTOR® to offer a rebate of his/her commission to go toward a buyer’s closing costs, or in other ways? | A licensee is permitted to give someone a gift in order to induce them to do business with the agent. However, it must be an incentive for that person to do business with you, not their friend or family member. You will have to follow the gifts and prizes rule, under TREC Rule 1260-2-.33: (1) A licensee may offer a gift, prize, or other valuable consideration as an inducement to the purchase, listing, or lease of real estate only if the offer is made: (a) Under the sponsorship and with the approval of the firm with whom the licensee is affiliated; and (b) In writing, signed by the licensee, with disclosure of all pertinent details, including but not limited to: 1. accurate specifications of the gift, prize, or other valuable consideration offered; 2. fair market value; 3. the time and place of delivery; and 4. any requirements which must be satisfied by the prospective purchaser or lessor. However, under state law, these gifts may not take the form of cash or be converted into cash in any way: “A real estate licensee shall not give or pay cash rebates, cash gifts, or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission’s general rulemaking authority, the commission may regulate the practices of real estate licensees in regards to gifts, prizes or rebates that are not otherwise prohibited by law.” Tenn. Code Ann. § 62-13-302(b). |
| Business Cards and Franchises: What is Permitted? | TREC rules say business cards are not advertising, but also say franchises are required to include specific details on business cards. Can you help me understand the difference? | This question relates to two parts of Rule 1260-02-.12 from the Tennessee Real Estate Commission (TREC) TREC Rule 1260-02-.12(1) states that business cards are considered promotional items and do NOT fall under the Advertising Rule (which requires firm name and phone number on advertisements). A bit later, TREC Rule 1260-02-.12(4)(b) states: “Any licensee using a franchise trade name on business cards, contracts, or other documents relating to a real estate transaction shall clearly and unmistakably indicate his name, firm name, and firm telephone number (all as registered with the Commission).” In light of these two rules: Business cards are considered promotional materials, not advertisements. The principal broker is free to make their own rules concerning business cards in that office. The only time business cards are regulated by TREC is if you are with a franchise. If so, any licensee using a franchise trade name on business cards shall clearly and unmistakably indicate their name, firm name, and firm telephone number. |
| Are Confirmation & Disclosure Forms Required? | It is my understanding that conformation form 302 and disclosure form 304 are no longer required to be presented with an offer, or shared with the opposing brokerage. As I represent the buyer, I am constantly asked by the listing brokerage to supply these forms, because they require them for the file. Must I comply and supply the forms? | The Confirmation of Agency Status form (302) is required. The requirements for the agency Disclosure Notice (304) differ under the Broker’s Act and the REALTOR® Code of Ethics. Disclosures are not required in writing under the Broker’s Act unless one of the parties is unrepresented; confirmation of agency is required to be done verbally, and then in writing, if the other side is not represented by an agent: (a) If a licensee personally assists a prospective buyer or seller in the purchase or sale of a property, and such buyer or seller is not represented by this or any other licensee, the licensee shall verbally disclose to such buyer or seller the licensee’s facilitator, agent, subagent, or designated agent status in the transaction before any real estate services are provided. Known adverse facts about a property must also be disclosed under the Tennessee Residential Property Disclosure Act, title 66, chapter 5, part 2, but licensees shall not be obligated to discover or disclose latent defects in a property or to advise on matters outside the scope of their real estate license. (b) The disclosure of agency status pursuant o subsection (a) must be confirmed in writing with an unrepresented buyer to the preparation of an offer to purchase. The disclosure of agency status must be confirmed in writing with an unrepresented seller prior to the execution of a listing agreement or presentation of an offer to purchase, whichever comes first. Following the delivery of the written disclosure, the licensee shall obtain a signed receipt for such disclosures from the party to whom it was provided. The signed receipt shall contain a statement acknowledging what the buyer or seller, as applicable, was informed that any complaints alleging a violation or violations of § 62-13-312 must be filed within the applicable statute of limitations for the violation set out in § 62-13-313(e). The acknowledgment shall also include the address and telephone number of the commission. Tenn. Code Ann. 62-13-405(a, b) You will notice that a signed receipt is required from the party to whom it was provided if that party is unrepresented. Part (d) requires that agency disclosure be made verbally if the other side is represented by an agent. However, if the agent is a REALTOR®, he must still make these disclosures in writing even if the other side is represented, as detailed in the Code of Ethics, Standard of Practice 16-10: REALTORS®, acting a buyer or tenant representatives or brokers, shall disclose that relationship to the seller/landlord’s representative or broker at first contact and shall provide written confirmation of that disclosure to the seller/landlord’s representative or broker not later than execution of a purchase agreement or lease. And in Standard of Practice 16-12: REALTORS®, acting as representatives or brokers of sellers/landlords or as subagents of listing brokers, shall disclose that relationship to buyers/tenants as soon as practicable and shall provide written confirmation of such disclosures to buyers/tenants not later than the execution of any purchase or lease agreement. The disclaimer notice, however, is not required to be presented to the other side of a transaction. This is why the signature blocks were cut down last year; you only need your client to sign your disclaimer and the other agent is responsible for having their client sign their disclaimer. This is to protect you with your client, and vice versa. |
| Commercial Property & Real Estate Taxes | I have a client who is not able to close on a commercial property due to the legal description of that property. He has been told that Tennessee has a state law that makes payment of real estate taxes a presumption of ownership. Is this the case? If so, how does he get his deed corrected? | This is a statute related to this issue, provided below, but we do not believe it would apply to the exact facts described in your question. If the buyer has questions concerning his legal rights and obligations, she should speak to his own attorney. The related state law is 28-2-109. Presumption of ownership from payment of taxes. Any person holding any real estate or land of any kind, or any legal or equitable interest therein, who has paid, or who and those through whom such person claims have paid, the state and county taxes on the same for more then twenty (20) years continuously prior to the date when any question arises in any of the courts of this state concerning the same, and who has had or who and those through whom such person claims have had, such person’s deed, conveyance, grant or other assurance of title recorded in the register’s office of the county in which the land lies, for such period of more than twenty (20) years, shall be presumed prima facie to be the legal owner of such land. |
| Make Agent’s Compensation Part of Offer? | It is permissible for a buyer to make compensation for the buyer’s agent part of their offer to the seller? Example: In the special stipulations sections of the Purchase & Sale Agreement, “Seller will pay buyer’s agent broker 3% of the purchase price at closing ” OR “Seller will pay buyer’s agent broker 50% of the real estate commissions paid at closing.” | It is not advisable for commissions to be stated in the contract itself since the agents are not parties to the contract. It would be better to have this outlined in an agreement between the parties which are paying and receiving the commission. The closing company will look at the listing agreement to see what the seller has agreed to pay the listing broker, and then will ask for a compensation agreement to determine the split. You would be wise to have the broker enter into a compensation agreement since neither of you are parties to the contract and cannot be bound by the contract. |
| Going for Brokers | As a broker, I have an agent who received a cash offer from another agent who was the actual purchaser, without any personal interest disclosure. Is this signed agreement voidable? | Yes, because the licensee violated the law, the contract could be deemed voidable. We recommend that the seller speak to their attorney regarding their options. |
| Going for Brokers | I have an affiliate broker who is “wholesaling” property with an investor. She is writing a contract for $X and selling it for profit, which she is splitting with the investor. No part of this transaction is being run through my firm. I feel that this both illegal and a liability to my firm, and that the firm is entitled to a commission for these transactions. | This affiliate could be exempt from the Broker’s Act and having to run these transactions through the firm if she herself is buying these properties in her name. However, if an LLC or other form of partnership is purchasing the properties, these would not be exempt transactions and must run through the firm. You can institute an office policy that only allows agents in your office to handle X amount of transactions annually outside of the firm (for the times that they are buying and selling homes for themselves). It is also concerning that she is sharing the profits. This could be in violation of the Broker’s Act by paying compensation to non-licensed persons. For more context: A broker is defined in Tenn. Code Ann. § 62-13-102(4)(A) as: Any person who for a fee, commission, finders fee or any other valuable consideration, or with the intent of expectation of receiving the same from another, solicits, negotiates or attempts to solicit or negotiate the listing, sale, purchase, exchange, lease or option to buy, sell, rent or exchange for any real estate of the improvements thereon or any time-sharing interval as defined in the Tennessee Time-Share Act, compiled in title 66, chapter 32, part 1, collects rents or attempts to collect rents, auctions or offers to auction, or who advertises or holds out as engaged in any of the foregoing. (a) The provisions of this chapter do not apply to: (1) An owner of real estate with respect to property owned or leased by such person; (2) An attorney-in-fact under a duly executed and recorded power of attorney from the owner or lessor; (3) The services rendered by an attorney at law in the performance of duties a such attorney at law; (4) A person acting as receiver, trustee in bankruptcy, administrator, executor or guardian, trustee acting under a trust agreement, deed of trust or will, or while acting under a court order or instrument; (5) A resident manager for a broker or an owner, or employee of a broker, who manages an apartment building, duplex or residential complex where such person’s duties are limited to supervision, exhibition of residential units, leasing and/or collection of security deposits and rentals from such property. The resident manager or employee shall not negotiate the amounts of security deposits or rentals and shall not negotiate leases on behalf of the broker; or (6) A corporation, foreign or domestic, acting through an officer duly authorized to engage in such real estate transaction, where the transaction occurs as an incident to the management, lease, sale or other disposition of real estate owned by the corporation; however, this exemption does not apply to a person who performs an act described in § 62-13-102(4)(A) either as a vocation or for compensation, if the amount of the compensation is dependent upon, or directly related to, the value of the real estate with respect to which the act is performed. |
| Going for Brokers | We have an outside broker-to-broker referral, and the other broker has asked to give his referral fee to the buyer and use the money to pay buyer closing costs. Can we legally do that? | No, you may not. “A real estate licensee shall not give or pay cash rebates, cash gifts or cash prices in conjunction with any real estate transactions. As part of the Tennessee Real Estate Commission’s general rulemaking authority, the commission may regulate the practices of real estate licensees in regards to gifts, prizes or rebates that are not otherwise prohibited by law” – Tenn. Code Ann. Also, pursuant to Tenn. Code Assn. § 62-13-302(a): It is unlawful for any licensed broker to employ or compensate any person who is not a licensed broker or a licensed affiliate broker for any of the acts regulated by this chapter. A licensed nonresident broker may pay a commission to a licensed broker or another state if such nonresident broker does not conduct in this state any of the negotiations for which a commission is paid. |
| Can You Change Wording of TN Forms? | I have a client who wished to make changes to CF701. Is this allowed? | The client may alter Commercial Form 701 (CF701) to fit their needs. However, they should consult an attorney on making any wording changes. You will need to change the font of the document to sans serif so it will be distinguishable from a Tennessee REALTORS® form. You will also need to remove the Tennessee REALTORS® logo and copyright information at the bottom of the document. Note that by altering a Tennessee REALTORS® form, Tennessee REALTORS® will no longer accept legal responsibility from any claim arising out of the use of the form. |
| Can You Change Wording of TN Forms? | Can you alter the wording in a purchase and sale agreement? I have a client who wants to change a few words on one line of the form. | A client and their attorney can change any portion of the contract that they wish. You would need to do this in special stipulations. Reference the line numbers that are changed and place the changed language there. However, it is not recommended that you determine the revised language. This could lead to issues of practicing law without a license, and if there is an issue with the revised language, you could be held responsible. Make sure that the person changing the language understands that if there are issues with the changed language, it is their responsibility-they do so at their own risk. |
| Can You Change Wording of TN Forms? | Another REALTOR® is making changes to signed contracts by marking them out. I think they need to add amendments or write up new contracts, but I can’t find anywhere where it says that you cannot mark up a contract after it is signed. | Any change to the contract before a contract is signed should be done in the special stipulations paragraph or via an addendum or amendment. This makes the changes clearer for parties to understand and notice. If the contract has been signed by both the buyer and the seller, then it can only be changed with the written consent of both parties to the contract and should be done via an amendment. An agent should never change any of the pages of an executed contract unless approved in writing by all parties to that contract. To do otherwise will likely be viewed as fraud. |
| Advertising Number of Bedrooms for Septic | I have a seller who would like me to list his 3BR/2BA home. He informed me that the septic tank is for a 1BR. Can I list the home in the MLS as a 3BR and put in the public remarks that the septic is only approved for 1BR. | In Tennessee, an agent and seller should only advertise a home for how many bedrooms it is permitted. You may advertise the home as having 1 bedroom and 2 bonus rooms/offices/etc. Advertising the way you presented in your question may raise misleading advertisement, concealment and/or misrepresentation claims. |
| Subsurface Sewage-Disposal System Disclosure | Is the Subsurface Sewage Disposal System Permit Disclosure required to be filled out in all transactions? | The septic provisions within the Tennessee Consumer Protection Act only apply to new construction, and this form should be used when selling all new construction homes. However, this does not limit the agent’s requirements for older homes. Although they are not required to pull the permits on every home under this particular law, they may still need to pull the permit on older construction to comply with some broad provisions of the Broker’s Act, such as the requirement to exercise reasonable skill and care to all parties to a transaction. Brokers can require that all septic permits be pulled as part of office policy. Agents should speak to their broker to determine when septic permits should be pulled. |
| New Septic-Disclosure Law (April 9) | In light of the new septic disclosure law effective April 9, 2019, requiring sellers to disclose to buyers the potential future obligation to connect to public sewer if a septic tank permit was granted during a sewer moratorium, should I have my seller complete a new disclosure form for any transaction that hadn’t closed as of that date? | Yes, we recommend asking sellers to complete a new disclosure, disclaimer or exemption form. Although a sewer moratorium will not be applicable in most transactions, it is best to be safe. |
| Enter Clients in a Drawing for a Large Gift? | Can an agent in my office offer to put people in a drawing for a big gift, like travel or TV, for sending them client referrals? | TREC’s Gifts and Prizes rule will allow some types of incentives. However, it must be an incentive for that person to do with business with you, not their friend or family member. Therefore, you cannot give a gift to a non-licensee in conjunction with these referrals. TREC Rule 1260-2-.33 states: (1) A licensee may offer a gift, prize, or other valuable consideration as an inducement to the purchase, listing, or lease of real estate only if the offer is made: (a) Under the sponsorship and with the approval of the firm with whom the licensee is affiliated; and (b) In writing, signed by the licensee, with disclosure of all pertinent details, including but not limited to: accurate specifications of the gift, prize, or other valuable consideration offered; fair market value; the time and place of delivery; and any requirements which must be satisfied by the prospective purchaser or lessor Also please be aware that under state law, these gifts may not take the form of cash or converted into cash in any way. In other words, they cannot trade it in for cash or get cash back. Tenn. Code Ann. § 62-13-302(b) states: “A real estate licensee shall not give or pay cash rebates, cash gifts of cash prizes in conjunction with any real estate transactions. As part of the Tennessee Real Estate Commission’s general rulemaking authority the commission may regulate the practice of real estate licensee in regard to gifts, prizes or rebates that not otherwise prohibited by law.” |
| Give Part of Commission Toward Closing Costs? | Can an agent give a portion of his/her commission towards a buyer’s closing costs in a real estate transaction? | No. A licensee could offer to discount the commission-not credit towards closing costs, but just a straight reduction. Similar to the question above, this state law applies: “A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. As part of the Tennessee Real Estate Commission’s general rulemaking authority the commission may regulate the practices of real estate licensees in regard to gifts, prizes or rebates that are not other prohibited by law.” Tenn. Code Ann. § 62-13-302(b) Furthermore, only licensed real estate agents can receive referral fees. |
| Law/Rules on Confirmation of Agency (part 1) | The requirements for agency disclosure are different under the Broker’s Act and under the REALTOR® Code of Ethics. Under the Broker’s Act, disclosures are not required in writing unless one of the parties is unrepresented; and confirmation of agency is required to be done orally, then in writing if the other side is not represented by an agent: (a) If a licensee personally assists a prospective buyer or seller in the purchase or sale of a property, and such buyer or seller is not represented by this or any other licensee, the licensee shall verbally disclose to such buyer or seller the licensee’s facilitator, agent, subagent or designated agent status in the transaction before any real estate services are provided. Known adverse facts about a property must also be disclosed under the Tennessee Residential Property Disclosure Act, title 66, chapter 5, part 2, but licensees shall not be obligated to discover or disclose latent defects in a property or to advise on matters outside the scope of their real estate license. (b) The disclosure of agency status pursuant to subsection (a) must be confirmed in writing with an unrepresented buyer to the preparation of an offer to purchase. The disclosure of agency status must be confirmed in writing with an unrepresented seller prior to execution of a listing agreement or presentation of an offer to purchase, whichever comes first. Following delivery of the written disclosure, the licensee shall obtain a signed receipt shall contain a statement acknowledging what the buyer or seller, as applicable, was informed that any complaints alleging a violation or violations of § 62-13-312 must be filed within the applicable statute of limitations for the violation set out in § 62-13-313(e). The acknowledgment shall also include the address and telephone number of the commission. Tenn. Code Ann. § 62-13-405(a, b). You must have signed receipt from the party to whom it was provided if that party is unrepresented. Part (d) requires that agency disclosure be made verbally if the other side is represented by an agent. However, if the agent is a REALTOR®, he must still make these disclosures in writing even if the other side is represented. Standard of Practice 16-10 says: Realtors®, acting as buyer or tenant representatives or brokers, shall disclose that relationship to the seller/landlord’s representative or broker at first contact and shall provide written confirmation of that disclosure to the seller/landlord’s representative or broker not later than execution of a purchase agreement or lease. 16-12 adds: Realtors®, acting as representatives or brokers of sellers/landlords or as subagents of listing brokers, shall disclose that relationship to buyer/tenants as soon as practicable and shall provide written confirmation of such disclosure to buyers/tenants not later than the execution of any purchase or lease agreement. |
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| Law/Rules on Confirmation of Agency (part 2) | The requirements for agency disclosure are different under the Broker’s Act and under the REALTOR® Code of Ethics. | |
| Sharing Confirmation of Agency? | I was told by a broker that sharing the confirmation of agency status form is not required, and that we shouldn’t do it because the information is private and confidential. I thought we were always supposed to have an agreement and disclosure with our client, and to share the disclosure. Right? | Yes, the confirmation of agency status form is required to be shared with the other party, under both the Broker’s Act and the REALTOR® Code of Ethics. |
| Commercial Transactions? | Do I use the confirmation of agency status from in commercial transactions? | Agency disclosure is NOT required for commercial transactions under Tennessee law. Tenn. Code Ann. § 62-13-405 contains the requirements that agency be disclosed: (e) Real estate transactions involving the transfer or lease of commercial properties, the transfer of property by public auction, the transfer of residential properties of more than four (4) units, or the lease or rental of residential properties shall not be subject to the disclosure requirements of § 62-13-403, § 62-13-404 and this section. However, as a REALTOR®, you are subject to the Code of Ethics, which requires written confirmation of agency status, not later than the execution of any purchase or lease agreement. This information is contained in the Commerical Purchase and Sale Agreement and Commercial Lease Agreement to satisfy this requirement. Therefore, a confirmation of agency status form is not required in commercial transactions. |
| No Buyer’s Rep Agreement? | If my buyer refuses to sign the buyer’s rep agreement, can’t we just use confirmation of agency to show that we represent them? | The confirmation of agency status form is a DISCLOSURE. It does not act as an AGREEMENT. The confirmation of agency status form is intended to disclose your agency status. It can also be used if your agency status changes. The form is not a substitute for a buyer’s rep agreement. It is strongly recommended to use one of the four forms available from Tennessee REALTORS® for buyer’s rep agreements. It is not Tennessee law that a buyer must fill out a buyer’s rep agreement; however, such agreements protect the buyer and the firm. By having one in place, the buyer is owed a higher level of service. An agent representing a buyer owes the duties contained in Tenn. Code Ann. § 62-14-404. Such representation is indicated by an agency agreement. The firm is protected in the event that a buyer decides to “cut out the agent” at the last minute. Buyer’s rep agreements generally require that the firm be paid no matter who assists the buyer in finding the home, and even if they have no assistance. It also requires that if there is no offer of compensation, or less than what is agreed to in the buyer’s rep agreement, the buyer must pay the difference. |
| Limited Services Listing? | Is Confirmation of Agency required in a limited services listing? | Yes, a limited services listing still requires a listing agreement and an agency relationship with the seller, it is just a limited one. A Confirmation of Agency Status form should be signed by both the agent and the client to disclose the agency relationship. |
| Confirmation vs. Working with a Real Estate Pro.? | In regard to the Working with a Real Estate Professional and the Confirmation of Agency Status, how are these forms used? Do we use these ONLY if the buyer is unrepresented? | RF301 – Working with a Real Estate Professional, is designed to be used when working with someone who is unrepresented. It is not required by law, but is helpful in such situations and will give you better protection. When working with unrepresented parties, you will also need to complete RF302 – Confirmation of Agency Status. If both parties are represented, RF302 is all that is needed and this document is required by law and the REALTOR® Code of Ethics. |
| Firm Closing: Listing Transfer, Security Deposit? | If an agent has a listing under their brokerage but the brokerage goes out of business, what happens to the listing? Can it be transferred to a new brokerage? Does it automatically terminate? Can we just do a new listing with the owner? | The listing can be transferred to a new brokerage. The principal broker and the owner of the firm can then decide whether the agents can take their listings and/or current contracts with them when they leave. If yes, then the new firm will need to execute amendments to the listings and/or contracts to indicate the change in firm. If your firm is holding earnest money, the contracts will need to be amended to reflect the change in the holder. At that point, you would play the earnest money to the new firm. The same would hold true for security deposits. Confirmation of agency status forms would also need to be completed. if you do not allow the agents to take their listings/contracts, then you will need to keep the firm open long enough for all transactions to close. You cannot perform any real estate activity once the firm closes. Then, any remaining listing agreements would have to be terminated. If the firm closes, the listing agreement will be void, and the seller of the property is free to sign a new listing agreement with a new company of their choosing. |
| Transferring Listings Within a Firm? | My office is switching to a new name and new principal broker. How do I go about transferring the listings from me back to the agents, since during the switch the listing came to me? | First, you will need to document that you are transferring the listing. Your MLS may have a form for this; however, Tennessee REATLORS® does not. Second, the new company will need to do an amendment to the listing agreement, and any contract documenting the change in listing company or agent will need to be signed, along with a new confirmation of agency status. You can use the Amendment to the Listing Agreement form (RF 601). Another option is for the old company to release the listing (using form RF 151) and the new company to execute a new listing agreement with the new company. If you have any contracts which are being transferred, then the contracts will have to be amended to convey the new listing company. If the old firm was holding earnest money for those contracts, the contracts will also have to be amended to reflect the transfer of the earnest money. |
| Poaching a Client from a Brokerage? | I was referred to a client by a friend. This individual had an agency relationship with another brokerage, but notified them in writing that they wanted to terminate said agency relationship. Can I represent this client legally since they have done this? | As set forth in Tenn. Code Ann. §62-13-312(b)(10), an agent can be punished for “Inducing any party to a contract, sale or lease to break such contract for the purpose of substitution in lieu thereof a new contract, where such substitution is malicious or is motivated by the personal gain of the licensee.” Further, Tenn. Code Ann. §62-13-604 states: “It is unlawful for a real estate licensee…to counsel a client of another real estate licensee on how to terminate or amend an existing agency contract.” Article 16 of the NAR Code of Ethics states, “Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation agreements that other Realtors® have with clients.” This does not prevent a buyer or seller from deciding to switch firms. It depends on your involvement in getting them to switch and whether under that fact pattern, you could be found for a legal or ethical violation. |
| Flat-Fee Commission vs. Percentage? | Our firm is thinking about listing homes for a flat commission fee instead of a percentage. What rules/laws do we need to follow, and what forms do we need to use? Or is this a question for my local MLS? | The hotline recommends that the agents follows guidelines from NAR: The commission rate be baed on the cost of the services the agent provides, the value of these services to its clients, and competitive market conditions. The commission not be determined by agreement with, or recommendations or suggestions from, any person not a party to a listing agreement with the firm. The agent not participate in any discussion with any person affiliated with, or employed by, any other real estate firm concerning the commission rates charged by the agent’s firm, or any other real estate firm in the community. When soliciting a listing, no agent can make any reference to a “prevailing” commission is the community, the “going rate”, or any other word or phrase which may suggest that commission rate uniform or standard in the marketing areas. The Tennessee REALTORS® listing agreement allows you to enter a flat fee for the compensation to be earned. You may need to speak with your local MLS about how best to enter a flat dee as a cooperating compensation rate. |
| Can Agent Accept “Showing” or “Consulting” Fee? | A buyer recently gave one of my agents $1,000 as a “showing or consulting fee” as they ended up not purchasing a home but wanted to compensate my agent for their time. I asked the buyer to put in writing, which they did. Can the agent accept this money from the client (with his written permission)? Can an agent be paid a “showing/consulting fee” for their services? | The hotline is unaware of anything that would prohibit this, but it would have to be a fee for services rendered and must be a reasonable amount of these services. You would also need to get something in writing from the buyer stating that the money is to be used as a showing or consulting fee, etc. Also, you need to determine whether a buyer’s representation agreement is in place. If there is, it would likely need to be amended to a reflect this payment. Finally, under the Broker’s Act, all payments for services which require a real estate license must go through the firm. |
| Write Commission into Purchase & Sale Agreement? | With regard to cooperating compensation when I am representing a buyer, what is my recourse as far as writing my compensation into the contract? Can I do this, and if so, what is the best way for same? | It is not recommended that commissions be stated in the contract itself since the agents are not parties to the contract. It is better to have this outlined in a compensation agreement between the parties who are paying and receiving the commission. The closing company will look at the listing agreement to see what the seller has agreed to pay the listing broker, and then will ask for a compensation agreement to determine the split. We encourage you to have the broker enter into a compensation agreement. Since neither of you are parties to the contract, you cannot be bound by the contract. |
| ‘For Sale’ Sign on Inactive Property | I submitted an offer on behalf of a buyer to a listing agent. We cannot get the listing agent to respond with a signed rejection of this offer. How can we ensure that the seller considered it? | Pursuant to TREC Rule 1260-2-.08: “A broker or affiliate broker promptly shall tender every written offer to purchase or sell obtained on a property until a contract is signed by all parties. Upon obtaining a proper acceptance of an offer to purchase, or any counteroffer, a broker or affiliate broker promptly shall deliver true executed copies of same, signed by the seller, to both the purchaser and seller. Broker and affiliate brokers shall make certain that all of the terms and conditions of the real estate transaction are included in the contract to purchase. In the event an offer is rejected, the broker or affiliate broker shall request the seller to note the rejection of the offer and return the same o the offeror o the offeror’s agent.” Obviously, an agent cannot force the client/customer to note a rejection, but they need to ask that this be done. Also, a new NAR Code of Ethics provision took effect this year that REALTOR® members should keep in mind when dealing with submitted offers (amended section in bold): When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counteroffers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. Upon the written request of a cooperating broker who submits an offer to the listing broker, the listing broker shall provide a written affirmation to the cooperating broker stating that the offer has been submitted to the seller/landlord, or a written notification that the seller/landlord has waived the obligation to have the offer presented. REALTORS® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease. |
| Advertise Non-Real Estate Business on Cards? | I am advertising on a local diner’s menu using my real estate business card, and also my business card for the construction company I own. Is it possible to word on the construction advertising side that we purchase investment properties/land/rental? If so, what is the legal way to word that? | It is not advisable to do this. Purchasing investment properties on behalf of another individual with the expectation of receiving a commission is an activity which requires a real estate license. Any activity requiring the license needs to go through a licensed real estate firm (not through construction business, in this case). TREC Rules 12260-2-.13(3)(a) states, “No licensee shall advertise to sell, purchase, exchange, rent, or lease property in a manner indicating that the licensee is not engaged in the real estate business.” Business cards are exempt from TREC’s Advertising Rule and state law. However, including real estate information on the construction company’s card could make the latter appear to be in the real estate business, and that would be a violation of the Broker’s Act. |
| Advertising on Directional Signs: Team Name? | On directional signs, can a team name be displayed as opposed to an individual agent (“John Smith Team” vs. “John Smith”) as long as other guidelines are followed on font size, etc.? | If the directional sign merely has an arrow and wording like “Open House”, then the firm name and telephone are not required. However, if it advertises the agent or specific property, then the TREC Advertising Rule likely comes into play. As states in Rule 1260-02-.12: (b) All Advertising shall be under the direct supervision of the principal broker and shall list the firm name and firm telephone number as listed on file with the Commission. The firm name must appear in the letters the same size or larger than those spelling out the same of a licensee or the name of any team, group or similar entity. |
| Agreement to Show: Impact on Brokers/Agents? | I am a Principal Broker trying to understand the RF161-Agreement to Show Property. Before a property is listed, an agent could create an agreement to show with a seller to bring a stated buyer a property, and the agent get paid a stated commission if they close. RF 161 states that the seller is obligated to pay the commission to the agent if the buyer purchases from the seller, with or without the help of that agent during the authorization period covered. When a seller enters a listing agreement with another agent, would that nullify the seller’s obligations under the Agreement to Show Property? | The Agreement to Show Property form is not void if the stated seller enters into a listing agreement with another company. If the buyer you introduced to the property purchases the property, then the seller would owe you a commission. If a seller enters into a listing agreement, they would need to make the listing company aware of the Agreement to Show Property Form, and the buyer named in that agreement should be excluded from the listing agreement. |
| Limited Services Listing: Contact Seller Directly? | Several companies in our area enter listings to the MLS and indicate on the Confirmation of Agency Status (RF302) that the seller is unrepresented. The buyer’s agent is directed to the contact the seller for questions, offer submission, contract negotiations, etc. How does Tennessee REALTORS® define agency roles in such situations? Are we crossing the agency boundary if we pursue these customers as our own? | This called a Limited Services listing. The pertinent state statute is Tenn. Code Ann. §62-13-404, which states: Any licensee who acts as an agent in a transaction regulated by the Tennessee Real Estate Broker License Act of 1973 owes to such licensee’s client in that transaction the following duties, to: (1) Obey all lawful instructions of the client when such instructions are within the scope of the agency agreement between licensee and licensee’s client; (2) Be loyal to the interests of the client. A licensee must place the interests of the client before all other negotiation of a transactions in other activities, except where such loyalty duty would violate licensee’s duties to a customer under §62-13-402 or a licensee’s duties to another client in a dual agency; and (3)(A) Unless the following duties are specifically and individually waived, in writing by a client, a licensee shall assist the client by: (i) Scheduling all property showing on behalf of the client; (ii) Receiving all offers and counter offers and forwarding them promptly to the client; (iv) Advising the client as to whatever forms, procedures and steps are needed after execution of the purchase agreement for a successful closing of the transaction. (B) Upon waiver of any of the duties in subdivision (3)(A), a consumer shall be advised in writing by the consumer’s agent that the consumer may not expect or seek assistance from any other licensee’s in the transaction for the performance of the duties in subdivision (3)(A). In addition, NAR Code of Ethics Standard of Practice 16-13 says, “All dealings concerning property exclusively listed shall be carried on the client’s representative or broker, and not with the client, except with the consent of the client’s representative of broker or except where such dealings are initiated by the client.” You may contact the seller directly with the consent of the broker. Typically, these types of listings will include a sentence along the lines of “contact seller directly at…” That would be enough to satisfy the requirement. |
| Forms FAQs: Land/Lot Disclosure and Exemption | Is the land/lot property condition disclosure form no longer needed? Is there replacement form? | That form was deleted because disclosure because disclosure reports are not required by law for vacant land. There is not replacement form. However, the Tennessee REALTORS® Residential Forms Committee added all items listed on the disclosure under Section 8 (“Buyer’s additional due diligence options”) of RF404 (Lot/Land Purchase and Sale Agreement). |
| Forms FAQs: Land/Lot Disclosure and Exemption | With regard to RF205 (Tennessee Residential Property Disclosure For Exempt Properties and Property Residential Disclaimers), does this form replace the property disclosure exemption form or do we use it in addition to it? | No, RF203 (Tennessee Residential Property Condition Exemption Notification) has everything an exempt seller need to complete on it. RF 205 may be used if the seller does not wish to fill out RF203 and state why they are exempt (which is not required by law). |
| Should Buyer’s Agent See the Inspection Report? | Should agents working with buyers receive a copy of the home inspection? In June 2018, you state that the home inspection should not go to the seller’s agent due to ownership issues and possible copyright violations. From that, I have inferred that agents working with buyers could, in fact, see the home inspection report. We have had instructor(s) put such a fear into agents that they don’t want to have anything at all to do with the report. Should the buyer’s agents, whether operating in agency or not, see the report in order to bets advise their customers/clients how to proceed? | Several issues come into play when talking about a buyer’s agent getting a copy of the home-inspection report. — The inspection report stems out of an agreement between the buyer and home inspector. The home inspector prepares it for the buyer. The buyer may breach their agreement with the home inspector if they share it with other parties, such as their real estate agent. — If an agent is asked to review an inspection report and interpret it for the buyer, this brings liability to the agent, and the agent would be acting outside of their realm as a real estate agent. — Once an agent views an inspection report, they will then have actual knowledge about adverse facts concerning the property that will need to be disclosed to potential buyers, should this buyer buy the property and then use the same agent to see the property later. The agent will likely have a hard time remembering what appeared on the report but will nonetheless be expected to make all appropriate disclosures. |
| Inspection Report: Additional Information | As your state association, Tennessee REALTORS® is committed to helping you serve your clients with the highest standards of professionalism, ethics, and customer service throughout the homebuying and selling process. The hotline Q/A in The Digest, our weekly member e-newsletter, on Monday August 26, 2019 addressed one critical part of that process. It’s important to note that the article did not state that the law explicitly forbids a licensee from viewing a home-inspection report. (It does not.) However, our legal team answered the member’s question in light of our commitment to make REALTORS® aware of any risks and potential liability involved with all aspects of the profession. The three main issues addressed in the answer-permission from the home inspector to share the report, interpreting a report for the buyer, and the disclosure of adverse facts-are areas in which concerns have arisen leading to multimillion-dollar lawsuits against brokerages and licensees. In a recent case, the Tennessee Real Estate Commission (TREC) originally found that a licensee has actual knowledge of adverse facts which he failed to disclose to parties in a transaction, since the home-inspection report had been emailed to him. It turned out that the agent had not opened or read the report, but if he had, he would have been liable for this adverse facts. We appreciate and respect the robust dialogue that this topic generated. It reminds us that Tennessee is blessed with sharp, engaged members who are dedicated to servicing clients with unparalleled excellence. |
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| Managing Short and Long-Term Rentals? | Is there any problem with an agent managing short-and/or long-term rentals while holding a real estate license? | If the leases are for a period of 14 days or fewer, then the individual may have to hold a vacation lodging service license. This distinction is discussed in Tenn. Code Ann. §62-13-104, which includes: (c) “Vacationing losing service” means any person that engages in the business of providing services of management, marketing, booking and rental of residential units owned by others as sleeping accommodations furnished for pay to transients or travelers staying no more than fourteen (14) days. If engaging in long-term rentals, your regular real estate license is sufficient. Not: It is advisable for affiliate brokers and principal brokers entering into property-management realm to attend continuing education classes centered around property management. You might also speak with your attorney and Errors & Omissions (E&O) provider regarding any liability you may be taking on. Your current E&O coverage will likely not cover property management, and you will need to purchase an additional policy. |
| Deposits in Property Management Escrow? | Please calcify whether agents who work for me are required to deposit monies received during their “Property Management” duties into my property Management Escrow (for security deposits) and Property Management standard checking accounts (for rent payments). | Here are the pertinent TREC rules concerning escrow accounts. Currently, TREC rule 1260-02-.09 states: (2) Each principal broker shall maintain a separate escrow or trustee account for the purpose of holding any trust money which may be received in his fiduciary capacity. (12) In addition to the escrow or trustee account referenced in paragraph (2), all trust money received and held which relates to the lease of property must be held in one (1) or more separate escrow or trustee accounts. Previously, TREC rule 1260-2-.09(1) states: (1) Each broker shall maintain a separate escrow account for the purpose of holding any funds which may be received in his fiduciary capacity as deposits, earnest money, or the like. Rental deposits must be held in a separate account. That may be where any confusion is coming from. Based on the reading of the current rule, you do not need a separate account for deposits, and a separate one for rent money. You just need to separate property management escrow account from your real estate escrow account. |
| What Happened to the Bill of Sale? | Why is the Bill of Sale form no longer available? | The Bill of Sale Agreement was originally intended to be used for incidental personal property items which would be sold but were not actually part of the real estate transaction. For example, a tractor, pool equipment, pool table, lawn mower, washer and dryer, refrigerator, etc. These were often items the seller would no longer need, and the buyer would have to purchase. The items could be sold between the parties through this side agreement. However, things have changed in real estate since this form was introduced. Given the increased regulation of financial institutions, these types of agreements can cause major problems with lenders in a transaction. Further, if something goes awry and the items do no remain with the property, it can create serious issues for the real estate agents involved. Even worse, the items generally are not items covered under the E&O insurance, which could lead to the agent being personally liable for the items in the event that a judgement was entered against them. Based of those factors, the Tennessee REALTORS® Residential Forms Committee decided to remove this form from its library. If you encounter a situation in which the parties want to see personal property in addition to the real estate, you should advise the buyer and seller that it would have to be handled separately from the real estate transaction, You should further advise them that you cannot help in the sale of personal property. They would need to enter a separate agreement to be handled before or after closing for the purchase and sale of personal property. If they need assistance drawing up such an agreement, you can suggest that they contact an attorney or the closing attorney in the transaction to negotiate the terms of the separate transaction of personal property. |
| Offer Submitted on Outdated Form? | An agent sent me an offer on a Tennessee REALTORS® Purchase and Sale Agreement from 2016. How should I proceed? | You should ask the agent to represent the offer on a current version of the agreement. One should always use the most current version. Part of the licensing agreement you sign (or click) indicates that agree to use the most current version of forms. This is to ensure that you are up to date with rile, statute and/or law changes. Failure to use the most current version could limit the amount of protection you receive from Tennessee REALTORS® (if any) for the boilerplate language of the forms. It also limited your defense in a lawsuit if you are using outdated forms. |
| LLCs and Real Estate in Tennessee | Upshot: The TN Attorney General weighs on whether an LLC can buy or sell property in Tennessee without using a real estate licensee. The Tennessee Attorney General (AG) recently released an opinion re: limited liability companies (LLCs) and how they are interpreted under the Broker’s Act, in response to a question from the then-acting Commissioner of Commerce and Insurance. This follows a previous AG opinion from 2014 which answered that LLCs do not fall under the exemption from “corporations” under the Broker’s Act because for purposes of the act, an LLC is not a corporation. The new opinion issued Sept. 16, 2019, answered whether an LLC can meet the definition of “owner” as found in an exemption to the Broker’s Act. The opinion states that the “owner exemption” in Tenn. Code Ann. §62-13-204(a)(1)(A) does apply to LLC but does not apply to any of the LLC’s agents, officers, or employees. Because of the plain meaning of the term “owner” and “person”, the AG is essentially saying an LLC itself (i.e. the actual entity) would qualify as an owner of the real estate as a person under the legal meaning of that term. However, an LLC cannot act for itself. Rather, it relies on its agents, officers, or employees to act in the LLC’s best interest. Since those individuals are not the actual owners of the real estate-because the LLC is the actual owner-then the individuals do not qualify for the exemption under the “owner exemption” in Tenn. Code Ann. §62-13-104(a)(1)(A). The AG clarifies this in Opinion No. 5 by stating that a person who owns all or part of an LLC does not have any estate or interest in the property owned by the LLC, because the property is the property of the LLC itself and not its individual members. In sum, this opinion does not change the log-held provision that an LLC need to use a real estate licensee to sell or purchase property in Tennessee. |
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| When is Contract Binding and Enforceable? | If both the buyer and seller have signed a contract but the contract has not been bound by the last receiving agent, is that a valid contract and enforceable? | The Purchase and Sales Agreement becomes a binding agreement/binding contract when one party submits an offer or counteroffer, the other party accepts, and then the original offering party receives notice of the other party’s acceptance. Once that happens, you have a contract. The binding agreement date serves only to start the clock for all deadlines. Legally, the purchase and sale agreement would constitute a contract even if the binding agreement date has not been filled in. |
| Commission for Buyer’s Agent Outside of that MLS? | I am representing a buyer. When we made the offer, the listing said that they were offering a 2.4% commission to the buyer’s agent. After we got everything under contract and executed, I sent a compensation agreement, but the agent refuses to sign it for anything more than 2%. She said if a buyer comes outside of their MLS, they only pay 2%. That is nowhere advertised or was ever told to me while we were in contract negotiations. What are my rights? | If you are not a member of the MLS in which the property was listed, it is unlikely that you are entitled to any cooperating commission at all. The cooperating compensation is offered to members of that MLS. That listing firm can decide to offer compensation, but is does not have to do so, and it does not have to be in the same amount as listed in the MLS. The listing agreement says compensation will be paid to any agent who is a members participant of any MLS(es) in which property is listed. |
| Commission Payment & Credit to Closing Costs? | Can a REALTOR® take a commission paid by the seller and agree to pay a credit toward the buyer’s closing costs on that transaction? | Guidelines set by the Real Estate Settlement Procedures Act (RESPA) include: There is an agreement spelling out what the agent is paying, signed by all parties. An interested party’s contribution cannot exceed 6% of sales price when the loan to value is 75.01-80% (this requirement is easily met). The broker is the agent approves the commission credit. The issue here is that the Tennessee Real Estate Commission (TREC) has determined that agents are not permitted to pay closing costs on behalf of their clients. They can, however, agree to reduce their commission. It can be done the following way: Seller agrees to pay a reduced amount to agent as commission, and the Seller agrees to pay an increased amount to buyer’s closing costs. Make sure this is the actual case, not that money is changing hands from agent to buyer. That would open up TREC violations as well as mortgage-fraud issues for misrepresentation on the closing disclosure. |
| Acceptable Phrases on Advertising Sign? | I would like to make a small, 24″ x 18″ sign with the firm logo prominent in the middle, and my name and phone number on the bottom (as required). At the top of the sign would be a phrase like: “What’s your house worth?”, “Buying or selling?”, or “Want a new home?” Are those phrases permissible to include? | Of these phrases, the only one that raises concerns in ‘”What’s your house worth?” because “value” is determined by appraisers. Therefore, that statement could be deemed to violate the Appraiser’s Act, which includes: “This chapter does not apply to a real estate broker or salesperson licensed by the state who, in ordinary course of business, gives an opinion to a potential seller or third party as to the recommended listing price of real estate or an opinion to a potential purchaser to third party as to the recommended purchase price of real estate. This opinion as to the listing price or the purchase price shall not be referred to as an appraisal and no opinion shall be rendered as to the value of the real estate or real property.” Tenn. Code Ann. §62-39-104(a). It is very important that you are not giving an opinion as to the value of a property. The other phrases appear to be acceptable. Be sure to follow TREC’s Advertising Rule (1260-02.12) for requirements on signage. |
| Changes Based on Property Condition Exemption? | How does a seller indicate changes to a property when a property condition exemption is used? My seller has agreed to repairs, and RF 202 does not seem to address the correct form. I have used this form for the changes, but it does not seem appropriate. | Tenn. Code Ann. §66-5-205 states: “Liability for changed circumstances. – If information disclosed in accordance with this part is subsequently rendered or discovered to be inaccurate as a result of any act, occurrence, information received, circumstances or agreement subsequent to the delivery of the required disclosures, the inaccuracy resulting therefrom does not constitute a violation of this part; provided, however, that at or before closing, the owner shall be required to disclose any material change in the physical change in the physical condition of the property or certify to the purchaser at closing that the condition of the property is substantially the same as it was when the disclosure form was provided. If, at the time the disclosures are required to be made, an item of information required to be disclosed is unknown or not available to the owner, the owner may state that the information is unknown or may use an approximation of the information; provided, that the approximation is clearly identified as such, is reasonable, is based on the actual knowledge of the owner and it’s not used for the purpose of circumventing or evading this part.” As you can see, the statute requires an update if the seller has previously been required to make the disclosures and that information has changed or is discovered to be inaccurate. The seller is also required to update the disclosure prior to closing, to disclose changes to to state that nothing has changed. However, if there is not disclosure required because of an exemption, then there would be not updated required. |
| Principal Broker for Two Firms in Same Location? | Presently I am the Principal Broker for [Agency A] and [Agency B] under the same roof. I sold [Agency A] last year and agreed to be the Principal Broker until [Agent X] got his Principal Broker’s license at the end of this year. Will I be able to be the Principal Broker for [Agency b] under the same roof? If so, then can either of us manage a second real estate company under the same roof? | Pursuant to TCA §62-13-309(g), a principal broker may act as a principal broker for two firms as long as both firms are in the same location. “The same location” means that both firms are located at and use the same physical address. So yes, you may remain principal broker for the two firms as long as they are operated at the same location. Also yes, you or the other principal broker could manage a second firm in that same location. |
| How to Handle an Earnest-Money Dispute? | I client recently had a contract fall through. We had though the buyer and seller would split the earnest money; however, the seller claimed the entire amount. What should we do to help resolve this dispute? | In earnest-money disputes, there are several options rooted in the Broker’s Act and Tennessee Real Estate Commission (TREC) rules that you could explore to help your clients resolve the issue. |
| Advertising to “Farmed” Area / Exclusive Agency? | According to TCA 62-13-312(b)(10), NAR Code of Ethics Article 16, and possibly others, if I maid marketing material by the USPS to a “farmed” area, group zip code, mail route, or similar planned marketing targets, to advertise my real estate services, and such material happens to be received by a buyer or seller who has an exclusive agency agreement with another firm, I am breaking a code of conduct and/or rule. Is this correct? TCA 62-13-312(b)(10) includes malicious or personal gain as a licensee, but not maliciously. Is there a difference between “personal gain” and “business gain”? How does radio or internet advertising comply with this rule when both may be received by someone with an exclusive agency agreement in place. | As long as this part of a mass mailing and the agents are not specifically targeting individuals who they know are under an exclusive agency agreement, then they are not in violation of the law or the Code of Ethics. The NAR Code of Ethics and Arbitration Manual addresses these issues. According to Standard of Practice 16-2: Article 16 does not preclude REALTORS® from making general announcements to prospects describing their services and the terms of their availability even though some recipients may have entered into agency agreements or other exclusive relationships with another REALTOR®. A general telephone canvas, general mailing or distribution addressed to all prospects in a given geographical area or in a given profession, business, club, or organization, or other classification or group is deemed “general” for purposes of this standard (Amended 1/04) Article 16 intended to recognize as unethical two basic types of solicitations: First, telephone or personal solicitations of property owners who have been identified by a real estate sign, multiple listing compilation, or other information service as having exclusivity listed their property with another REALTOR®; and second, mail or other forms of written solicitations of prospects who properties are exclusively listed with another REALTOR® when such solicitations are not part of a general mailing, but are not directed specifically to property owners identified through compilations of current listings, For Sale or For Rent signs, or other sources of information required by Article 3 and Multiple Listing Service rules to be made available to other REALTORS® under offers of subagency or cooperation. (Amended 1/04) |
| Individual Tax Benefits though an S Corp.? | My accountant informed me that I could have tax benefits if I incorporate as an S Corp. What are the rules and regulations with regard to REALTORS® doing this? | An individual licensee who had “incorporated” himself or herself cannot be paid commission through the company. The only time that a company can hold a license id if it is a firm license. A company cannot be issues an individual license. An agent can only be paid in the name of their license-which would be under your name. |
| Can Broker Pay Former Agent? | What is the responsibility of a broker on releasing commission checks from closing after an agent leaves the firm, when the contract was pending at the time of the agents departure? | An agent who has left the firm can be paid directly as long as the contract was entered into while he or she was affiliated with original firm. The Tennessee Real Estate Commission enacted a rule covering these situations. (See TREC rule 1260-2-.39) TREC has determined that a commission is earned by a licensee when the contract to purchase (or lease) is signed by all parties. Therefore, if an agent is affiliated with a company at the time the contract is signed, then the broker can pay that individual after closing, even if that agent is no longer affiliated with his/her company. The broker does not have to pay that individual. |
| Can Licensee’s Company Receive Commission? | We have an agent who wants their commission check written to their company (a sole proprietorship). Is this acceptable? | No. An agent can only be paid by their broker, and a broker can only pay a licensed broker or licensed affiliate broker. An agent can only be paid in the name of their license. Therefore, an individual licensee who has “incorporated” himself or established a sole proprietorship cannot be paid a commission through the company. The individual holds the real estate license, not the company. The only time that company can hold a license is if it is a firm license. |
