|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
(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.