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.

TopicQuestionAnswer
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/FriendWith 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 CompanyCan 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 AttorneyI 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 FactsIf 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 praying 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 ReminderWhen 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 ClausesAre "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 ClausesIf 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."

Leasing-Agreement Form?

Q: I am looking for a residential listing agreement to exclusively list a property for lease. Can you help?

A: 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?

Q: Which form can I use to manage an owner’s property?

A: 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)

Q: In regard to the new Wire Fraud Warning form, should I use it in every transaction?

A: 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

Q: Is a contract “bound” if the binding agreement date gas not been filled in?

A: 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?

Q: I am doing a listing agreement for vacant land and noticed RF206 (property condition) has been deleted. Which form replaces it?

A: 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?

Q: 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?

A: 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

Q: 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?

A: 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

Q: 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?

A: 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:

  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.

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?

Q: 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.

A: 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?

Q: Can we store our records electronically?

A: 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?

Q: How long are we required to keep our files on transactions?

A: 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?

Q: Does an applicant have to live here for 45 days in order to get a Real Estate License?

A: 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?

Q: 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?

A: 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?

Q: 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?

A: 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?

Q: Can a seller require a buyer to submit a pre-qualification letter before the Seller will review the offer?

A: 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

Q: Can a seller require that a pre-qualification letter be from a specific lender?

A: 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?

Q: What may an unlicensed employee, assistant, or secretary do?

A: 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?

Q: What is an unlicensed employee, assistant, or secretary NOT permitted to do?

A: 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

Q: Does a sitter/hostess for model homes need to be a licensed REALTOR®?

A: 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:

  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.

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

Q: Where can I locate reports of discipline taken against real estate licensees, such as ethics, rules and law violations? Are they publicly available?

A: 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?

Q: When two agents are co-listing a property, do both the primary agent and the co-list agent have to sign contracts?

A: 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.?

Q: 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: 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?

Q: 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?

A: 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?

Q: 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?

A: 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

Q: 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?

A: 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?

Q: 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.”

A: 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

Q: 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?

A: 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.

Q: 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.

A: 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.

Q: 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?

A: No, you may no.

“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?

Q: I have a client who wished to make changes to CF701. Is this allowed?

A: 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.

Q: 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: 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.

Q: 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.

A: 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

Question: 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.

Answer: 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

Question: Is the Subsurface Sewage Disposal System Permit Disclosure required to be filled out in all transactions?

Answer: 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)

Question:  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?

Answer: 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?

Question: 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?

Answer: 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:

  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

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?

Question: Can an agent give a portion of his/her commission towards a buyer’s closing costs in a real estate transaction?

Answer: 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.

Sharing Confirmation of Agency?

Question: 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?

Answer: 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?

Question: Do I use the confirmation of agency status from in commercial transactions?

Answer: 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?

Question: 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?

Answer: 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.


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.

Limited Services Listing?

Question: Is Confirmation of Agency required in a limited services listing?

Answer: 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.?

Question: 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?

Answer: 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?

Question: 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?

Answer: 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?

Question: 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?

Answer: 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?

Question: 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?

Answer: 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?

Question: 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?

Answer: The hotline recommends that the agents follows guidelines from NAR:

  1. 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.
  2. 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.
  3. 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.
  4. 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?

Question: 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?

Answer: 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?

Question: 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?

Answer: 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

Question: 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?

Answer: 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?

Question: 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?

Answer: 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?

Question: 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.?

Answer: 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?

Question: 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?

Answer: 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?

Question: 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?

Answer: 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

Question: Is the land/lot property condition disclosure form no longer needed? Is there replacement form?

Answer: 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).

Question: 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?

Answer: 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?

Question: 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?

Answer: 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.

Managing Short and Long-Term Rentals?

Question: Is there any problem with an agent managing short-and/or long-term rentals while holding a real estate license?

Answer: 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?

Question: 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).

Answer: 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?

Question: Why is the Bill of Sale form no longer available?

Answer: 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?

Question: An agent sent me an offer on a Tennessee REALTORS® Purchase and Sale Agreement from 2016. How should I proceed?

Answer: 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.

When is Contract Binding and Enforceable?

Question: 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?

Answer: 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?

Question: 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?

Answer:  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?

Question: 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?

Answer: Guidelines set by the Real Estate Settlement Procedures Act (RESPA) include:

  1. There is an agreement spelling out what the agent is paying, signed by all parties.
  2. 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).
  3. 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?

Question: 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?

Answer: 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?

Question: 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.

Answer: 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?

Question: 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?

Answer: 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?

Question: 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?

Answer: 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?

Question: 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.

Answer: 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.?

Question: 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?

Answer: 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?

Question: 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?

Answer: 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?

Question: We have an agent who wants their commission check written to their company (a sole proprietorship). Is this acceptable?

Answer: 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.

Disclaimer Signature Block

Q: Why does the disclaimer notice only have one signature block instead of two?

A: The disclaimer notice only needs to be signed by the client or customer of the agent—not all parties. If you are the listing agent, you will have the seller sign this form. If you represent the buyer, you will have the buyer send this form. The committee eliminated the second signature block to make it clearer that this form does not require the signatures of all parties.


Property-Condition Exemption

Q: Please why the property condition exemption form no longer has a space for buyer’s signature of necessary disclosure questions on the form?

A: The exemption form is different because it is not required by law. If a seller is exempt, they are exempt; they do not need buyer approval for exemption. The forms committee voted to make this form act as a notification to buyers that a seller is exempt. The seller will sign the form and make it available to the buyer purely for their information.

However, an exempt seller is still required by law to make certain disclosures. These disclosures can be found on RF205, Tennessee Residential Property Disclosure (for exempt properties & property residential disclaimers). This form needs to be completed by an exempt seller prior to acceptance of an offer. The law does not require the buyer’s signature on this form, but it will be best for your record-keeping to have the buyer sign it as proof they received the disclosures.


Non-Refundable Earnest $

Q: Can you advise the position that Tennessee takes on “non-refundable” earnest money clauses?

A: Non-refundable earnest money is an acceptably legal concept in Tennessee. The forms committee has added a clause in the special stipulations form that can be inserted into the contract to make all earnest money non-refundable if the parties wish.


Indentify the Fire Department?

Q: The 2018 property condition disclosure form asks which fire department services the property. Is there a place for a seller to find that information?

A: Yes, the seller may visit https://tnmap.tn.gov/fdtn/ and enter the property address. This question is not required by law, so a seller is not obligated to answer.


Disclose a Past Fire?

Q: If a seller signs the disclosure exemption form, yet he is aware that there has been a major fire at the house, is he required to disclose it?

A: Please note that the Tennessee REALTORS® Legal & Ethics Hotline cannot (and nor should you) advise sellers as to what they are required to disclose. If the sellers have questions about whether they are required to disclose the fire, they should speak with their own attorney. Otherwise, you could be responsible for their actions.

However, for your personal information, if a person is exempt from having to make the disclosure, they are exempt.

The real estate agent may have other obligations to disclose as an adverse fact under the law, and to avoid concealment of facts pursuant to the REALTOR® Code of Ethics.


Leave the Fire Extinguisher?

Q: Are fire extinguishers supposed to stay with the home?

A: A fire extinguisher is not required to go with the property, especially residential. If the buyer wants a fire extinguisher to go with the property, it should be address in the contract.


Non-REALTOR® Present at Listings?

Q: I have an owner on a listing that wants someone present for every listing. They are comfortable with their property manager or best friend being there and opening the property if I cannot. Would this be allowable if they are not licensed REALTORS®?

A: That is allowable if the sellers wish to have someone present at the home for every showing, regardless of their status as a REALTOR®. However, as part of your MLS rules, you may not be able to share lock box codes with these persons. The seller would need to arrange for their entry.


Advertise ‘Low-Crime’ Area in MLS?

Q: We have a client who wants us to promote that his area has less crime/fewer break-ins than other areas. He wanted us to pull the last 10 years of police reports to prove it. Can we do that? Can we enter it into the MLS, either in Public or REALTOR® Remarks? Can we provide this documentation as an attachment to the listing online or as an accompaniment to our marketing?

A: It is not advisable to advertise this if it is unfounded. However, if the police reports can prove lower crime, then you likely would not face claims of misleading advertising. You are instructed to follow all lawful instructions of your client. The concern with this request is that you may incur extra liability should you advertise this way and then an incident occurs on or near the property. It is also wise to check with your local MLS to see if they will allow this practice.

Here is the pertinent TREC Advertising Rule (1260-02-.12)  for your review:

(3)(f) No licensee shall advertise 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 other similar terms that would lead the public to believe that those licensees are offering real estate brokerage services independent of the firm and principal broker; or

3. Any webpage that contains a link to an unlicensed entity’s website where said entity is engaged or appears to be engaged in activities which require licensure by the Commission.

(7) Guarantees, Claims and Offers

(a) Unsubstantiated selling claims and misleading statements or inferences are strictly prohibited.


Accept Counter-offer After Deadline?

Q: A counter-offer was sent from the seller’s agent to the buyer’s agent with a deadline. The buyer signed the counter but missed the deadline. The buyer’s agent contacted the seller’s agent and asked if it was okay; the seller’s agent said it was. The buyer’s agent then sent the counter back to the seller’s agent and followed up with a call to be sure they had received it. The seller’s agent works a full-time job and is not able to respond until after work. If the seller’s agent binds this, is it legal, even though the buyer missed the deadline?

A: Technically speaking, once an offer or counter offer expires, it is over and cannot be accepted. It is possible to “revive” an offer, but that would require very specific language. The simplest and cleanest way to handle this situation is to simply have a new offer signed. In the event that one of the parties wanted out down the road, they could raise the argument that there was no contract, since it was accepted after the offer had expired.

Inspection-Period Deadline?

Q: The seller accepted the contract on a Saturday, it was bound on Sunday, and a two-week due diligence period for the buyer expired this past Sunday. The buyer says it should have ended one business day after Sunday. Who is correct?

A: The Purchase and Sale Agreement states that in the event a performance deadline—other than the Closing date, date of possession, completion of repair deadline, and offer expiration date—occurs on a Saturday, Sunday or legal holiday, the performance deadline shall extend to the next business day. Therefore, in this situation, the inspection period deadline would extend to the following business day.


Former Tenant: Fees?

Q: We notified a renter who moved out that they still owed expenses, but the renter informed us they did not have to pay because they were not notified within 30 days of vacating the premises. Is this correct?

A: The answer is likely found in the lease agreement signed by both parties. The answer may also hinge on whether you are located in a jurisdiction which is subject to the uniform residential landlord-tenant act. It is advisable to contact an attorney who is familiar with landlord-tenant law and have them review the lease agreement and pertinent facts.


Offer Agents Chance to Win Gift Card?

Q: I have a team in my office that sends thank-you cards at the end of the year to ALL of the agents they worked with throughout the year. This year, they would like to include in the card a chance for them to win a gift card. It would say something like, “Thank you for working with ABC Team in 2017, if you work with us again in 2018 your name will go in a drawing for a $250 gift card.” Can they do this?

A: This is almost certainly permissible. Rule 1260-2-.33 from the Tennessee Real Estate Commission (TREC) 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:

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.

For further clarification, you may wish to contact TREC directly at THIS LINK.


“Coming Soon” Sign Guidance?

Q: What is the rule on when I can post Coming Soon Signs?

A: A listing agreement is not required for a “Coming Soon” sign; it only requires written permission of the seller. TREC Rule 1260-2-.12(2)(c) states, “No licensee shall post a sign in any location advertising property for sale without written authorization from the owner of the advertised property or the owner’s agent.”

When written permission is secured, you may post the sign, but it should not be on the property for an extended period. This would be both misleading and ineffective for the seller. There is no hard-and-fast state law/rule as to how long is too long. Avoid being misleading, which would be a violation of the TREC Advertising Rule.

It would be wise to check with the local MLS to determine whether they have any other rules concerning “Coming Soon” listings and/or signs, including time frames.


Multiple-Offer Mayhem?

Q: I represented a buyer who made a cash offer to a seller in divorce proceedings. We were told the divorce court would rule on the offer at 2 p.m. Friday. But two hours after that time, the seller’s agent sent a text saying the judge had ruled for a higher offer from an out-of-state bank. My cash buyer had no knowledge of any other offers. Is this an ethical concern? Does the seller have the right not to notify the first/original offer of any other offers, or is it mandatory to advise all offers of a multiple-offer situation?

A: In a situation with multiple offers, the listing agent must present all offers to the seller. Then the seller has several options.

One, the seller could review the offers received and select one to counter. Two, the seller could notify all interested buyers to submit their highest and best offer by a particular date and time. The seller would then review all offers and select the one they wish to work.

The REALTOR® Code of Ethics does address multiple offers. Standard of Practice 1-15 states: “Realtors®, in response to inquiries from buyers or 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.”

Disclosure of multiple offers is only required when asked by the buyer or cooperating broker, and still, such disclosure can only be given with permission from the seller.


Referral/Incentive to Nonprofit

Q: I am the president of a 501(c)(3) organization for teachers. I would like to offer an incentive to city-school employees to make referrals for buyer/sellers. In turn, I would make a donation in the name of a specific teacher so that when they ask for grant money for their classroom, the funds I deposit will be available to them. Is this legal? Also, could I do this for other 501(c)(3) organizations (i.e. band boosters, athletic boosters, etc.)?

A: 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; and only licensed real estate agents can receive referrals—even if the referral is going to charity. You will have to follow the gifts and prizes rules 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 prospective purchaser or lessor.

Also, be aware that 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 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).

In addition, take note that a new section of the Advertising Rule includes advertising offers or gifts. TREC Rule 1260-2-.12(5) 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.

Finally, there are some concerns about donations to charity. If the donation is in cash, TREC could interpret this as violating the statute. However, you could provide a gift card to the charity in that amount or purchase items from their wish list in that amount—again, only as an incentive for that person to do business with you, not as a referral.


Proceeds to a Deceased Agent’s Estate?

Q: Tragically, I had an agent who was killed over the weekend. Can I legally give the proceeds of one of his listings to his estate? If so, how would I go about doing so?

A: Yes, you may 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.


Seller has Died; Listing Agreement Binding?

Q: I have a listing agreement but the seller recently passed. Is the listing agreement binding on his heirs

A: Yes. The agreement states, “This Agreement shall be for the benefit of, and be binding upon, the parties hereto, their heirs, successors, legal representatives and permitted assigns.” Therefore, the Tennessee REALTORS® Residential Forms Committee intended for the listing agreement to be binding on a deceased seller’s heirs. However, all parties should speak with their own attorneys to determine their legal rights under the agreement.


Disclose Previous Homicide at Property?

Q: I am listing a home where a murder was committed. Do I need to disclose this on the listing?

A: It is not a legal requirement to voluntarily disclose such information.

Pursuant to Tenn. Code Ann. §66-5-207, “Notwithstanding any of the provisions of this part, or any other statute or regulation, no cause of action shall arise against an owner or a real estate licensee for failure to disclose that an occupant of the subject real property, whether or not such real property is subject to this part, was afflicted with human immunodeficiency virus (HIV) or other disease which has been determined by medical evidence to be highly unlikely to be transmitted through the occupancy of a dwelling place, or that the real property was the site of: (1) An act or occurrence which had no effect on the physical structure of the real property, its physical environment or the improvements located thereon; or (2) A homicide, felony or suicide.” [emphasis added]

This means that, again, you do not have to disclose these things voluntarily. However, if a buyer/renter asks you about this, then you must be honest with them.


Waiving the Lead-Paint Assessment?

Q: I represent a buyer on a transaction. The seller/agent sent a lead paint form and checked the box stating the buyer waived their right to assessment. I asked the seller/agent to send a blank form, but they refuse. How should I handle this situation?

A: Lead-based paint disclosures are required under federal law. A buyer may only waive the opportunity to conduct an assessment in writing. The seller needs to send the buyer a disclosure with the box unchecked or they are violating federal law.

24 C.F.R. § 35.88 requires disclosure of lead-based paint by the lessor or the owner. It states:

(a) The following activities shall be completed before the purchaser or lessee is obligated under any contract to purchase or lease target housing that is not otherwise an exempt transaction pursuant to § 35.82. Nothing in this section implies a positive obligation on the seller or lessor to conduct any evaluation or reduction activities.

(1) The seller or lessor shall provide the purchaser or lessee with an EPA-approved lead hazard information pamphlet. Such pamphlets include the EPA document entitled Protect Your Family From Lead in Your Home (EPA –747–K–94–001) or an equivalent pamphlet that has been approved for use in that State by EPA.

(2) The seller or lessor shall disclose to the purchaser or lessee the presence of any known lead-based paint and/or lead-based paint hazards in the target housing being sold or leased. The seller or lessor shall also disclose any additional information available concerning the known lead-based paint and/or lead-based paint hazards, such as the basis for the determination that lead-based paint and/or lead-based paint hazards exist, the location of the lead-based paint and/or lead-based paint hazards, and the condition of the painted surfaces.

(3) The seller or lessor shall disclose to each agent the presence of any known lead-based paint and/or lead-based paint hazards in the target housing being sold or leased and the existence of any available records or reports pertaining to lead-based paint and/or lead-based paint hazards. The seller or lessor shall also disclose any additional information available concerning the known lead-based paint and/or lead-based paint hazards, such as the basis for the determination that lead-based paint and/or lead-based paint hazards exist, the location of the lead-based paint and/or lead-based paint hazards, and the condition of the painted surfaces.

(4) The seller or lessor shall provide the purchaser or lessee with any records or reports available to the seller or lessor pertaining to lead-based paint and/or lead-based paint hazards in the target housing being sold or leased. This requirement includes records and reports regarding common areas. This requirement also includes records and reports regarding other residential dwellings in multifamily target housing, provided that such information is part of an evaluation or reduction of lead-based paint and/or lead-based paint hazards in the target housing as a whole.

(b) If any of the disclosure activities identified in paragraph (a) of this section occurs after the purchaser or lessee has provided an offer to purchase or lease the housing, the seller or lessor shall complete the required disclosure activities prior to accepting the purchaser’s or lessee’s offer and allow the purchaser or lessee an opportunity to review the information and possibly amend the offer.

And 24 .F.R. § 35.90:

(a) Before a purchaser is obligated under any contract to purchase target housing, the seller shall permit the purchaser a 10–day period (unless the parties mutually agree, in writing, upon a different period of time) to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards.

(b) Notwithstanding paragraph (a) of this section, a purchaser may waive the opportunity to conduct the risk assessment or inspection by so indicating in writing.


“Coming Soon” Sign?

Q: Can I place a Coming Soon sign on a property without a signed listing agreement?

A: A listing agreement is not required for a “Coming Soon” sign. It only requires written permission of the seller. So you can obtain written permission and place the sign in the yard before a listing agreement is executed.

The sign should not be on the property for an extended period of time. This would be both misleading and ineffective for the seller. There is no hard and fast rule as to how long is too long. Just use your common sense. Mostly you want to avoid being misleading, which would be a violation of the TREC Advertising Rule.

TREC Rule 1260-2-.12(2)(c) says, “No licensee shall post a sign in any location advertising property for sale without written authorization from the owner of the advertised property or the owner’s agent.”

Therefore, the agent must have written permission of the seller to place a sign in the yard. If the sign is a “Coming Soon” sign, the agent still must have the seller’s permission. Check with your local MLS to determine whether they have any rules concerning “Coming Soon” listings and/or signs, including time frames.


Agency Disclosure / Commercial Contract?

Q: Can you please tell me if an Agency Disclosure  is required to accompany a Commercial Purchase and Sale Agreement? I do not see one listed under Commercial forms.

A: Agency disclosure is NOT required for commercial agents or for leases under Tennessee law. Tenn. Code Ann. § 62-13-405 contains the requirements that agency be disclosed. However, in the last paragraph, it states:

(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. [emphasis added]

Therefore, under state law, agency disclosure is not required in Tennessee for commercial transactions or for leases. However, the confusing part occurs when you factor in NAR’s REALTOR®Code of Ethics. 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.

And the Code’s Standard of Practice 16-12:

Realtors®, acting as representatives or brokers of sellers/landlords or as sub agents of listing brokers, shall disclose that relationship to buyers/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.

So, according to the Code of Ethics, as a REALTOR® you must provide written confirmation of your agency status not later than the execution of any purchase or lease agreement. This information is contained in the Tennessee REALTORS® Commercial Purchase and Sale Agreement. This should be sufficient, per the agency disclosure contained in paragraph 12 B. of the 2016 Commercial Purchase and Sale Agreement and paragraph 24 B. of the Commercial Lease Agreement.

Basic Residential-Listing Forms?

Q: Which forms do I need to use to do a residential listing?

A: A typical residential listing package will include five forms:

  • RF302 – confirmation of agency status
  • RF304 – disclaimer notice
  • RF209 – lead based paint disclosure
  • RF201 – residential property condition disclosure
  • RF101 – exclusive right to sell listing agreement (designated agency)

Basic Commercial-Listing Forms?

Q: Which forms are required for a commercial listing?

A: Please understand that commercial transactions are much different from residential transactions. If you are not familiar with commercial transactions, it is strongly recommended that you seek out a commercial agent to assist with the transaction. You can get yourself into trouble without realizing it if you are unfamiliar with commercial transactions. That said:

— the Commercial Purchase and Sale Agreement is CF401.
— It has four amendments to it: CF501CF502CF503, and CF504.
— There are several listing agreements for commercial:CF101CF103 and CF104
— along with letters of intent (CF402CF423)
— and a confidentiality agreement (CF461).


New-Construction Forms?

Q: With regard to new construction properties, is there a list of required documents for thus type of transaction?

A: Every transaction is different, but here is a helpful list of construction-related forms that may apply:

  • New Construction Purchase and Sale Agreement (RF403)
  • Pre-Construction Specification Exhibit (RF505) (if applicable)
  • New Construction Allowance Addendum (RF630) (if applicable)
  • New Construction Change Order (RF661) (if applicable)
  • New Construction Walk Through List (RF662)
  • Confirmation of Agency Status (RF302)
  • Exemption form (RF403) (if appropriate)
  • Impact Fees or Adequate Facilities Disclosure (RF207)
  • Final Inspection form (RF660)

Other forms may be required by your closing agency.


Changes to RF203 – Exemption Form

Last month, our Residential Forms Committee voted to reverse several changes made in 2017 to the Tennessee exemption Form (RF203).

Previously, the committee had updated RF203 to serve as a notification form, removing:
1) the buyer’s signature, since under state law, a buyer does not have to acknowledge or agree that a seller is exempt; and
2) the mandatory disclosures for exempt sellers, so sellers would use RF203 as a notification of their exempt status and also use RF205 to make the mandatory disclosures.

However, based on feedback from the REALTOR® community, the committee has now reversed those changes, and the updated RF203 is available to REALTOR® members HERE(login required) The form restores the ability for a seller to mark why they are exempt and to make the disclosures required by law. And it again provides a place for the buyer to sign acknowledging these disclosures.

Part of the reason for the original changes was that REALTORS® were encountering sellers who did not want to explain to the buyer why they were exempt. If you encounter such a seller, this is okay. Remember, a buyer does not have to agree to a seller’s exempt status. Your seller can forego using the Exemption Form (RF203) and simply make their required disclosures by using RF205, Tennessee Residential Property Disclosure (for exempt properties and property residential disclaimers).

If you have any questions regarding these updates, please contact the Hotline at 800-899-5297 or .


No Price/Late Counter Offer?

Q: One of my agents made an offer on a property on Tuesday with a time limit of 5:00 p.m. Wednesday. At midday Wednesday, she called to check in with the listing agent, who said he needed until the following Monday because he had other people coming to look at the property. The offer my agent made was clean, almost 100% asking price, so she asked him to counter by the 5:00 p.m. deadline. Several hours later she received a counter that had no price but asked for the offer to be extended until Monday. My agent considered the offer to have expired (since he was late responding, with signature and date but no time) and is moving on. Is it legal to counter with an extension of the date and nothing else? Is there another way this should have been handled?

A: It is legal to counter with an extension and nothing else, but your agent is correct: the offer is dead because the deadline has passed.


Offer Not Presented in Timely Manner?

Q: I presented an offer late Tuesday (11 p.m.). Wednesday morning, the listing agent called to tell me I needed to change the expiration date because the sellers were not going to make any decisions until the following Saturday. There was nothing in the MLS stating this, and I have no way of knowing if the offer was even presented to the sellers. Can this be done without being disclosed up front to any agent showing the property? The listing agent told me she did not have any other offers in hand “yet”, they were wanting to see what was going to happen. It is still not disclosed on the MLS. Isn’t “time of the essence” on all offers?

A: 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 says, “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.” So an agent must present all offers to the client unless they have instructed them not to do so in writing, signed by the seller.

Under Standard of Practice 1-6, “Realtors® shall submit offers and counter-offers objectively and as quickly as possible.” Standard of Practice 1-7 adds, “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.”

Therefore, if the seller has instructed the agent that they wanted to receive all offers on a certain day (in writing), then this would be appropriate. If not, the agent is in violation of the Broker’s Act.


Advertise Home Before Listing Agreement?

Q: I am preparing to list a house, but no agreement has been signed yet. The seller would like to send flyers to a group of students who will be moving to town the same time the seller hopes to move out. Ideally, a student would buy the home. The seller wants me to prepare marketing material—photos, brochure, etc.—to send students prior to listing the home on the MLS. Is this permissible? Would creating Coming Soon flyers + placing a yard sign be a better way to meet the seller’s needs now?

A: Pocket listings are an interesting issue, as is the timing surrounding them. They are not technically illegal in Tennessee, but they are not necessarily permitted, safe, or in the best interests of the seller, either.

First, in order to advertise any property for sale in Tennessee, one must have the written permission of the seller.  TREC Rule 1260-2-.12(3) includes:

(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 property owner. Written authorization must be evidenced by a statement on the listing agreement or any other written statement signed by the owner.

Therefore, the agent must have written permission to place a sign and/or to advertise property for sale. This does not necessarily mean that they have a listing agreement, but they may.

If the agent is a REALTOR®, then there may be a violation of the Code of Ethics. Article 12 states: “REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. REALTORS® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that the recipients of all real estate communications are, or have been, notified that those communications are from a real estate professional. (Amended 1/08)”

Standard of Practice 12-4 states: “REALTORS® shall not offer for sale/lease or advertise property without authority. When acting as listing brokers or as sub agents, REALTORS®shall not quote a price different from that agreed upon with the seller/landlord. (Amended 1/93)”

The second consideration is whether a written listing agreement is in place. If so, then the local board may have rules re: when it must be entered into the MLS. An agent should check with the MLS and/or local board to determine the rules. If there is no listing agreement, then the agent is running a real risk of not being paid a commission since there is nothing documenting his compensation.

You could go the Coming Soon route, but check with your local MLS to determine whether they have any rules concerning those, including time frames.


Proper Use of ‘REALTOR®’

Q: I have a question regarding the use of Realtor. I’ve used a tagline for several years, “The Realtor You Deserve”. I would like to ensure that I’m not in violation. I have read the rules at https://www.nar.realtor/LetterLw.nsf/pages/TrademarkLogoRules, but I’m not an attorney. We know you can’t give advice on advertising and approve or disapprove advertising, but are we using the word properly?

A: Some potential issues from NAR with your tagline are:

Never use an initial capital and lower case letters for the MARKS and omit the federal registration symbol “®” (except for news articles and features—see “In News Releases”):

–Realtor
–Realtor-Associate

Never use descriptive words or phrases to modify the MARKS. This is explicitly prohibited by Article V, Section 7 of the Bylaws of the National Association.

Adjectives may suggest an improper vocational meaning and also tend to distort the consistent understanding and image of these terms, thereby undermining their identifying function:

— Main Street’s most qualified REALTOR®
— Consult a professional REALTOR®
— Doe County’s leading REALTOR®
— The concerned REALTOR®
— Number one REALTOR-ASSOCIATE®
— Your local REALTOR®
— Your international REALTOR®
— Commercial REALTORS®

For more information, visit HERE.

“Meth Lab” Property Disclosure / Law

Q: An agent in our firm was working with a client who was ready to purchase a certain home. However, it was not disclosed that the property had been used as a lab for methamphetamine [or “meth”]. The client is on a waiting list for a lung transplant. Had she bought and moved into the house, she could have been removed from the donor list if the residual drugs in the house caused her to test positive. What is the law related to this kind of property?


A: When it comes to adverse facts such as a house associated with meth, Tennessee law requires real estate agents to disclose any such facts of which they are aware. As stated in Tenn. Code Ann. § 62-13-403(2), an agent must “[d]isclose to each party to the transaction any adverse facts of which the licensee has actual notice or knowledge.”

The law defines an adverse fact 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.” Tenn. Code Ann. § 62-13-102(2)

In this case, state law also requires that anyone with knowledge of a “meth property” (i.e. meth lab) must report it to the Tennessee Department of Environment and Conservation. The property should then display signs identifying it as such, and it should be cordoned off. In addition, the deed in the registrar’s office must show that it is a meth property. The only legal way for the property to become habitable again is to have it cleaned thoroughly by a hazardous-materials (hazmat) team.

Many resources are available to help in situations like this, starting with the local police and sheriff’s department. The Tennessee Bureau of Investigation (TBI) also provides good information HERE, including links to websites with search engines for meth properties. In addition, Tennessee has established the Tennessee Methamphetamine Task Force; its website HERE contains good information and search engines the homebuyer can use.

Be sure your clients/customers understand that you are not guaranteeing the accuracy or completeness of any information found on these sites; you are simply pointing them toward the sources.


Use of Firm/Team Logo Image

Q: With regard to team logos, I understand the font must be the same size or smaller than the firm logo, but does the size apply to the image or just the font?

A: The pertinent provision of the Advertising Rule is below. Although the rule only says “letters,” the spirit of the rule is likely that the firm name is not smaller than the team name. Therefore, to be on the safe side, it is recommended not to have the image of the team larger than the image of the firm, even if the lettering is the same size.

TREC Rule 1260-02.12 (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


Name/Phone on Directional Signs?

Q: With regard to directional signs, I have noticed some of these that have the firm name and the agent’s name, but only the agent’s cell phone number. Is this allowable, or do we have to have the firm number on these as well?

A: If the directional sign merely shows an arrow and something to the effect of “Open House”, then the firm name and telephone number would not be required. However, if the sign is intended to advertise the agent and/or specific property, then the requirements of the Advertising Rule—including firm name and number—would likely come into play.


Youth-Sports Banners?

Q: I want to do a banner for my daughter’s softball team. What are the advertising guidelines with regard to this type of sign?

A: As set forth in the Advertising Rule, sponsorship of community and charitable events does not have to adhere to the rule. If the banner is a sponsorship of the team, then you do not have to follow the rule. If the banner is not a sponsorship, but rather just an advertisement, then you do need to meet all the requirements of the Advertising Rule.


Lot/Land Disclosure Form Mandatory?

Q: I am listing a property (60 acres of land) on which the owners have never lived. Does my seller have to fill out a lot/land disclosure form?

A: The law does not require that the RF 206 Lot/Land Seller’s Disclosure Form to 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. Sellers may complete this form to lessen the likelihood that a buyer could come back after the sale and claim that misrepresentation occurred. It is wise to encourage all sellers to speak with an attorney before doing so.


Update Needed for Exempt Sellers?

Q: If a seller signs a property condition exemption, are they also exempt from doing an update prior to closing?

A: he law 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.


Personal-Interest Disclosure for LLC?

Q: I have an agent who is buying a property using another agent to represent him in the transaction. The buyer is an LLC that my agent has ownership in. Is he required to disclose that he is a licensed real estate agent even though he is represented by a buyer and the LLC is buying it?

A: Under Tennessee law, if the property owners own the property in their individual capacity, then an owner/agent disclosure will have to be made. However, 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, a REALTOR® is obligated to disclose ownership or “any interest” in the property being sold. That would include any legal ownership or possible future ownership, such as through inheritance or ownership interest in a company.


Paid for Contracts at Previous Firm?

Q: I had several contracts where I represented the buyer with my prior firm. Can my previous broker deny my earned commission on these closed contracts?

A: As a general rule, non-compete agreements are legal as long as they are properly limited in scope (geography) and length (time). What constitutes reasonability can vary widely. Therefore, before you sign such an agreement, you should have your own attorney review it and advise you accordingly.

Listings, buyer’s representation agreements, and contracts belong to the real estate firm, not the agent working in the field. TREC Rule 1260-2-.02(3) states, “When a licensee terminates his affiliation with a firm, he shall neither take nor use any property listings secured through the firm, unless specifically authorized by the principal broker.”

Neither state law, TREC rules, nor the REALTOR® Code of Ethics speak to ownership of leads or contacts created while employed with a firm. Some firms may have agents sign agreements that any leads generated while employed with the firm remain property of the firm. There is nothing inherently illegal about this practice. Absent such an agreement, it would likely be concluded that a firm has no ownership rights of a lead or contact made by an agent during their employment.


Non-Compete with Former Broker?

Q: My prior broker has denied me commissions from previous leads from realtor.com and has threatened to keep all of these commissions if I do not sign a post-exit non-compete stating my prior broker/firm will keep all of these leads whether or not they want to stay with that firm. Is this legal?

A: 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 when the contract is signed, 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; the broker is allowed to pay a commission, but is not required.

If an agreement was in place stating you were entitled to such commissions, then it is likely that agreement would override this rule. If an agreement was in place that you would not be entitled to commissions, then you would not be entitled to them. If no agreement is in place, then payment of commission is at the discretion of the previous firm’s broker.


Prior Broker Refusing to Pay Me?

Q: I was the listing agent for the builder/seller of new construction townhomes. I have two bound lot hold agreements, with me as procuring listing agent, and they are refusing to pay my commission. Can you help?

A: In Tennessee, an agent who has left the firm can be paid directly as long as the contract was entered into while he was affiliated with original firm. TREC enacted a rule which covers these issues which went into effect on October 18, 2015. 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 up to the broker; he or she is allowed to pay a commission but not required to do so.

Commercial-Listing Agreement?

Q: I need to list a commercial property and want to know if the Exclusive Right to Sell form will work for commercial property as well as residential.

A: Tennessee REALTORS® offers commercial forms. The commercial listing forms are CF101 or CF103. You may use either, depending on which agency relationship you prefer. If you are unfamiliar with selling commercial property, it would be wise to engage a licensee who is familiar with commercial real estate.


New-Construction Contract?

Q: I represent a buyer on a new construction. Do I have the option to use the regular agreement or do I have to use the new-construction agreement?

A: This would be determined on a case by case basis, depending on the level of completion of the home. In some instances, it would make more sense to use the Purchase and Sale Agreement while in others, it would make more sense to use the New Construction Purchase and Sale Agreement.


Early-Occupancy Agreement?

Q: What form do I use for early occupancy prior to closing?

A: You would use RF626, Temporary Occupancy Agreement for Buyer Prior to Closing.


Audio Recordings?

Q: Regarding security cameras with audio in listings, if we are the listing agent do we have to let the buyer know about this? If we are the buyer’s agent, are we required to ask the seller if they have cameras with audio?

A: Let’s look at applicable state law and recommended best practices.

In Tennessee, a person may record oral conversations where either the person is a party to the conversation or at least one of the participants has consented to the recording, per TCA §39-13-601(b)(5). A person may not photograph or record, for the purpose of sexual arousal or gratification, a person when the person has a reasonable expectation of privacy if the image would offend or embarrass an ordinary person, per TCA §39-13-605(a).

If you have a listing and the seller has recording devices in place, it is advisable to disclose this to each person looking at the house. You can disclose this in the MLS listing or in emails to buyer’s agents. Just be sure the disclosure is in written form.

Tennessee law re: audio recordings says that a person may record if they are a party to the conversation or if they have the consent of one of the participants. Under this, you would be wise to have a potential buyer sign a consent form to being recorded before entering a house with a recording device.

As a buyer’s agent, it is good practice to remind your clients this is a possibility before entering any house. If this is a concern to your client, you may want to ask each listing agent (via email) before entering a property whether or not there are recording devices. Then you will have written documentation that you asked and whether or not the agent disclosed.


Smart Homes?

Q: I represent a buyer in the purchase of a smart home. What special things do we need to be aware of?

A: The Online Trust Alliance and the National Association of REALTORS® recently created a “smart-home checklist” to provide consumers with information to increase security and privacy.

The checklist HERE includes an overview of things to do prior to closing; smart home devices and applications; modems, gateways, and hubs; security alarms, keyless entry, gate systems; and home thermostats, HVAC systems, smart TVs, lighting, and other device.


Security-Company Referral Fees?

Q: Agents in my office have received solicitations from a security-system company offering an incentive to agents to recommend their product to buyers. Is an agent’s participation in this program a RESPA violation?

A: This would not be a RESPA violation because the alarm-system company is not a real estate settlement service provider. 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)

However, you will need to disclose any referral fee to your clients. Pursuant to TCA § 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.


Compensation Negotiations?

Q: Recently an agent submitted an offer on one of our listings and requested an increase to the selling agent’s commission in the special stipulations (stips) portion of the Purchase and Sale Agreement, rather than the Compensation Agreement, which would be the acceptable form, in our opinion. Is is legal for him to negotiate commission within the sales agreement?

A: It is not recommended that compensation be included in the Purchase and Sale Agreement. Real estate agents / firms are not parties to the P&SA, so it makes it more difficult to pursue the commissions in the event that they are not paid. Instead, compensation should be addressed in a separate agreement between the party getting paid and the party paying the commission, such as the Compensation Agreement provided by Tennessee REALTORS®.


Commission Rebates?

Q: I would like to entice future listing by offering a rebate on my commission. Is this legal?

A: No, this is not legal in Tennessee: “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).

Therefore, this type of advertising would be in violation of state law. You could agree to reduce your commissions, but not to pay them back.


Paid After Leaving Firm?

Q: I was both the listing and selling broker on a property with my previous firm. I am having trouble collecting my commission on this closed transaction. How should I handle this situation.

A: In Tennessee, an agent who has left a firm can be paid directly as long as the contract was entered into while he or she was affiliated with the original firm. TREC enacted a rule covering these issues on Oct. 18, 2015. 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 licensee earns a commission 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 the agent is no longer affiliated with the company. However, it is the broker’s decision; he or she is allowed to pay a commission, but is not required.


“As is” Meaning?

Q: I listed a property “As Is” and presented it to buyer. After the inspection, the buyer noticed a few substantial items and requested the seller make these repairs. What does “As Is” mean in this situation? Does it take away the rights of the buyer to have an inspection contingency?

A: If the property is sold “As Is”, the buyer could likely still terminate if they found something in the inspections unsatisfactory. If the parties don’t wish to terminate, then they can negotiate repairs and/or a change to the purchase price. “As is” typically serves to place the buyer on notice that the seller is not willing to make any repairs. This does not preclude the buyer from performing an inspection and requesting repairs.


Disclaimer for Lot/Land?

Q: I am selling some raw land in which I have a personal interest, “As Is”. Is there a disclaimer form for the property condition report?

A: A property condition disclosure (or exemption or disclaimer) is not required on sales of unimproved property, a.k.a. raw land. Therefore, in your case, no document would be required. A disclosure statement for lot/land is provided so sellers may disclose what they know to prevent any future litigation.


Incapacitated Seller?

Q: I have a property I am trying to lost. The owners are both mentally incapacitated, and their daughter has power of attorney for their affairs. Regarding the property condition disclosure, the daughter have never lived in the property. Which form do we use for this disclosure?

A: A power of attorney 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 the 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 seller’s permission or the person holding the power of attorney before stating this to the buyer.) This may make prospective 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.

Unlicensed Assistants

Q: We have an assistant in our office who is not a licensee, and we aren’t sure how they can help us? Specifically, can they:

  1. Make phone calls to invite people to an open house?
  2. Distribute door hangers to invite prospective buyers to the open house?
  3. On expired listings, deliver information on our agency?

A: The Tennessee Real Estate Commission (TREC) is issues the following guidelines as part of its official manual, with items highlighted that relate spcefically to this question:

AN UNLICENSED EMPLOYEE/ASSISTANT/SECRETARY MAY:
  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 make 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 contracts forms for approval by licensee and Principal Broker;
  10. Monitor licenses and personnel files;
  11. Calculate, print or distribute commission checks;
  12. Place sings 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/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 transactions; or
  6. Negotiate of 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.

Based on this guidance, an unlicensed assistant may not make phone class to generate business (such as calling people an Open House). However, the assistant is allowed to prepare documents/fliers to hand out or deliver.


Utilities ON for Final Inspection?

Q: The residential Purchase and Sale agreement indicates the seller mist ensure all utilities are on for initial inspections. Is the seller contractually obligated to keep them on during the final walk-through as well?

A: Yes. The Purchase and Sale Agreement states, “Seller shall cause all utility services and any pool, space, and similar items to be operational so that Buyer may complete all inspections and testes under this Agreement.” The final inspection is an inspection contained within the Agreement. As such, the committee intended for the utilities should be on for that final inspection.


Resolution Period vs. Inspection Period?

Q: Re: the Purchase and Sale Agreement, Section D and D3. The first is the inspection period and has X days, the latter is the resolution period and has X days. Are these two periods the same as one? How does this section work?

A: They are two separate timeframes. The inspection period is the amount of time a buyer has to perform an inspection AND provide written notice to the buyer. This can be completed in the timeframe stated on the line, or shorter. The resolution period starts when the seller receives the written list of items the buyer requests to be repaired. At the point, the inspection timeline is no longer relevant.


Sharing Home-Inspection Report?

Q: Should I send a copy of the home inspection report with the notification form terminating the contract based on findings from the inspection to the seller and the seller’s agent?

A: No, the forms committee changed the Purchase and Sale Agreement to no longer state that the buyer shall furnish inspection report upon the seller’s request. The agreement now states that, “Buyer shall furnish Seller with a list of written specified objections and immediately terminate this Agreement via the Notification form or equivalent written notice. All earnest money/trust money shall be refunded to the Buyer.”

The contract only requires a list of written, specified objections to terminate under this contingency. There are issues with sharing a home inspection report. Often the buyer contracts with the home inspector that the inspector is performing the inspection on behalf of the buyer, and the buyer is not to disseminate that report. Sharing the report could open up ownership issues of the report and possible copyright violations. Further, it could place the listing agent in a difficult position if they learned of adverse facts in reviewing the report.


“Sold” Signs?

Q: If a broker is putting up sold signs on every corner, when in fact he didn’t sell anything on those streets-misleading the public and falsely advertising-what can another agent do about it?

A: 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.

Therefore, once the property has closed, the new owner is the one who determines who is permitted to place a “sold” sign on the property and how log it will be placed there. Based on this standard of practice, you may file an ethics complaint with your local board. You could also file a complaint with the real estate commission for misleading advertising.


P.O. Box? Home-Office Sign?

Q: Is an agent allowed to have a P.O. Box Address? If they have their only office out of their residence, does there have to be a sign posted showing that their real estate office is located in the home?

A:Each firm must have a physical location, but it can have a P.O. box for receiving mail.

TREC rule 1260-02-.05 POST OFFICE BOXES states that use of a post office box as a business location is prohibited. However, a post office box may be included in a business address for the purpose of receiving mail.

Regarding home offices, Pursuant to Tenn. Code Ann. § 62-13-309:

  1. (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)(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 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.

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.


Firm Number in Radio Ad?

Q: I plan to begin radio advertising and want to know if the firm phone number is required during my radio ad spot. Alternative to stating the phone number, can I just mention my website URL in the ad, as this is where most potential customers will visit first vs. calling me?

A: No. TREC’s Advertising Rule below states that it applies to radio advertising [emphasis added]. Therefore, the firm phone number must appear in the ad. A website will not substitute for this requirement.

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.


Door-to-Door Soliciting?

Q: If there is NOT a “No Soliciting” sign on an owner’s door, but there IS one put out by the HOA or other such entity, it is illegal for us to knock on those doors? Are there certain activities that would not necessarily be considered soliciting that we are permitted to do? In addition, if there IS a law stating that we cannot knock on those doors, is there some type of soliciting permit that we could obtain? If so, where would we secure one?

A: Ordinances regarding door-to-door solicitation are typically passed and enforced by municipalities, and they vary widely from place to place. Some example of typical anti-solicitation ordinances include registration and permit requirements, hour restrictions, “do not knock” lists, commercial solicitation bans, and, in rare cases, laws that forbid solicitation altogether.

For example, Metro Nashville has a permitting system: http://www.nashville.gov/Metro-Clerk/Solicitation-Permits.aspx

If an HOA posts a no-solicitation sign, this would indicate that it extends to the whole neighborhood. You can send out mailers to these people rather than going door to door.

It is wise to check with your city to see if any local ordinances are in place and if a permit is required.


Poaching Your Listings?

Q: If another Broker has contacted at least four of my current listings, even offering a couple of them cash money, what do I need to do to stop this?

A: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 a new contract, where such substitution is malicious or is motivated by the personal gain of the licensee.”

Further, 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.” 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®.

Disclaimer Changes?

Q: With regard to the new disclaimer form, how do I use it now?

A: The signature blocks were cut down to make it clear that both sides of the transaction do not need to sign this document. You only need your client to sign your disclaimer, and the other agent is responsible for having their client sign it. The purpose of the change is to protect you with your client, and vice versa. The document does not need to be shared with other side.


Multiple Offer: Buyer Sign?

Q: On the Multiple Offer Disclosure, there is only a place for the seller to sign. Shouldn’t the buyer sign this document?

A: No, this document serves as notification from seller to buyer that multiple offers have been placed, and how the seller plans to move forward. There is nothing in this document that the buyer must agree to in writing. After receiving notification, the buyer can either decide to resubmit an offer, extend their offer, withdraw their offer, or take no action to either let their offer expire or stick with the offer already submitted.


Rental-Property Locator?

Q: I am looking for a form to use with a client in order to charge them a flat fee for finding a property for rent.

A: You can use the Buyer’s Representation Agreement. The agreement states that the client is employing the broker to locate property for purchase, lease, exchange or option.

As far as compensation, in paragraph 3E, you can enter a flat fee as compensation for you in the event a seller/landlord does not offer compensation to you.


Exemption Form Needed?

Q: Why do we have to have our sellers complete RF203 (property disclosure exemption) and RF205 (additional required residential disclosure) when they have the same questions and answers?

A: You do not; duplication is not necessary. If you have an exempt property and your seller is willing to complete RF203 and mark why they are exempt, you need only use that form. If your seller wishes not to mark why they are exempt (which is not required by law), then they need only complete RF205, which contains the mandatory disclosures.


Exempt Seller Disclosing Discovered Facts?

Q: When selling a rental property, the seller has the Property Condition Disclosure Exemption. If the house goes under contract and inspections are performed, but then the buyer backs out due to material defects (such as foundation issues), do the seller and agent have to disclose the material defects, since they are both now aware of the found defects?

A: Generally, once a person is exempt, they are exempt. Their status typically does not change. If the sellers have questions about what they do or do not have to disclose, they should with their own attorney. However, this does not relieve you of the obligation to disclose adverse facts (i.e. material defects). Pursuant to Tenn. Code Ann. § 62-13-403(2), a real estate agent is required to “disclose 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 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 of present a significant health risk to occupants of the property.” Tenn. Code Ann. § 62-13-102(2). If an agent has actual knowledge of an adverse fact, he or she must disclose it.


Update Form for Exempt Sellers?

Q: If a seller signs a property condition exemption, it is my understanding they do not need to do an update. Am I correct?

A: Correct.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 the 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 inaccurate. He is also required to update the disclosure prior to closing, either to disclose changes or state that nothing has changed. However, if there is no disclosure required because of an exemption, then there would be no update required.


Early Closing Date?

Q: I have had two instructors indicate that RF657 (Closing Date/Possession Date Amendment) is NOT required is the closing date is earlier than what is agreed upon in the Purchase and Sale Agreement. Is this correct?

A: Technically, any time the closing date is changed, whether 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 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 the transaction closed by the original closing date, no harm no foul.


Title Expenses in Contract?

Q: On the Residential Purchase and Sale Agreement (Form RF401), Seller Expenses, Buyer Expenses, and Title Expenses are listed. There is a line following title expenses. Is this line to write in how the title expenses are to be paid? Example: By the buyer or by the seller or whatever is being presented. Or does this line pertain to all the closing costs?

A: The line under D.3., Title Expenses, is intended to list which party is paying title expenses. Title expenses are defined above-cost of title search, mortgagee’s policy and owner’s policy.

If the seller is paying buyer expenses, vice versa or portions thereof, this information should be entered on line 149-150, which is a few line down from the liner underneath “Title Expenses.”


Is Agreement Binding on Heirs?

Q: A listing agent has a listing with four heirs of an estate. However, two of the heirs have since passed away. is this listing agreement still valid?

A: Yes. The listing agreement states: “This Agreement shall be for the benefit of, and be binding upon, the parties hereto, their heirs, successors, legal representatives and permitted assigns.”

The Tennessee REALTORS® Residential Forms Committee intended for the listing agreement to be binding on a deceased seller’s heirs. The death of two parties would not necessarily affect the legality of the listing agreement.


Agreement, Inspection, and Earnest Money?

Q: Can a buyer terminate a contract, while inside their inspection timeframe, if they did the inspection themselves and no licensed home inspector or specialist in any field was consulted. If so, what happens to the earnest money?

A: 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 agreement also allows an individual to perform their own home inspection, but 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.


What if the Transaction Falls Through?

Q: I have an agent who represents a buyer on a transaction that has fallen through. I’ve contacted the listing broker over the past 21 days+ regarding the release of the earnest money, to no avail. Can I file the interpleader on behalf of my agent’s client? Also, this client wants to report the listing agent to the state. How would they do this?

A: The person who is holding the funds is the one who determines whether to file an interpleader. The buyer and/or seller can request that one be filed, but it is up to the holder of the funds to make that decision. It is advisable to contact the agent’s principal broker regarding this issue.


Transfer Earnest Money to New Property?

Q: I’m a buyer’s agent who had a contract on a house. The deal fell apart, and we have an earnest-money release signed by the buyer and the seller. There is another property we are working on, and the buyer wants to transfer the currently held earnest money to that new property. Does Tennessee law allow that?

A: Yes. It is wise, first and foremost, to make sure all documents have been properly drawn up demonstrating that the earnest (or trust) money from the original transaction will be distributed to the buyer. Second, ask the buyer to instruct you, in writing, to retain the funds within your earnest-money account until they enter another purchase and sale agreement, or until the end of the buyer’s rep agreement, or until instructed otherwise in writing by the buyer.

Include Phone Number on Radio Ad?

Q: When doing radio advertising, I know I have to state my firm name, but I do also have to include the firm telephone number?

A: Yes, the firm telephone number must appear in the ad. Note the bold portions of the Advertising Rule below:

Rule 1260-02-.12 Advertising

(1) All advertising, regardless of its nature and the medium in which is 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 of the name of any team, group or similar entity.


Former Agent Using Firm’s Website?

Q: We have an agent who was released in 2017. This agent continues to manipulate our website to be directed to her website. We have fixed it and asked her to stop, but she does it again. How can we remedy this problem?

A: In this situation, it is recommended that you engage an attorney to help you draft a cease-and-desist letter threatening legal action should the problem continue. The attorney could also help you understand your rights in the matter.


Home Address or Firm’s Address on Mailer?

Q: When an agent is mailing advertising, can they use their own address for the return address on the mailing, or does the return address have to be the firm address?

A: The envelope should have the firm name and address on it rather than your home address.


What if Seller is Exempt?

Q: If a seller signs a property condition exemption, it is my understanding they do not need to do an update. Am I correct?

A: Correct. This form is not needed if a seller is exempt. It is only needed if the seller completed or was required to complete a property condition disclosure report.


Should Seller Request Home-Inspection Report?

Q: With regard to the property condition disclosure update, how is this form used? I was told by another REALTOR® that anything listed on a home inspection report was to be included in an update.

A: It is not encouraged for sellers to request full copies of home inspection reports. Doing so places a burden on them of having new knowledge of material defects or changes which must be disclosed on the update, or to future buyers should the first transaction fall through. It also places a burden on the listing agent to disclose adverse facts revealed by the inspection report. If the sellers have questions regarding what should be disclosed on the update, they should contact their attorney.


Inspection Form vs. Property Condition Disclosure?

Q: What is the difference between the final inspection form and the Property Condition Disclosure Update?

A: RF660, the Buyer’s Final Inspection, is a right provided to the buyer in the Purchase and Sale Agreement. This allows the buyer to confirm that the property is in the same or better condition as it was on the Binding Agreement Date and that all repairs/replacements have been completed. If this is not done, the buyer may be waiving any rights has had for complaints following closing.

RF202, the Property Condition Disclosure Update, is not required to be completed until closing and should be completed by the seller. The form should include any material change in the physical condition of the property or should certify the condition of the property is substantially the same as it was when the disclosure form was provided to the buyer.


Exclude a Licensee from Showing?

Q: I have a seller who doesn’t want a certain licensee showing their home. Is that legal?

A: An agent has a duty to follow the lawful instructions of their clients. If the client does not wish to permit an agent for showing, selling, or participating in the purchase of a property, then this is likely permitted as long as it is not based on a discriminatory reason. However, you will need this in writing from your seller. Be advised of NAR Standard of Practice 3-10:

The duty of cooperate established in Article 3 relates to the obligation of share information on listed property, and to make property available to other brokers for showing to prospective purchasers/tenants when it is in the best interest of sellers/landlords.

Be aware that an ethics complaint could be filed against you; this is why it is so important to have the instruction in writing from your seller.


Exclude a Specific Home Inspector?

Q: I have a listing agent who is refusing to allow a specific home inspector onto a property. How do I handle this situation?

A: The parties can contract with seller stating that a particular home inspector will not be used, as long as their is not discriminatory motive. The seller cannot dictate exactly who will do the home inspection, since the buyer is paying for it.


Exclude a neighbor from Purchase?

Q: It is the wish of my seller not to sell the property to the adjoining property owner. Can we exclude a buyer from purchasing the property?

A: Your seller may exclude buyers from the listing agreement, so land as it is not for a discriminatory reason as defined under fair-housing law. You would need to exclude that party from the listing agreement in the Special Stipulations section. You would simply state that “John Doe” as a buyer is excluded from the agreement.

Out-of-State REALTOR® Fee/Commission?

Q: I have a client that has an out-of-state REALTOR® who identifies property for them. This agent is not licensed in Tennessee. Can I pay them a commission or finder’s fee?

A: TCA §62-13-302(a) states:

It is unlawful for an 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 licensee if the licensee did not conduct any of the negotiations in Tennessee. If the licensee 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 Prior to Agent’s Retirement?

Q: Can I pay one of my retired agent a referral fee is the agent referred the client prior to retiring her license?

A: If the agent was licensed t the time that the contract under which is owed a commission or 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 is inactive.

TREC Rule 1260-2-.39 states:

(1) The commissions earned by an affiliate licensee whole 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.

The same principle applies if the licensee has expired.


Non-Agent Friend/Client Referral?

Q: 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?

A: 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.

Be aware that an ethics complaint could be filed against you; this is why it is so important to have the instruction in writing from your seller.


Can Seller Mandate Closing Company?

Q: Can a listing agent or seller tell the buyer where you have to close? Or can each party close wherever they wish? Also, is it legal to say, “Close where the listing agent or seller wants to close, or the seller will not pay your closing costs”?

A: Under RESPA, sellers are permitted to offer incentives to buyers to use their preferred lenders or closing companies. However, they are NOT allowed to require them to use these companies. If the buyer does not wish to take the incentive, the buyer has the option to close with any company they choose.


Selling to Owner Occupant Only?

Q: My seller wants to sell only to someone who will occupy the home-no investors. Is this legal?

A: Yes, your seller may do this. The seller just needs to work with an attorney on how to place appropriate verbiage in the contract, as well as deed restrictions he wishes put in.


Seller Required to Make Repairs?

Q: We represent a seller on a contract. The contract is contingent upon a home inspection. The seller is refusing to do the repairs. Under the standard contract, is the seller liable to make any repairs as a result of the home inspection, or are they to be negotiated and at the seller’s discretion?

A: All repairs are negotiable. Under a standard contract, the seller is not required to make any repairs, but the buyer can terminate the contract based on the inspection results.

When a Brokerage Holds the Earnest Money

Q: Our brokerage has earnest money that neither party is willing to release. What steps do we need to take to get this resolved?

A: Let’s look at a broker’s duties relating to the earnest money. First, 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 issued a new rule defining what constitutes a reasonable time. TREC Rule 1260-2-.09(7) states, “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 has several options to remit the funds if the deal does not close. (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: “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.” Bear in mind that TREC Rule 1260-2-.09(7) requires this to be done within 21 days from the date it is first requested in writing.

If you have a valid contract, then you will likely have four options. The holder of the earnest money can choose whichever option they wish. You can try to get the parties to agree on the distribution and 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. 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 it is wise to have 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. Keep in mind that 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 provides some protection. Lines 159-161: “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 acourt order (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, it is possible the party not receiving the funds could sue you.

If you decide to interplead the funds, an interpleader is the court action the holders of earnest money can take to determine who is entitled to the funds in a dispute between buyer and seller. If 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 Tennessee REALTORS® website (www.tnrealtors.com) and downloading and/or printing Tennessee REALTORS® 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. buyer or 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.

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 for who covers court costs in an interpleader, it depends on the earnest money agreement and/or contract. Generally speaking, the losing party typically is responsible for paying the court costs. The firm will be listed as the plaintiff. Bear in mind that incorporated firms, LLCs, and certain types of partnerships must be represented by an attorney. An individual cannot represent the interests of an incorporated entity without a law license.

You may indicate to the parties that if they cannot reach a decision and/or split, 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 attorney’s fees and costs, you should include a specific request for those.


Buyer’s Rep Conflict with Another Broker/Agent

Q: I have a buyer’s representation agreement with a client. Another broker knowingly wrote an offer with my buyers. They want to back out of the Purchase and Sale Agreement and have it written by me. Is this legal?

A: The buyers would be unable to get out of the agreement under these terms. There are a few options available to you, though:

You may request a procuring cause determination before your local board. NAR has provided numerous documents offering local boards guidance in making a procuring cause determination through arbitration. There is not an exhaustive list of factors that the local board may consider in a particular situation. Who shows the property is only one factor. It is also possible for the board to give more weight to one factor than to others. Procuring cause is determined by the local board after the property is closed. You may request the local board to have a hearing once the closing has occurred.

You might also consider attempting to reach an agreement on splitting the commission with the other broker. Often, awards at arbitration are all or nothing. Therefore, it may be worthwhile to reach an equitable split so that everyone receives something. However, if you cannot, you could bring it before the local board. There is a 180-day statute of limitation.

Another option would be to pursue action against the buyer if you had a buyer’s representation agreement with them. It is advisable to speak with your firm’s attorney to see if you have a cause of action based on breach of contract. You would have six years to file.

You must wait until the deal closes for a procuring cause hearing to occur; it is also wise to wait until the deal closes to file a breach action.

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 a new contract, where such substitution is malicious or is motivated by the personal gain of the licensee.”

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.”

Finally, you may choose to file an ethics complaint or a TREC complaint against the other broker.


Keys to Helping a FSBO Buyer

Q: I am working with a buyer on a cash sale with a FSBO. Which forms do I need to use?

A: You would draft an offer for a For Sale By Owner (FSBO) just as you would for an MLS property. There are a few differences in that you may need to provide the seller with the Residential Property Condition Disclosure form for them to complete. You will also need to make sure that you provide the seller with the Confirmation of Agency Status and have the seller sign it before submitting the offer. This is required by law. It is also advisable to have the seller fill out a Working with a Real Estate Professional form (RF301).


Commission for Property Not on Market

Q: I am looking for a form I can use for a property that is not on the market. I need a document to have the seller sign regarding a commission.

A: You may use RF161 – Agreement to Shoe Property. This form is designed most often for FSBO properties. There is a brokerage compensation paragraph where you can negotiate a commission with the seller.


A Form that Protect You (RF301)

Q: With regard to FORM 301, what is its purpose, and do we have to get any client we meed to sign it at our first meeting? I understood this form to be used uf you have an unrepresented buyer or seller.

A: 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. If both parties are represented, then RF302 – Confirmation of Agency Status is all that is needed.


The Peril of Escalation Clauses

Q: My sellers received an offer that contained an “escalation clause” stipulating that the buyer’s agent and buyer must receive written proof that competing offers were lower than the offer the buyer had submitted. How should I handle providing proof that the escalation clause included in these offers is satisfied without breaking confidentiality and agency status.

A: Escalation clauses are legal, but they are dangerous to do correctly and troubling for several reasons.

First, this puts the listing agent in a difficult spot. It encourages a bidding war. An agent runs the very real risk of one of the buyers claiming that he “played favorites” with one over the others. An agent has 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. § 62-13-403(4)). Thus, if you disclose the contents of one offer to one buyer, you must disclose the contents of all offers to all buyers. You could easily be caught in an endless circle of offers and changed offers to get the best possible deal. In addition, it only takes one buyer who did not get the property to file a complaint against you.

Under Code of Ethics Standard of Practice 1-15, REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the seller’s approval, disclose the existence of offers on the property.

As a REALTOR®, you must keep confidential information confidential. This is something that is completely negotiable between the parties. If the buyer in the transaction agrees to share the information, you may do so without any repercussions unless there is a confidentiality or nondisclosure agreement in place. However, the agents cannot make the decision to distribute the contract without the consent of the parties.

There is an alternative: The parties could agree to share the contents of the contract except any confidential details or identifying information. This would keep the major portions of the contract confidential while demonstrating that there is a binding contract in place.


‘Service-Center’ Office in Remote Location?

Q: Since my office is in a remote location, would it be permissible to have a service-center office in a community closer to our clients where my agents could meet with them and it not be considered another office, and thus, have to have a principal broker?

A: You cannot operate an office at a different location without it being considered a branch office and having its own firm license and principal broker. You can set up a modular unit as temporary offices on construction sites. However, you could apply for a waiver due to unusual geographical circumstances (TCA 62-13-309(c)).


Broker Oversee Two Offices?

Q: If I decide to open another office within a 50-mile radius of my current office, can I be the principal broker of both, or do I have to hire a broker to run one?

A: Pursuant to TCA §62-13-309(g), you may act as a principal broker for two firms as long as both firms are in the same location, which means both firms are located at and use the same physical address. Under this statute, you cannot be the principal broker at both offices if they are in different locations You will need to hire a principal broker to run the branch office.


Team Establish Separate Office?

Q: There is a team operating within my firm that wants to establish a separate office downtown. Can they do this?

A: No, under the TREC rule below, a team shall not establish a physical location separate from the physical location of the firm.

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.

Best Form to List a Commercial Property?

Q: Which form should I use to list a commercial property?

A: Tennessee REALTORS® offers several commercial forms. The listing forms are CF101 or CF103. You may use either, depending on which agency relationship you prefer.


Commercial Property Disclosure Form?

Q: Is there a form for commercial property disclosures?

A: Pursuant to Tenn. Code Ann. 66-7-108(a): “At the request of a prospective tenant, the owner of commercial of industrial real property where the commercial property space is one thousand five hundred feet (1,500 sq. ft.) or less, and the industrial real property is five thousand square feet (5,000 sq. ft.) or less, shall furnish to such prospective tenant a signed disclosure statement detailing the extent to which such real property is understood by the owner to be in compliance with local and state fire, plumbing, and electrical codes for a building of the type under construction. If, at the time of such disclosure is made, an item of information required to be disclosed is unknown or not available to the owner, the owner may state that such information is unknown.”
You may use form CF201, Commercial/Industrial Real Property Disclosure.


Lead-Based Paint Disclosure for Commercial?

Q: Do commercial transactions require lead-based paint disclosures?

A: Generally, a commercial piece of property does not require a lead-based paint disclosure. The exception is if the property is, or can, be used where children will spend a great deal of time. For example, if the property is a school, day care center, apartments, etc., they would require a lead-based paint disclosure if there were built prior to 1978. It is also needed if the building will be used for any residential purposes. You can use form CF209 is this disclosure is necessary.


New Form RF308 – Wire Fraud Warning

Unfortunately, it is a growing trend for cyber-criminals to hack the emails of real estate licensees. Clients are receiving fraudulent wiring instructions via email across the country. To help address this problem, our Residential Forms Committee has created a WIRE FRAUD WARNING document, a.k.a. RF308. The document was unveiled during our Forms Broker Forum last week and is now available for use in Tennessee REALTORS® forms library. RF308 was created to bring attention to consumers and to protect REALTORS® from liability. Please use this document in all transactions and NEVER involve yourself with wiring instructions!
**Search for RF308 and see all updates for 2019 on our “Forms on the Fly” HERE
** Watch the Forms Broker Forum for an explanation of form updates on YouTube HERE


Alternate (Dummy) Phone Numbers?

Q: Our website developer wants to track where our customers are finding us. One of the ways they do this is through phone tracking, typically in internet advertising, using a number that connects to the main line of the firm. If this number is dialed, they can track back to its internet source, The “dummy” phone number is not the one registered with TREC, although it does connect to the line of the firm’s main phone number, which is registered with the Commission. Is this allowed?

A: No. As detailed in the rule below, the phone number featured on any advertisement has to be the firms number on file with the Commission. It is highly unlikely that TREC would consider a different number listed as in compliance, even if it connects to the firm number.

TREC Rule 1260-2-.12

(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’s telephone number as listed on file with the Commission. The firm name must appear in letters the same size of larger than those spelling out the name of a license or the name of any team, group or similar entity.


Radio Ads?

Q: If I run a radio ad, do I have to include my office phone number or can I just use my cell number?

A: The firm number registered with TREC must be included in the radio advertisement, per this part 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 of 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 recording 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.


Ads on Car Wraps?

Q: Does a car wrap have to adhere to the provisions of the Advertising Rule?

A: In the past, TREC has considered car wraps to be mobile billboards. In light of that, car wraps are subject to all advertising rules applicable to signs.

Facilitator Duties?

Q: What duties does a facilitator have in a real estate transaction?

A: Tenn. Code Ann. § 62-13-403 lists the duties that are owed to all parties in a transaction:

A licensee who provides real estate services in a real estate transaction shall owe all parties to such 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 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 which the party would reasonable expect to be held in confidence, except for information which the party has authorized for disclosure, information 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 such transaction only when such information is available through public records and when such 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 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 disclosure of such interest and the timely written 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 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.


Defaulting to a Facilitator?

Q: If I am a designated agent for a seller and an unrepresented buyer makes an offer, can I change to the facilitator of the transaction? If so, how would I need to do this?

A: You can change to facilitator or you can continue to represent the seller. If you continue to represent the seller, have the unrepresented buyer complete form RF301, Working With a Real Estate Professional. If you are defaulting to a facilitator, then you would simply complete a Notification of Change in Agency Status (RF303) to be signed by both parties.


Facilitator Forms Needed?

Q: If the Confirmation of Agency shows that an agent is Facilitator/Transaction Broker, do both parties involved need to sign Working with a Real Estate Professional (RF301)?

A: If you are the facilitator/transaction broker, then working with a real estate professional does not have to be completed—but it may be a good idea so the parties have familiarity with the terms involved. As a facilitator/transaction broker, you just need Confirmation of Agency forms.


New MLS Policy: Proof of Offer Presentation

The NAR Board amended its MLS policy in November 2018 to allow local associations to impose disciplinary action against members who fail to present either written confirmation that an offer was presented, or evidence that the seller didn’t want to see the offer. It is not a new requirement to demonstrate to a buyer’s rep that you presented an offer; the rule has long been laid out in the Code of Ethics. But now that it carries potential for disciplinary action, it has more bite. The policy reinforces cooperation and brings MLS policy in line with the COE. Under the rule, listing brokers will be required to provide written affirmation or notification to cooperating brokers on the disposition of their offer. The requirement gives associations the ability to impose disciplinary action against a listing broker who fails to present either written confirmation that the offer was presented or evidence that the seller waived the obligation to have the offer presented.

MLS Policy Statement 7.73 says: “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 his 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.”


What Does the MLS Policy Mean for TN Law?

Pursuant to Tennessee Real Estate Commission (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 counter-offer, 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.”

Obviously, an agent can’t force a client/customer to note a rejection, but they need to ask that this be done. If an agent has a client/customer who will not do this, it is advisable to document that they requested the rejection but the client refused. This documentation can then be relayed to the other side in accordance with the MLS policy.