In this case, the sellers entered into a listing agreement to sell 46.8 acres of vacant land. The listing agreement, which was not a C.A.R. form, stated that the listing price was “$17 million cash or for such other price and terms acceptable to” the sellers. It also stated that a cooperating broker could, as a third party beneficiary, enforce the terms of the listing agreement against the sellers.

RealPro represented a buyer for this property. In November 2005, RealPro submitted an all-cash offer of $17 million for a ready, willing, and able buyer. The listing agent indicated that the terms of the buyer’s offer were acceptable to the sellers, except that the listing price was being increased to $19.5 million. The parties did not enter into a purchase agreement.  RealPro nevertheless sued the sellers for its $340,000 commission as a third party beneficiary of the listing agreement.

The court denied the commission. RealPro argued it was entitled to its commission because the word “or” separated $17 million from “such other price and terms acceptable to” the sellers. The court, however, interpreted “or” to include “such other price.” Stated in another way, the court interpreted the listing to be for $17 million or such other price, plus terms acceptable to the sellers. According to the court’s reasoning, requiring a payment of commission upon receipt of a full price offer had many possible results that could not have been intended by the seller, such as an obligation to pay multiple commissions in a multiple offer situation regardless of the terms of the offers, or an obligation to pay a commission if the buyer backed out.

The broker in this case is seeking a petition for review before the California Supreme Court.

Source: RealPro, Inc. v. Smith Residual Company, LLC (2012) 203 Cal.App.4th 1215.

• Home sellers looking for additional incentives to attract home buyers may want to talk to their REALTOR® about offering cash incentives.  No matter how perfect a house may seem to the seller, the new owners will want to change something about it.  It could e the paint, landscaping, or event the front door.
• Acknowledging this upfront and offering a cash incentive to pay for those improvements could make the house stand out from the competition.
• Cash incentives also give sellers the upper hand because they’re setting the amount of the incentive – say $1,000 or so – and can work that into the house’s asking price to recoup the outlay.

In this case, the real estate broker was the listing agent, and also entered into a buyer-broker agreement with buyers Ted and Patti Henley. After the Henleys closed escrow in May 2006, they discovered various construction defects in the home and sued the contractor and sellers. In May 2009, the Henleys amended their complaint to include the broker, claiming they had recently discovered the broker’s involvement. The Henleys alleged that their agent was present at the property in March 2006 when photos were taken to list the property for sale, and that she saw “efflorescence” (i.e., an off-white powdery substance) on the back side of the house while it was being painted over with dark brown paint. (These and other facts are contested and are currently the subject of a rehearing petition).

The broker moved to dismiss the lawsuit as untimely based on the buyer-broker agreement, which states a claim must be brought within two years as is consistent with the two-year period in Civil Code section 2079.4. While the appellate court agreed that parties to a contract may stipulate to a reasonable period of limitation shorter than that fixed by the statute of limitations, the court focused on the discovery rule, which means the time starts when the problem is discovered. In this case, the Henleys specifically claimed their agent knew but did not disclose knowledge of the construction defects and the seller’s concealment. The court reasoned the broker “may not reap the benefit of a shortened contractual limitations period when its own alleged malfeasance contributed to the delay in the discovery of the buyers’ injury.”

The appellate court remanded the case back to the trial court to determine at what point in time the Henleys discovered the broker’s alleged concealment of the defects. While fraud and active concealment claims are typically subject to the discovery rule, the court also ruled that the Henleys’ remaining claims of negligence, negligent inspection, and breach of fiduciary duty were not limited by the two-year contractual limitation in the buyer-broker agreement and were in addition to the duties in Civil Code section 2079. A motion for rehearing has been submitted and it is expected the parties will file a petition for review before the California Supreme Court.

Source: William L. Lyon & Associates, Inc. v. Superior Court of Placer County (2012 WL 1232114) (decided April 12, 2012).

Duties to Clients and Customers

Article Six

REALTORS® shall not accept any commission, rebate, or profit on expenditures made for their client, without the client’s knowledge and consent.

When recommending real estate products or services (e.g., homeowner’s insurance, warranty programs, mortgage financing, title insurance, etc.), REALTORS® shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the REALTOR® or REALTOR®’s firm may receive as a direct result of such recommendation. (Amended 1/99)

Standard of Practice 6-1

REALTORS® shall not recommend or suggest to a client or a customer the use of services of another organization or business entity in which they have a direct interest without disclosing such interest at the time of the recommendation or suggestion. (Amended 5/88)

• Once a primary tool for real estate agents looking to sell a home, experts say the traditional open house has lost its influence in the Internet age.  Most buyers today conduct their preliminary research at home – reviewing online photos, virtual tours, and a home’s layout – and arranging for private showings of the properties they’re interested in.
• Many REALTORS® report that open houses rarely attract interested, qualified buyers.  During the boom times, it was more common for buyers to make offers at an open house because they were worried that another buyer would beat them to it.  But with real estate sales slow in most markets, the urgency is no longer there.
• Buyers who visit an open house without their REALTOR® could be setting themselves up for problems.  Listing agents – the REALTORS® who are representing the seller – have a fiduciary responsibility to represent the sellers’ best interests, which, not surprisingly, are often in conflict with the buyers’ best interest.

Register for the class today!

Date: Wednesday, May 9, 2012
Time: 9a – 1p
Price: *$39 C.A.R. Members | $78 Non-Members
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OR

Date: Tuesday, June 5, 2012
Time: 9a – 1p
Price: *$39 C.A.R. Members | $78 Non-Members
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Please note: the LearnMyWay™ Distressed Properties course is not Department of Real Estate (DRE) accredited for 4 hours of Continuing Education (CE) in Consumer Protection.

C.A.R. has received reports that a private company may also be using testers posing as prospective tenants to upsell its own services. The company purportedly uses testers to catch agents engaging in discriminatory acts, and then issues demand letters offering to settle if the agents sign up for the company’s own fair housing training courses. In at least one report, a brokerage paid a $25,000 settlement and was also required to sign up for three years of training at that company for which it had to pay $10,000 per year.

The best way to ensure that you do not run afoul of the law is to be knowledgeable about and strictly comply with federal and state fair housing laws, particularly those pertaining to service dogs and disability accommodations. Violations of such laws expose REALTORS® to potential liability, as well as DRE disciplinary action for license suspension or revocation.

Duties to Clients and Customers

Article Five

REALTORS® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.