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Real Estate BrokersReal Estate I

Mike Brigner, J.D.

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Parties to Real Estate

Contract• Buyer• Seller• Listing/Selling Broker• Buyer’s Broker

• Real estate transactions are covered by

• Text Chapter 6• R.C. 4735.51-.74

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Real Estate Agents• Real Estate Agent =• Real Estate Sales

Agent• Broker =• Real Estate Broker =• (Agents work for

Brokers)• All are Agents• All are Realtors

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Listing Agreement• Agreement between seller & listing

broker– “Exclusive Right to Sell” (Text pp. 156-157)

• Contract for services (not real estate)– So, not covered by Statute of Frauds – R.C. 1335.05, law that says which contracts

must be in writing– Sale of real estate must be in writing– Listing of real estate need not be in writing

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Listing Agreement• Must contain a definite

expiration date R.C. 4735.18(A)(27)

• typically 3-6 months• May be renewed• "extension clause" – commission is

due to broker if he/she found a Buyer during the listing period, even if sales contract not signed until after expiration of listing agreement

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Listing Broker• Owes to the seller the fiduciary

duties of loyalty, obedience, disclosure, confidentiality, reasonable care, diligence and accounting R.C. 4735.62•a. No duty to obey illegal instructions•b. Must use customary business

methods, w/o interference from the seller

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Listing Broker• More fiduciary duties:

– c. Disclosure - full, fair, timely disclosure of any material fact

– d. Material fact = Reasonable person would attach importance in making a decision

– e. No duty to the buyer except to deal fairly and non-fraudulently

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Other Brokers

• SELLING BROKER: Subagent of listing broker. Owes same fiduciary duties to seller as listing broker.

• BUYER’S BROKER: Owes fiduciary duties to the buyer only. No duty to the seller except to deal fairly and non-fraudulently.

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Agency Disclosure• Ohio Real Estate Commission adopted an

agency disclosure regulation as required by Ohio Revised Code (R.C. 4735.57)

• Requires all real estate licensees to disclose in writing their agency relationship– That is, which party do they represent?

• Purpose: consumer protection – protects both buyer and seller

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Dual Agency• Conflict of interests issues – one

person can’t be loyal to both sides• Dual agency is permissible in Ohio• A single broker may represent the

buyer and the seller, but only with the knowledge and consent of both parties

• Must use state form (R.C. 4735.57)– State of Ohio: http://ohio.gov/index.stm

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Listing/Seller’s Broker

Compensation• Contingency

basis: Listing broker is paid only if he/she obtains a buyer

• Usually paid a percentage of purchase price (typically 6 to 7%)

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Listing/Seller’s Broker

Compensation• Usually gets paid

from purchase money at closing

• Broker’s right to commission is a much-litigated issue

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Buyer’s Broker Compensation

• Can be flat fee from buyer

• But usually is a share of listing broker’s % (“split commission”)– Seller’s Broker 5%,

Buyer’s Broker 2%– Or, each broker paid 3½%

• Splitting commissions requires consent of seller and buyer

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Exclusive Listing• “Exclusive right to sell” in contract means

listing broker gets commission if house is sold by any means during the listing

• “Exclusive agency” in contract means listing broker gets commission if house is sold by anyone other than the owner himself

• Listing broker also gets commission after end of any exclusive period, if broker was the “procuring cause” of finding the buyer

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Inspections & Disclosures

• Caveat Emptor - “Let the Buyer Beware” is the common law rule as to observable defects in real estate

• Ohio Law: Seller now has duty to disclose known material facts. – R.C. 5302.30– State of Ohio:

http://ohio.gov/index.stm

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Inspections & Disclosures

• Seller NOT liable for failure to disclose if:– defect observable upon

reasonable inspection, and– purchaser has opportunity

to inspect, &– no fraud on part of the

seller• Seller IS liable for failure

to disclose if:– defect is not observable

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Inspections & Disclosures

• Listing Broker has a DUTY to conduct a reasonable inspection. R.C. 4735.67(A)

• Listing Broker may not rely on seller’s word if broker has reason to believe seller is incorrect

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Inspections & Disclosures

• Buyer has DUTY to inspect and inquire

• BUT Buyer has NO DUTY to inspect when an affirmative representation is made to buyer about condition

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Inspections & Disclosures

• "As is" = seller is relieved of duty to disclose defects

• So, bars claim against seller for fraudulent nondisclosure

• But does not bar claim for fraudulent misrepresentation or concealment– EX: "good sound house", but house has

termites = fraudulent misrepresentation– EX: painted-over water marks =

fraudulent concealment

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Fair Housing• Federal Fair Housing

Administration enforces federal law against discrimination in housing practices. Covers sale and rental– 42 U.S.C. 3601 et seq.– 24 C.F.R. 100.204

• Ohio Civil Rights Commission enforces state laws against housing discrimination– R.C. 4112.02(H)

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Real Estate Brokers

Concluded Thank you

Mike Brigner, J.D.END OF CLASS: (EVERY Class) Clean up classroom; log off computers; check for personal property & computer disks; make sure you have signed in.