REAL ESTATE TRANSACTIONS
CIOCCO
SPRING 2013
BUYING PROCESS
In re lanza (1974) pg. 18
Facts:
· Respondent was an attorney – he agreed to represent the seller of a home, he then also agreed to represent the buyers – the seller claimed she was not made aware of this until a later date by the buyer.
· Buyer agreed to give seller a later-dated check to cover the outstanding balance, the check was returned and the buyer said they wouldn’t honor the check because the home had water damage in the basement – and it was a breach of a representation the seller made
· Seller contacted attorney who did nothing on her behalf
Court
· His conduct was unprofessional because he didn’t notify the seller of his representation of the buyers; and
· Because he didn’t suggest the seller be paid in tax when he learned the buyers couldn’t do so
· FROM CLASS
o Agent must disclose all possible conflicts of interest – shouldn’t represent two individuals – send letters declaring who you represent to each party
BROKERS
Brokers
· Brokers work for the seller – the seller enters into exclusive contract with broker to have them sale the property.
· Brokers traditionally sold the property on the MLS
· Not bound by attorney rules of ethics
· Not uncommon to represent both sides
· Unauthorized practice of law
· Housing discrimination – TITLE VIII – see below
1. New Brokerage Model (allows consumers to pay less for brokerage services)
· The internet – allows clients to choose what brokerage services they want
· One is the exclusive buyer’s agent
o They do not accept any listings, ensuring that they will avoid a conflict of interest (when a buyer wants to buy a selling clients house)
· Lead Generator – refer the clients to an agency and then get a piece of the commission for referring
Title VIII
· Title VIII of the 1968 Civil Rights Act provides in part that it shall be unlawful for profit, to induce or attempt to induce any person to sell or rent any dwelling by representations regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race, color, religion, sex, handicap, familial status, or national origin
· Has also been interpreted to prohibit racial steering, another discriminatory practice, in which the broker directs white buyers to white neighborhoods, and minority buyers to minority or mixed neighborhoods
· Today the Association endorses the principal that brokers have the responsibility to offer equal service to all clients and prospects without regard to race
Business Consulting Services, Inc. v. Wicks pg. 38
· Rule — In order for a broker to be entitled to a commission, under and in accordance with an extension clause, he must ordinarily be able to establish at least some causal connection between his actions and efforts in regard or relation to the listed property and the ultimate purchase thereof, and with the sale eventually made to such purchaser.
· Generally speaking, an extension clause is intended to afford a measure of protection to a broker against an unscrupulous and fraudulent attempt on the part of a property owner to secure the advantage of the broker’s services and yet avoid paying him a commission through the device of delaying sale of the listed property to a purchaser interested therein by the broker until after the expiration of the listing agreement
· FROM CLASS
o Most people call the extension a “tail”
o Turning on the term “referred” – broker must do more than merely refer or point a potential buyer to a seller – in contract an attorney should define what refer means
Tristram’s Landing, Inc. v. Wait (1975) pg. 43
Facts:
· Brokers contacted seller to list property – seller entered into nonexclusive agreement – Brokers found buyer, agreed on price and buyer pulled out. Seller did not seek action against buyer but kept deposit.
· Brokers sued seller for commission and lower court found in their favor
· No mention of commission to be paid was had, the only mention of commission was in the purchase and sale agreement singed by the buyer and seller
Court:
· When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when
o He produces a purchaser ready, willing, and able to buy on the terms fixed by the owner
o The purchaser enters into a binding contract with the owner to do so; and
o The purchaser completes the transaction by closing the title in accordance with the provisions of the contract.
· FROM CLASS
o “On said sale”
o Know that general rule is that must say when broker will be paid – when produce buyer and the property is sold
Does a Broker have any rights against a buyer?
· Third party beneficiary theory, tortious interference with contractual relations, and the emerging tort of unlawful interference with prospective economic advantage have been the main ground for relief
· Look at pg. 49 Harris v. Perl
Ellsworth Dobbs – not all states follow
· When a prospective buyer solicits a broker to find or to show him property which he might be interested in buying, and the broker finds property satisfactory to him which the owner agrees to sell at the price offered, and the buyer knows the broker will earn a commission for the sale from the owner, the law will imply a promise on the part of the buyer to complete the transaction with the owner
BROKER’S DUTIES TO SELLER AND TO BUYER
Duty
· Realtors are obligated to treat all parties honestly
A Reassessment of the Selling Real Estate Broker’s Agency Relationship with the Purchaser
· Typically, the seller and broker enter into a listing agreement which expressly authorizes the broker to act as the seller’s exclusive agent in selling the specified property – this broker is commonly referred to as the listing broker
· Access to the MLS (multiple listing service) is one of the most important services a broker could offer to a client
· Usually, when a cooperating MLS member, working with a potential purchaser, prepares to make an offer on the listed property, the cooperating or selling broker is deemed a subagent of the listing broker. Generally subagents are in a fiduciary relationship with their principals. As a result, they owe their principal – the seller – the same duties as those which an agent owes the principal
· A clear distinction exists between the listing broker and the selling broker
o It is the seller of real property who usually
nts within the trade area
· Income levels within the trade area
· Traffic counts within the trade area
· Zoning
· Competition in the market (existing and potential)
· Access to roadways and traffic signals
· Potential community support or opposition to the plan
Type of Development
· Life Style Center
o A lifestyle center is a shopping center that combines upscale oriented tenants, restaurants and amenities and is mostly comprised of small shop space
o The life style development is typically seen in major regional areas that boast high income levels and very dense demographics. The developer would look for a minimum of 100k-150k people within the 3 mile trade area with median incomes of 100k for a life style center
o Retailers would look for intersection of two major highways at a point where the traffic counts are 30k cars per day or greater on each road
· Outlet Center
o An outlet center is a shopping center where upscale oriented tenants or full price retailers maintain stores that sell products at a discounted price
o Outlet centers are successful only in rare and specific instances. Generally, they look to locate off of major interstate highways in tourist areas and are usually occupied by Factory Outlets such as Carters, Calvin Cline and Nike or they are an inventory dumping ground for mainstay retailers such as Gap Outlet. They try to stay away from any standard retail developments due to the fact that they do not want to be seen as competition for their customers, the mainstay retailer or normal consumer
· Power Center
o A Power Center (300k – 400k square feet) consists of a couple large anchor stores, each usually in excess of 100k square feet, and several junior anchor tenants and a very small sampling of small stores and pads
o In a typical suburban market, tenants that you would find within a power center are focused on demographics of the 5 mile trade area. Typically, tenants in this style of development will look for between 125k-150k people within the trade area and median household incomes of 65-75k
o Power centers are typically located at the intersection of 2 major highways at a point where the traffic counts are 30k cars per day or greater on each road
o Power centers require a larger tract of land and most likely closer t o50 acres would be needed based on the current development laws today
o FROM CLASS
§ Typically, anchor stores pay the lowest rent – smaller stores are paying the highest rent
§ Requires a very large tract of land – parking is the huge reason for a large area need
§ Need smaller stores, anchors aren’t what bring in all the money
