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Property II
University of Dayton School of Law
Reilly, Tracy

REAL ESTATE BROKERS
There are three types of listing agreements:
1) Open listing – the owner agrees to pay to the listing broker a commission if that broker effects the sale of the property but retains the right to procure the services of any other broker in the sale of the property.
2) Exclusive Agency listing – for a certain time only one broker may sell the property, but the seller retains the right to sell himself without commission.
3) Exclusive right to sell listing – the seller is required to pay the broker a commission during the period no matter how the house is sold. (The exclusive right to sell is the most common listing agreement.
Multiple listing services – non-brokers and non-members are not permitted to list property directly with the MLS. Access to a multiple listing service can be essential to marketing and selling property. The seller submits a card with detailed information of the home.
The traditional functions of full-service brokers:
1) Market the home in the multiple listing service
2) Review contracts including advice on pricing, home inspections
3) Negotiating with potential buyers and sellers
4) Locating properties for prospective buyers
5) Arranging for prospective buyers to inspect the property
6) Proving buyers with pertinent information about the community such as relative property values, recent selling prices, and property taxes
7) Notifying buyers of financing alternatives
8) Assisting in the formation of negotiation of offers, counter-offers, and acceptance
9) Assisting with the closing of the sale.
Fee-for-service brokers – unbundle the services offered by full-service brokers and charge a fixed or hourly fee for specific services. This save sellers money by only purchasing the services they need.
Minimum service laws – regulations that dictate the services that a consumer must purchase when entering into a relationship with a broker. They harm consumers in two ways 1) they reduce consumer choice by forcing consumers to purchase services they may not want. 2) Brokers add more services and charge higher prices.
Majority rule for broker commissions– a broker is entitled to a commission when he produces a buyer, ready willing and able to purchase the property o the seller’s terms, even if the sale is not completed. (The rationale for this rule is that the broker is not an insurer of the subsequent performance of the contract.)
The seller is estopped to deny the qualifications of a purchaser with whom he is willing to contract.
Dobbs Minority Rule – commissions shall not be deemed earned unless the contract of sale is performed. The owner expects that money for the commission will come from the sale proceeds. However even under the Dobbs rule a broker is still entitled to a commission if improper or frustrating conduct by the owner prevents title from passing.
In an installment contract the full commission is owed even in a jurisdiction that follows the Dobbs rule. It is possible for the broker agreement to state otherwise, but this never happens.
Brokers’ duty of disclosure – It is more common for courts to find liability where the broker was silent in the face of actual knowledge of a material fact concerning the property. (Exculpatory clauses will not prevent liability). The duty of disclosure can run in favor of the seller as well if the buyer’s broker fails to disclose to the sellers adverse financial information about the buyer.
Easton Case – the agent had a duty to conduct a reasonably competent and diligent inspection of the residential property listed for sale and to disclose to prospective buyers all facts materially affecting the value of the property. (This is a growing trend, but is not the majority.) The Easton decision imposes a duty of investigation on the broker.
The fact that a broker communicates a message does not make him their agent.
A brokers conflicts of interest – An agent who causes loss to his principal because of the conflict may lose the commission and be liable for damages.
Selling agents are traditionally considered a sub-agent of the listing agent and therefore an agent of the seller.
Broker disclosure requirements – many states requires brokers to disclose in writing whether they represent the buyer or seller.
Most states allow the listing broker to split their commission with selling broker who represents buyers.
Several states allow dual agency where a broker can represent both the buyer and the seller. The dual agent must not violate the duty of loyalty to one party by fulfilling the same duty to the other.
Transaction broker – represents neither party to the exclusion of the other, but has a duty to facilitate the transaction for both sides. Dual agents and transaction brokers have a duty of even-handedness toward the parties, and cannot disclose confidential information obtained from either party to the other.
CLASS NOTES:
There are typically two contracts in a property sale. 1) The listing agreement between the seller and the broker.
The second is the mortgage – a promise to repay under the terms of the agreement. The lender will attach a lien as a security interest in the house (not an ownership interest) so if the borrower fails to repay based on the terms the lender can foreclose on its security interest in the property.
Lawyers do not get involved in listing agreements. Lawyers become involved in the real estate contract.
3 types of listing agreements:
Open listing – commission is only paid if the broker proves that his efforts caused the property to be sold. The burden of proof is on the broker – must prove that their efforts were the dominant cause in selling the property.
Exclusive agency or exclusive broker – only one broker is allowed to sell the house, but the owner is also allowed to try to sell on their own.
Exclusive right to sell – broker gets the commission no matter who sells during the time period.
Most states hold that the broker is entitled to commission prior to closing.
Majority position – if the broker fulfills the duty of the listing agreement by finding a willing and able buyer then the broker is entitled to commission.
Dobbs – minority rule- the broker only receives commission if the house closes. Rationale: the owner usually expects that money for payment of a commission will come from the sale proceeds. (Unless the sale is prevented or frustrated by the seller).
Minority Jurisdiction – the broker must prove 1) found a willing and able buyer and on the sellers terms located in the listing contract 2) the buyer then actually enters into a real estate contract by signing 3) the contract actually closes and the proceeds are achieved though closing.
Broker liability for nondisclosure
Easton case in California – a reasonable broker should have known that there were soil problems and that the broker had a duty to conduct a reasonably competent and diligent inspection of the property and to disclose to prospective purchasers all facts materially affecting the value or desirability of the property that suc

money. However every contract is negotiable. Standard contracts can be modified by addendum or phrases can be striked out.
2 types of contracts:
1) Short term agreement/earnest money contract – buyer puts down a deposit of money (this is the typical real estate contract) – These are separate from the actual deed.
2) Installment contract – the seller of the property may act as the financier. The seller is paid as if they are a mortgagee. These are rarely used, but sometimes happen between family members. It is a mortgage substitute.
These are the elements for the statute of fraud for the sale of land:
Intent
Writing Names
+ ID Prop
Signed Essential terms
Purchase price, date of closing, provisions for proportioning taxes do not need to be included because they are not essential. The court will fill in whatever is reasonable. The writing can be on any type of paper.
There are exceptions to the statute of frauds when there is clear intent to enter into a contract.

PART PERFORMANCE
Part performance is only recognized in equity – the only remedy is a suit for specific performance.
Requirements to remove an oral agreement from the statute of frauds 1) the making of the oral agreement and 2) its part performance by clear and convincing evidence which does not mean uncontradicted.
3 general methods of demonstrating part performance by the purchaser 1) payment of part or all of the purchase price 2) taking possession of the property 3) making substantial improvements.
Oral modifications or waivers of the contract clause that states the time of performance are widely upheld.
Cardozo wants the performance to be unequivocally referable to the agreement.
Rationale for part performance: reliance and estoppel
Restatement – a contract for the sale of land may be specifically enforced notwithstanding a failure to comply with the statute of frauds if it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can only be avoided by specific enforcement. (There should be a showing of significant harm because of partial performance).
The restatement language is not limited to the 3 methods described above. However if they are not one of the 3 it is referred to as promissory estoppels rather than part performance.
When the terms of a written contract are ambiguous and susceptible to more than one interpretation, extrinsic evidence is permitted to establish the intent of the parties and the meaning of the contract then becomes a question of fact.
CLASS NOTES:
Modifications can be made with an addendum and a signature.

An oral modification is subject to the statute of frauds particularly if it contains essential terms.