1 Real Estate Brokers Real Estate I Mike Brigner, J.D.

2 Parties to Real Estate Contract Buyer Seller Listing/Selling Broker Buyer’s Broker Real estate transactions are covered by Text Chapter 6 R.C

3 Real Estate Agents Real Estate Agent = Real Estate Sales Agent Broker = Real Estate Broker = (Agents work for Brokers) All are Agents All are Realtors

4 Listing Agreement Agreement between seller & listing broker –“Exclusive Right to Sell” (Text pp ) Contract for services (not real estate) –So, not covered by Statute of Frauds –R.C , 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

5 Listing Agreement Must contain a definite expiration date R.C (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

6 Listing Broker Owes to the seller the fiduciary duties of loyalty, obedience, disclosure, confidentiality, reasonable care, diligence and accounting R.C a. No duty to obey illegal instructions b. Must use customary business methods, w/o interference from the seller

7 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

8 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.

9 Agency Disclosure Ohio Real Estate Commission adopted an agency disclosure regulation as required by Ohio Revised Code (R.C ) 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

10 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 ) –State of Ohio:

11 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%)

12 Listing/Seller’s Broker Compensation Usually gets paid from purchase money at closing Broker’s right to commission is a much-litigated issue

13 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

14 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

15 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 –State of Ohio:

16 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

17 Inspections & Disclosures Listing Broker has a DUTY to conduct a reasonable inspection. R.C (A) Listing Broker may not rely on seller’s word if broker has reason to believe seller is incorrect

18 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

19 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

20 Fair Housing Federal Fair Housing Administration enforces federal law against discrimination in housing practices. Covers sale and rental – 42 U.S.C et seq. – 24 C.F.R Ohio Civil Rights Commission enforces state laws against housing discrimination – R.C (H)

21 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.