Risk Management at the CAR Winter Meeting | SummitDaily.com
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Risk Management at the CAR Winter Meeting

Rick Eisenberg
Broker Associate
Omni Real Estate Co., In
Director, Colorado Association of Realtors
Director, Breckenridge Area, Summit Associatio

The CAR Winter meetings in early February provide opportunities for committee members and board members to meet face to face and to attend educational forums to assure that our membership remains informed on current issues affecting our business. One of the educational forums presented was on Risk Management. Litigation against real estate brokers is on the rise as many brokers are being a bit too ‘creative’, and are either knowingly or unknowingly disregarding, or flaunting regulations. Consider these do’s and don’ts:

• DO ensure that if you are a principal in a transaction (CP-35) that you serve in an agency capacity with yourself, and treat the other party as a customer. No brokerage relationship may exist! And don’t forget to disclose that you are a licensed real estate broker in this state.

• DO use the Short Sale Addendum and the Foreclosure Property Addendum when required.

• DON’T attempt to represent the lender in a short sale transaction when working with a buyer.

• DON’T work with the lender in a short sale to attempt to modify the terms and conditions of your seller’s loan. You may be considered a ‘Foreclosure Consultant’ and you are not licensed to perform this function through real estate licensing. However, you may work with the lender to take out the entire loan.

• DO report all criminal convictions to the real estate commission, even if it is a misdemeanor conviction. The list that constitutes license law violation has grown since 2008. Before you plead guilty to what seems like an innocuous misdemeanor, be sure to consult a knowledgeable attorney cognizant in real estate law. It could affect your license!

• DON’T overstep boundaries when trying to market the property ‘aggressively’. There has been an increase in brokers:

Staging properties without permission from the seller,

o Living in properties without permission from the seller

o Marketing properties at prices lower than agreed to by the seller

o Mis-describing properties.

• DO understand the rules and regulations when performing property management services, particularly those relating to proper accounting of monies. There has been a dramatic increase in misuse of funds including brokers paying personal or business expenses with other people’s funds.

• DON’T charge your clients for services unless they are actually performed (RESPA, Sec. 8(b)). There has been an increase in brokers charging a flat fee on top of commission in order to cover ‘overhead’, ‘file closing fee’, etc. It is OK to charge for an additional service provided, but it must be in the listing contract, and the specific service must actually be provided.

• DO be careful if charging an additional fee, that you don’t mark up a third party fee. In some parts if the country, title companies are, e.g., adding on a fee to county recording fees. Some circuit courts are allowing, some are not. Colorado has not weighed in yet, proceed with caution.

• DO make all AFBA disclosures to the real estate commission annually. Over 60% of brokers do not accurately disclose affiliated business arrangements or joint marketing agreements.

The bottom line is that in these tougher times, we need to be extra diligent in ensuring that we are following license law. No one is exempt! Have a profitable year, keep it squeaky clean, and when in doubt…disclose!


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