CALIFORNIA REAL ESTATE UPDATE #9

LATEST LAWSUIT OF INTEREST TO LICENSEES

Fax.com is a facsimile marketer based in Aliso Viejo. The company acknowledges sending over 3,000,000 faxes a day and many of them are unsolicited advertisements or announcements to personal, business and government machines.

Earlier this month, the Federal Communication Commission proposed fining Fax.com $5.38 million for sending these faxes. This is the largest fine ever proposed for such a violation.

This decision was based on the fact that the company sent unrequested faxes that used receiver's machines, toner and office personnel time. This is costly to a company. Faxes were sent at all hours tying up messages to emergency machines at hospitals, police, etc. Also, faxes sent in the middle of the night would disturb people in their homes.

Now, another lawsuit has been filed in State and Federal courts in California by a coalition of activists. This law- suit is seeking $2.2 trillion in damages. It is getting dangerous to send faxes.

Our State Legislature is considering another bill to establish new regulations concerning faxing. These regula- tions would be very restrictive. Before sending a fax, you would have to have permission or a request from the prospect.

Currently, you must have an 800-number in a prominent spot on the fax being sent that recipients can call to be taken off the fax list. Then, when someone calls, you must take them off the list as soon as possible. Fax.com is accused of sending millions of faxes and not removing any fax numbers from their lists.

Keep an eye on these cases. The activists are requesting a minimum statutory remedy of $500 per fax sent by every advertiser who used Fax.com over the last four years. Fax.com and Cox Communications (their Internet Service Provider) are being sued for triple damages ($1500 per fax) on every unsolicited fax. Just calculating - ($1500 x 3,000,000 per day equals $4.5 billion a day or about $1642+ billion a year or $6570 billion in 4 years.) I hope Fax.com has saved some money.

WHAT CLIENTS SHOULD KNOW ABOUT AGENCY DISCLOSURES AND COMFIRMATION REGULATION EXAM

The following is a ten question exam with comprehensive answers covering Agency and Disclosure regulations in California. It is helpful for training of associates and can be used as a handout to buyers and sellers.

Also, there are ten more questions and answers on our Web site. Check them out. I've been teaching Agency for over sixteen years in California and these are the most misunderstood areas.

If you or any associate want to use this exam as a handout, please request our permission by contacting our office by either e-mail or fax and explain how you will use the information. You must give us credit for the exam. For example, you should include a statement such as "This exam is copy- righted by Duane Gomer Seminars, a California Real Estate Education company. Phone number: 800-439-4909 and Web site: www.DuaneGomer.com".

The next newsletter will discuss Installment Sales. In many cases, owners would benefit by using Seller Financing and I believe associates should be recommending it to sellers more often. Send me any comments on future exams you would want to see.

The California Legislature passed a regulation concerning Agency Law and it was effective on Jan. 1: 1988. 2002. 1986. 1856. More explicit information about Agency Law can be found in: Department of Real Estate Regulations. California Civil Code. Business and Professions Code. Realtors' Code of Ethics. The purpose of the Agency Disclosure form is to allow clients to: Determine the amount of commission. Define listing and selling agency. Understand what type of agency relationships are available. Establish who is representing whom. Whom of the following must receive an Agency Disclosure in California? A seller of a 4-unit apartment. A buyer of a mobile home. A renter in a 16 month lease in a single family home. All of the above. When must a seller receive an Agency Disclosure? Prior to entering into a listing agreement. At the outset of a transaction. From a selling agent as soon as practicable prior to presenting an offer. All of the above. What can an agent do if a client refused to sign an acknowledgement of receipt of the form? Set forth, sign and date a written declaration of any facts. Nothing can be done. File a notice with DRE. None of the above. The Agency Disclosure can be provided: By certified mail. In person. Only in person. Both a and b. The confirmation of the Agency relationship in a transaction can be completed on: The purchase contract. In a separate writing. A form provided by DRE. Both a and b. When could a homeowner legally receive more than one disclosure? Never. When they talk to different agents about listing their home. Always. All of the above. In California when Betty of Company A has a listing and Mary of Company A has the buyer, most companies have the following policy: They would be seller's agent only. They would be buyer's agents only. They would be dual agents. They would decide on each case as it arises. If Company A has a listing and Company B has a buyer, Company A has the following obligation to the buyer: Duty of honest and fair dealings. Diligent exercise of reasonable skill and care in their performance. Duty to disclose all known material facts affecting the value or desirability of the property that are not known to or within the diligent attention and observation of the parties. All of the above. A real estate agent acting as a dual agent must disclose to all parties: All confidential facts. Any physical handicaps of buyers and sellers. If seller is willing to sell at less than the listing price. None of the above. Company A has a listing and Company B wants to submit an offer to the seller. Prior to presenting the offer the company B associate must: Check the commission agreement. Provide a copy of the disclosure form to the seller and have it signed. Show the seller the signed Disclosure Agreement from the buyer. None of the above. What is the penalty listed in the Civil Code for not providing an Agency Disclosure in a timely fashion? Loss of license. $1,000 for the first infraction. Triple damages. Nothing is discussed. Which optional forms developed by CAR should be used with the Agency Disclosures? Listing Agreement. Transfer Disclosure. Seller and Buyer Advisories. None of the above. The Agency Regulations were codified to make precise the case of: Wellenkamp versus Bank of America. Fields versus Century 21. Easton versus Straussburger. Starker versus Tax Court. What other information must be printed on the back of the Disclosure? Your Company Agency Policy. Excerpts from Civil Code Section 2079. Code of Ethics. Address and phone number of Brokers. If sellers pay a commission: All parties must be their agent. It cannot be split between companies. Payment of a commission does not determine Agency Relationship. None of the above. When a firm is acting as an agent for a seller or buyer, their most important obligation according to State regulations is: Work hard. Putting a property in multiples. Preparing a marketing program A Fiduciary duty. Company A has a listing and Company B has the buyer. On the confirmation portion of the purchase contract, Company B has stated that they are working as the Agent of the buyer exclusively. On the Listing Agent portion of the Confirmation, they wrote the name of Company A. For the listing agent relationship boxes, Agent B should: Check that Company A is the Agent of the seller of the seller exclusively. Check that Company A is the Agent of both buyer and seller. Leave the agency relationship to be completed by Company A when they are assisting in presenting the offer. None of the above.

ANSWERS TO THE AGENCY DISCLOSURE AND CONFIRMATION REGULATION EXAM

1. A.  In 1986, CAR sponsored, promoted and lobbied to get a regulation passed concerning Agency Relationships. Before this regulation was promulgated, Multiple Listings regulations in California stated that all agents represented sellers. No one represented buyers. This led to many lawsuits as in many cases buyers were not told that they weren't being represented. Also, many sellers sued agents as being "undisclosed dual- agents" by placing buyer's desires above the sellers. This new regulation also recognized that companies could work as dual agents in a transaction with the know- ledge and consent of both parties.

2. B.  Statement of fact. The discussion about Agency relationships is in Civil Code Sections 2079.12 through 2079.24.

3. C.  The Agency Disclosure should be treated only as a distribution of information about the three types of Agency Relationships available, Seller's Agency, Buyer's Agency and Dual Agency. At the time this form is given to a client, no determination of the agency relationship should be done or confirmed. Clients should read and understand the signature line as they are only acknowledging that they received a copy of the disclosure.

4. D.  The disclosure goes to buyers and sellers of 1 to 4 dwelling units and mobile homes (when sold according to Section 10131.6 of the Business and Profession code) plus any tenant or landlords or leasor of those proper- ties when a leasehold exceeds one year.

   After listening to many learned attorneys in my classes, I recommend one rule for all companies. Give the Agency Disclosure and Confirmation to all clients. It is professional and informative to do so and might prevent a lawsuit in the future.

5. D.  All three answers are correct. Also, the form is to be given to anyone with whom there is more than a casual relationship. A buyer must be given the form by their agent as soon as possible prior to their execution of the offer to purchase. To me, these hard to understand requirements illustrate that the Agency Disclosure should be given as soon as possible. (To all agents, if someone says hello to you at a shopping center, give them a form.)

6. A.  In other words a client does not have to sign the form stating that they received a copy. These agent can complete the form. However, as an experienced real estate broker, I would be very apprehensive if anyone would not sign a simple form that acknowledges they received information about possible agency relationships.

7. D.  If the form is sent certified mail and a receipt is obtained, no signed acknowledgement is required.

8. D.  In practice, almost all confirmations are done in the Confirmation Section on a Purchase Agreement.

9. B.  Statement of fact.

10. C.  Almost all resale companies in today's market are dual agents on all transactions when they have both the buyer and the seller in a transaction. One exception to this rule is New Home Sale Tracts. In these transactions most companies represent only the seller. Remember that an agent can state that they will be dual agents but clients do not have to accept this elective. Agents and clients must agree on the agency relationship for their transaction and a good time to discuss the alternatives is before a listing or sales agreement is signed.

11. D.  Even though a party is represented by another agent, brokers have the three duties outlined in the question to the other parties.

12. D.  If a confidential fact is not material fact (i.e. clients' financial situation or sellers reason for selling) it does not have to be disclosed. Also, questions concerning race, creed, color, religion, marital status, gender, age, physical handicaps including AIDS etc, are not to be disclosed because of Fair Housing Regulations. When an agent is acting as a dual agent, price should not be discussed unless both parties are present or agree to a discussion.

    A dual agent is acting for both parties. They have a fiduciary relationship with both parties. This situation is unbelievably difficult and agents should be extremely careful about all statements about the properties and clients.

13. B.  Statement of fact. In many areas of California this is not done by buyer's agents. It is clearly expressed as a requirement in the code.

14. D.  No where in the Civil Code is a penalty discussed about non-compliance. However, there was a court case that stated that an agent would have no right to a commission if the proper forms were not provided.

15. C.  These optional advisories are outstanding and should be used by all licensees and read and understood by all clients. The forms spell out the responsibilities of all principles and agents. The code states that the parties should be diligent in attention and observation of the properties. This means, "Look around and ask questions".

16. C.  In the Easton case a listing broker was penalized for not being fair and honest with the buyer. The preamble to the Civil Code Section mentions the Easton Case and its importance in Agency law. Fields versus Century 21 is a recent case in San Diego that stated "The Statute of limitations on a Violation of a fiduciary Duty is 3 years from date of discovery of the violation". That means actions against agents could be started years after a transaction.

17. B.  Statement of fact. Many companies forget to fax the back side or make photocopies of only the front side.

18. C.  Right out of the code. A seller can pay part of a commission to an agent representing the buyer.

19. D.  The fiduciary relationship is the most complete type of agency relationship. The code says this duty includes utmost care, integrity, honesty and loyalty. Agent must walk in the moccasins of their client.

20. A.  The buyer's agent must complete the Confirmation Statement and have their client sign the Purchase Agreement which means that they know and consent to this arrangement. If the buyer's agent left this box to be completed later, it would be a change to a contract "above a client's signature" making the contract voidable. Also, buyers do not want some other party representing them. It is best if the buyers and the sellers each have their own agents. The buyers have the right to state that they want the listing broker to work only for the seller. Every resale listing company that I know always work for the seller exclusively in these two agent transactions so there should be no problem at all. The agent working with the buyer should complete both sides of the Confirmation Section. Many agents are not doing this. Incidentally, if you are a listing broker and receive an offer where the listing agent relationship isn't completed, include the correct relationship in a counter offer.

COMPLETE INFORMATION ON REAL ESTATE LICENSING

PRIVACY STATEMENT and UNSUBSCRIBING

DUANE GOMER, INC., DOES NOT SELL, RENT, LOAN, TRADE, LEASE OR OTHERWISE TRANSFER ANY PERSONAL INFORMATION COLLECTED ON OUR SITE, INCLUDING REGISTRATION FORMS OR E-MAIL LISTS, TO ANY THIRD PARTY.  WE WILL TREAT ANY INFORMATION YOU PROVIDE AS CONFIDENTIAL INFORMATION AND WILL NOT DISCLOSE IT TO ANY THIRD PARTY.  IF YOU RECEIVED THIS IN ERROR, WE WILL PROMPTLY UNSUBSCRIBE YOU FROM OUR MAILING LIST, AND WE APOLOGIZE FOR ANY INCONVENIENCE.