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Home / Legal Tips

Bullock_Curtis Curtis A. Bullock is the CEO of the Salt Lake Board of Realtors®. He earned a law degree from the J. Reuben Clark Law School at Brigham Young University. He is currently a member of the Utah State Bar. He has served Realtors® in a variety of capacities for more than a decade. Prior to joining the Salt Lake Board of Realtors® in 2012, Curtis served as legal counsel for the Utah Association of Realtors®. There he managed the UAR Legal Hotline answering thousands of real estate related legal questions. He is a certified continuing education instructor and has taught many contract and agency law courses across Utah to real estate licensees. Below are some of the most commonly asked real estate questions by Utah Realtors®.


Post-Closing Issues, Professionalism & Relevancy

Q: Suppose you represent the buyer and have just attended Settlement. Shortly after the buyer gets the keys and takes possession of the home, they find a few problems with the property that were not discovered when doing the walk-through. The refrigerator is missing, there is a small hole in the drywall in the stairway and the prior owner has left a bunch of trash in the garage. Your buyer calls you and asks for help. You say, “sorry that’s not my problem, call the seller, it’s between you and them. I have a good lawyer you can call.” Your buyer hangs up the phone frustrated at your response and goes on their way. Does this sound familiar? Have you ever done that? I suppose there are legal answers to this problem, but my message here goes beyond that. What is the practical and smart thing for you as the Realtor® to do when faced with this situation?

A: One thing is certain is that in today’s competitive marketplace, it is more important than ever to provide the best possible service to your clients. Increasing the level of your professionalism and maintaining your relevancy in the transaction is vital. There are many industry disruptors out there that would love to automate the real estate transaction and make the real estate professional less important. The best way to combat that is to show the tremendous value you provide.

Situations like the one above can actually be a good thing for you as a Realtor®. It can really turn into an opportunity for you to shine and set yourself apart as a vital component to any real estate transaction. Remember, just because the transaction has closed and you have received your check does not mean you should forget about your client. Maintain a good relationship with them. Take this kind of situation as an opportunity and turn it into a positive thing for your client. It might even be good to look for and seek out situations like this because you can do so much good with it and can leave a positive impression with your client.

I highly doubt the buyer in this situation would refer you to a friend if you left them hanging and conversely I’m sure that if you helped them actually solve the problem, they would remember you more for that than anything else that happened during the transaction.

Having said all that, as the professional, there are some things you can do to minimize classic post-closing problems like these. Here are a few that come to mind:

(1) When you are with your buyer during the walk-through, pay attention for common problems and advise your client accordingly. The classic problem of missing appliances can be dealt with in the REPC and you can remind the Seller that such things must stay in the home. Who knows, maybe the Seller isn’t even aware that the fridge was supposed to stay.

(2) Use your intuition as you go through the transaction and anticipate problem areas. Most likely you’ve dealt with similar situations so learn from your experience and solve the problem before it even happens.

(3) Refer your client to a good contractor that could help with the small hole in the drywall (which was likely made when the piano was being carried out by the moving company). Maybe even send a text to your contractor friend to give him a heads up that your client might be calling them.

(4) Take an hour and offer to help clean the garage of all the trash that was left by the former owner. There is nothing more powerful than serving your client and having them see you roll up your sleeves and go to work. That small investment of time will pay back in dividends.


Managing Multiple Offers

Q: Let’s suppose three different buyers make an offer on your listed property one after the other over a two-day time period. Prior to the offers coming in, your seller instructs you not to disclose to competing buyers that there are in fact multiple offers. Your seller is concerned about disclosing this to potential buyers because she fears that it will scare off buyers who might not want to get into a bidding war. Furthermore, your seller has decided to simply deal with each offer one at a time as they come in. Is this an acceptable way to handle multiple offers?

A: Yes. A common misconception is that the seller and listing agent must disclose the existence of multiple offers on the property. Ultimately, the decision on how to handle multiple offers rests with the seller. As the listing agent, you will need to guide your client on what is best for them. It may be that the best and most effective method is in fact to disclose that there are multiple offers on the property. On the other hand, it may be that the seller does not want to make that disclosure. Article 1, Standard of Practice 1-15 of the NAR Code of Ethics states that “Realtors®, in response to inquiries from buyers or cooperating brokers, shall, with the sellers’ approval, disclose the existence of offers on the property.” So again, the seller may decide how to handle this situation. Also, a good tool for Realtors® to use is the Multiple Offer Disclosure. That form lists out three different options the seller may choose when dealing with multiple offers. Having a conversation with your seller about this form and the options contained in it is a good business practice.


What is a Dual or Variable Rate Commission?

Q: What is a Dual or Variable Rate Commission? Does it Have to be Disclosed on the MLS? Why?

A: The NAR Code of Ethics states that “listing brokers have an affirmative obligation to disclose the existence of a dual or variable rate commission arrangement.” A dual or variable rate commission is where one amount of commission is payable if the listing broker’s firm is the procuring cause of the sale and a different amount of commission is payable if the sale results through the efforts of the seller or a cooperating broker. For example, the listing broker may charge a lower fee of 4 percent or 5 percent if the home is sold by the listing brokers office, but charge a 6 percent fee if the sale is a result of the efforts of a cooperating broker in another office. When this happens, the listing broker is required to disclose, as soon as practical, the existence of such arrangements to potential cooperating brokers, and must, in response to questions from cooperating brokers, disclose the differential (i.e., the different commissions being offered – 5 percent or 6 percent, for example) that would result. This rule is intended to make sure cooperating agents and buyers are able to make an informed decision on how to structure their purchase offer. The cooperating agent and buyer could choose to make an offer with a higher purchase price, among other things, if they had knowledge of the lower commission amount being charged by the listing brokerage for an “in-house” sale. This simple and logical ethical rule helps ensure a fair and equal bargaining position for all parties.


Conditions on the Buyer Agent Commission

Q: Let’s suppose you are ready to list a client’s property for sale on the MLS. On your last transaction you became frustrated at the lack of involvement, service and attention to detail on the part of the Buyer’s agent. You feel like you spent more time doing the Buyer Agent’s job than working for your client. With that in mind, you decide that you are going to put some restrictions on the BAC offered on the MLS and that you are going to do that by using the private agent remarks section. In the remarks, you include the following: “Buyer agent must be present on the first showing in order to receive the full BAC.” Is including this type of language acceptable?

A: The short answer is no. I have noticed that from time to time listing agents will include this or similar language in the remarks on the MLS. What this amounts to is a condition being placed on the offer of compensation. When a listing broker offers a BAC on the MLS, it must be “unconditional” and is considered a “blanket unilateral offer of compensation to Cooperating Brokers” (see Section 32 Utahrealestate.com policies). So in short, placing any sort of restrictions or “strings attached” to the BAC violates one of the most fundamental principles of our cooperative MLS system. So remember to avoid placing conditions or similar restrictions to the BAC being offered. The rationale behind this brilliant system of cooperation that we are fortunate to have in the Utah and in the U.S. is that cooperating brokers have the right to know what his/her compensation will be prior to beginning the transaction. This system of cooperation and sharing fees is the envy of many other countries and something we need to protect. That being said, the bigger issue here stems from listing agents frustration that other cooperating buyer agents aren’t pulling their weight. The listing agent doesn’t feel like the buyer’s agent should be paid the full BAC if certain things aren’t being done by that agent. While I can understand that frustration it still doesn’t allow putting conditions on the BAC in the agent remarks. Either the cooperating agent is the procuring cause of the sale or she isn’t. Either the cooperating agent is entitled to the full BAC offered, or is not. As Realtors® we are all in this together and we all need to work in the spirit of cooperation, especially in this busy market. Please do your part when representing your client through to the closing process and help raise the level of professionalism in our industry.


Representing Both Buyer and Seller

Q: Suppose you represent the seller and have the property listed on the MLS. A buyer who is unrepresented calls you and would like to see the property. After showing the property to the buyer, she informs you that she would like to submit an offer but would like some help with the contract, finding a home inspection company, title company, mortgage loan company, among other things. You ask her if she has an agent to which she responds that she does not. At that point you explain that you represent the seller, but may also represent the buyer as a limited agent. You then explain in some detail what that entails. What documents will you need her to sign, and also the seller to sign?

A: To properly represent the buyer and seller as a limited agent, there are three separate documents that will need to be signed. These are all in addition to accurately filling out section 5 of the REPC where you will indicate that you and your brokerage represent both buyer and seller as limited agents. The three documents that will need to be signed are: (1) the Limited Agency Consent Agreement – this form will be signed by both the buyer and seller. Be sure to spend some time explaining this form to your clients. It is important that you obtain the “informed consent” to act on behalf of each client simultaneously. (2) Next, you will need the buyer to sign the Exclusive Buyer Broker Agreement & Agency Disclosure. You should also spend some time explaining this form to the buyer and make sure they understand agency and what it all means. Many of us don’t adequately explain what this form means to the client. Take a little extra time here and have a professional conversation with your new client. (3) Finally, since you already have the Exclusive Listing Agreement signed when you listed the property, you are good to go on the seller’s side. Just make sure your seller still understands what limited agency is all about and have he/she sign the Limited Agency Consent form. Taking a little extra time to make sure your clients understand what this all means is so important. Most clients aren’t familiar with the intricacies of agency law and will need your help to understand it.


Do HOAs need to provide CC&Rs to Lot Owners?

Q: The standard REPC requires the Seller to provide to the Buyer a copy of any applicable HOA documents including CC&Rs, minutes of meetings, budget and financial statements. These documents are to be provided to the Buyer prior to the Seller Disclosure Deadline. Are HOAs required to provide copies of these materials at an owner’s request?

A: Yes. Utah code 57-8a-227 requires that an association keep and make documents available to lot owners in accordance with the statute. The law further states that a lot owner within the association may either inspect the documents or ask for copies. If copies are requested, the association may only charge the reasonable cost of the copies or electronic scans which cannot exceed 10 cents per page and $15 per hour for the employee’s time making the copies. If an association fails to comply with this law, various remedies are provided for which can include court action to require compliance with the law or monetary damages. For more information on this law, contact the UAR legal hotline at (801)676-5211.


The Personal Property Transfer Agreement & Bill of Sale form

Q: How do I use the Personal Property Transfer Agreement & Bill of Sale form?

A: The Utah Association of Realtors® recently released a form designed to help buyers and sellers better negotiate and handle personal property that is being sold with a home. This form is designed to be used when there is a significant number of personal property items that are being included in the sale. Transactions that involve a home that is fully furnished or a home that has a large list of items of personal property that are being included in the sale are good examples of when to use the PPTA. The Personal Property Transfer Agreement & Bill of Sale is premised on the concept of transparency and disclosure. It is imperative that when the PPTA is used, a disclosure statement is inserted onto the blank line in section 1.2 of the REPC that alerts the underwriter of the fact that personal property is being sold with the home. More specifically, a statement in section 1.2 of the REPC that reads, “additional items of personal property Buyer intends to acquire from Seller shall be by separate written agreement” should be included. Once that statement is inserted into the REPC, the PPTA may be used to handle the transfer of personal property with the sale of a home. When using the PPTA be sure to carefully read the form and acquaint yourself with how it is worded. A separate Inventory List of Personal Property (UAR Form 55D) and the Addendum to the PPTA (UAR Form 55C) are also designed to be used in conjunction with the PPTA.


Making Disparaging Comments About Competitors

Q: Suppose there is an online blog, Facebook page or other public forum where Realtor® members communicate with each other. It is a place for real estate professionals to share ideas and help each other improve their business and gain more knowledge. Suppose a topic involving a particular member or affiliate member comes up and that the discussion starts to go downhill. Negative comments, whether true or not, are made about the business practices of that particular person. The comments made by some tend to be somewhat misleading or exaggerated. What potential pitfalls should you watch out for when participating in online or other public forums?

A: Article 15 of the NAR Code of Ethics indicates that Realtors® shall not make false or misleading statements about other real estate professionals, their business, or there business practices. Standard of Practice 15-2 also mentions that Realtors® should not recklessly publish or repeat misleading statements made by others whether it by in writing, by technological means (e.g., the Internet), or by any other means. With that in mind, it is so important that as Realtor® members, we all think carefully before making what could be considered a disparaging comment about a competitor. Online and other public forums can attract this type of discussion and it can lead to potential problems. If you have a grievance with a competitor or other individual, resolve the complaint by taking it directly to that person and avoid making public comments that are based on one person’s opinion that may turn out to be untrue.


HOA, CC&Rs, Transfer Fees, etc.

Q: Suppose you are the listing agent and the home you are selling is located in an HOA. When a property is sold in that HOA, a “transfer fee” or “change of ownership” fee of $500 is required to be paid to the HOA. The seller is aware of this fee. Suppose further that an offer is presented by a Buyer and it is accepted by the Seller. How should the transfer fee and anything else related to the HOA be disclosed to the Buyer?

A: It is imperative for listing agents and sellers to understand that as part of the Seller disclosures, section 7(c) and (d) require that a copy of the CC&R’s, any rules and regulations affecting the property, minutes of HOA meetings, budget and financial statements all be provided to the Buyer no later than the Seller Disclosure Deadline. In addition, the Seller should accurately fill out the Seller Property Condition Disclosure form as it relates to any HOA. In that form, certain information regarding the HOA must be provided to the Buyer. The Seller should also disclose the existence of any transfer or change of ownership fee required by the HOA. If there is such a fee, the Seller may attach an addendum to the Seller Property Condition Disclosure form and make that disclosure so it doesn’t come up at the last minute. Another point to remember is that section 3.4 of the REPC requires that the Buyer pay for any transfer fee. This could, of course, be a point of negotiation between the Buyer and Seller prior to going under contract.


Square Footage Issues

Q: Suppose you represent the Seller. As you are gathering information about the property for listing purposes, you ask the Seller what the square footage of the property is. The Seller replies, “I think it’s about 4,500 square feet.” You’ve been selling real estate for quite a few years and to you that seems quite high. But you are in a rush to get to another appointment so you input the information into the MLS and the property is listed for $400,000 with approximately 4,500 square feet. Are there any potential problems here? What safe harbor steps might you consider when dealing with square footage issues?

A: Square footage problems are one of the top legal issues litigated each year. The reason is because getting an exact square footage measurement is simply not an exact science. The typical scenario involves a buyer who closes on a home thinking that the property is a certain size. Later, that buyer comes to find out the property is smaller. Invariably, the buyer becomes upset at the listing agent. So to avoid this type of problem, remember to simply disclose the source that you used for the square footage information. Don’t necessarily just rely on what the seller might tell you. Also, the Seller is required to disclose the source used for the square footage on the Seller Property Condition Disclosure form. Whether it be county records, an appraisal or building plans, it doesn’t matter. Disclose the source and allow the buyer to independently verify the information if it is important to them. Disclosing the source, as opposed to you personally being the source for the square footage information will also help reduce the risk to you if there is a discrepancy.


Submitting Additional Earnest Money

Q: Section 8.4 of the standard REPC allows the buyer to submit an additional earnest money deposit during the escrow stage of the transaction. In what circumstances might a buyer choose to do this?

A: With the low amount of inventory of homes on the market, it has created a very competitive environment for buyers and multiple offer situations. For a seller to accept the buyer’s offer, the offer must stand out and be attractive to the seller. One way for a buyer to make their offer more competitive is to check the “WILL” box in section 8.4 of the REPC (“Additional Earnest Money Deposit”). This will require that the buyer provide an agreed upon additional earnest money deposit prior to the Due Diligence Deadline or the Financing & Appraisal deadline, whichever is later. What this tells the seller is that your buyer is serious about the property and is willing to put more “skin in the game” as the transaction progresses. It tells the seller that the buyer isn’t as likely to walk away from the deal. Taking this approach may be just the thing to make your buyer’s offer look more attractive to the seller. As a buyer’s agent, take a few minutes to review section 8.4 of the REPC and familiarize yourself with how it works. It may come in handy for your clients in today’s real estate market.


Breach of Fiduciary Duty?

Q: Should a Realtor® submit two offers for two different buyers on the same property at the same time?

A: A court in Ohio dealt with this issue and said that a Realtor® could be found to have breached her fiduciary duty of loyalty by representing more than one buyer on the same property at the same time. The court indicated that it is difficult for the Realtor® to vigorously pursue one client’s offer when they have duties to another client on the same property. (Ford v. Brooks, Ohio 2012). Risk Reduction Tip: If you are faced with this scenario, the first course of action would be to consult with your broker. Your broker may have an internal office policy on how this should be handled. One way to deal with this would be to simply refer one of the buyer clients to another agent in your office. That would likely be the best solution and would solve any conflict of interest. If you choose to proceed with representing both clients, the only way to proceed would be to disclose the situation to both buyers in writing and obtain their informed consent. However, the safest solution would be to refer one of the clients to another agent.


Are Fixtures Included in a Sale?

Q: Is a TV that is mounted to the wall a fixture? What about a mirror mounted to the wall in the bathroom? Are these items part of the real estate and included in the sale?

A: This question comes up on a regular basis for many of our members. The problem seems to always come up when a seller removes one of these types of items from the property prior to closing and the buyer then becomes upset. The buyer will often argue that the item in question is a fixture and included in the sale. The seller argues, however, that it is not a fixture, but personal property and not included in the sale. Well, there is a simple solution to this dilemma. Simply write the included item into section 1.2 of the REPC! Don’t concern yourself with trying to figure out whether the TV or mirror are fixtures. Who cares whether the TV is a fixture or not. Nobody wants to debate this point. Simply write it as an included item in section 1.2 of the REPC and it is less likely you will run into this problem.


Giving Rebates to Your Buyer

Q: Can a Realtor® can offer an inducement or a rebate to a buyer?

A: The short answer to this question is yes, but there are a few things to remember. Utah Administrative Rule 162-2f-401a requires that the Realtor® follow three steps before an inducement is offered to the buyer. (1) Authorization from his/her principal broker must be obtained; (2) any underwriting guidelines that apply to the buyer’s loan must be complied with; and (3) notice that the inducement is being offered to the buyer must be given to the seller’s broker (if represented) or to the seller (if not represented).


Implied Agency Tip

Q: Let’s suppose you have located a home on the MLS that your Buyer would like to see. In the agent remarks on the MLS it instructs the buyer’s agent to contact the Seller directly to see the property. You call the Seller directly to set up a showing. Your Buyer likes the home and makes an offer. The Seller receives the offer and calls you to discuss its terms. You inform the Seller that you would like to discuss the terms of the offer and any potential counter offer negotiations with the listing agent. At that point, the Seller informs you that she has only contracted with the listing agent to place the property on the MLS and that it would be fine to work directly with the Seller until closing. You are concerned and have a few questions – (1) As the Buyer’s agent, may you speak directly with the Seller in this situation? (2) If during the negotiations the Seller has questions for you about the REPC, or needs other State Approved forms, may you provide that information to the Seller directly? (3) Won’t doing this create an implied agency relationship between you and the Seller?

A: During this most recent Utah Legislative Session, a new law was passed that specifically authorizes a Buyer’s agent to contact the Seller directly, and to discuss items related to the real estate transaction when the Seller’s broker gives the Buyer’s broker authorization to do so. The new statute further indicates that by so doing, the Buyer’s agent is in no way deemed to be the representative of the Seller. In other words, there would not be any sort of implied agency relationship created by the Buyer Agent’s conduct. Providing state approved forms directly to the Seller in this situation would also be acceptable. To read this new law in its entirety, see Utah Code 61-2f-308(4)(a).


Not Showing Up for Showing Appointments?

Q: Let’s suppose you represent a buyer and have just scheduled an appointment with the the listing agent to show the home. The home is occupied so the listing agent makes arrangements with the homeowner to get the home ready for showing and for the owner to not be present. For whatever reason, a couple hours before your showing appointment, your buyers decide they do not want to see the home. Because you are busy with other clients, you fail to let the listing agent know and simply don’t show up for the appointment. As a licensed real estate professional and Realtor® member, is this acceptable?

A: The inconvenience and lack of respect this shows the listing agent and the seller is something we should all be concerned about. As a Realtor®, if you set up a showing appointment, make every effort to follow through with that appointment, and if something comes up, communicate that with the listing agent. As Realtors® we are all in this together and our entire industry is centered around cooperation. Let’s take it up a notch in this area and raise the level of professionalism in our industry.


New Sale Lease Back Agreement

Q: Let’s suppose the Buyer and Seller are under contract and have a closing date set for Feb. 10. The Seller is purchasing a new home but it will not be ready to occupy until March 10. Because of this timing problem, the Seller needs to remain in the home she is selling for about 30 days after closing. What document may be used to legally handle this situation?

A: The Utah Association of Realtors® released the “Short Term Lease-Back Agreement (Less than 60 days).” This agreement is intended to deal with the situation described above. The agreement allows the seller to remain in the property for up to 60 days after closing upon terms and conditions that are mutually agreed to in the new UAR form. The buyer and seller are able to agree upon the length of the rental period (which should not exceed 60 days), rent payment amount, security deposit, etc. The form is very simple and straightforward and I would recommend using it in this type of situation. One thing to note is that this form is not an addendum to the REPC, but is a stand alone short term lease agreement. The UAR form is available on utahrealestate.com and www.utahrealtors.com.


Misrepresenting Properties that are Under Contract

Q: Let’s suppose you come across a property on the MLS, or you see that same property on a different website as being for sale. You represent a Buyer who is interested in that particular property. You contact the listing agent who tells you that it actually has been under contract for a few days and that the property is not available for sale. The listing agent then tells you that she has another property available for sale, but in a different location. What are the issues here? Are there any pitfalls to be aware of as the listing agent?

A: This scenario poses some potential problems for the listing agent and the prospective buyer. Obviously, the Buyer might become frustrated that the property that he/she is interested in is simply not for sale. This may cause the Buyer to become upset and ask why the property is even being marketed as being for sale. The other problem is that the listing agent may run into a potential ethical problem. Article 12 of the Code of Ethics requires Realtors® to be honest and truthful in their communications and to present a true picture in their advertising, marketing and other representations. If the listing agent in this case intentionally fails to update her listing and other marketing to reflect that the property is now under contract, the listing agent may be have to defend themselves in a potential ethics hearing. Likewise, the law in Utah indicates that licensed real estate professionals may not misrepresent the availability of a piece of property. Intentionally not updating ones listing could be viewed as a misrepresentation and thereby subject the agent to potential fines by the State of Utah.


Commissions and Agent Remarks

Q: Let’s suppose you are ready to list a client’s property for sale on the MLS. On your last transaction you became frustrated at the lack of involvement, service and attention to detail on the part of the Buyer’s agent. You feel like you spent more time doing the Buyer Agent’s job than working for your client. With that in mind, you decide that you are going to put some restrictions on the BAC offered on the MLS and that you are going to do that by using the private agent remarks section. In the remarks, you include the following: “Buyer agent must be present on the first showing in order to receive the full BAC.” Is including this type of language acceptable?

A: The short answer is no. I have noticed that from time to time listing agents will include this or similar language in the remarks on the MLS. What this amounts to is a condition being placed on the offer of compensation. When a listing broker offers a BAC on the MLS, it must be “unconditional” and is considered a “blanket unilateral offer of compensation to Cooperating Brokers” (see Section 32 Utahrealestate.com policies). So in short, placing any sort of restrictions or “strings attached” to the BAC violates one of the most fundamental principles of our cooperative MLS system. So remember to avoid placing conditions or similar restrictions to the BAC being offered. The rationale behind this brilliant system of cooperation that we are fortunate to have in the Utah and in the U.S. is that cooperating brokers have the right to know what his/her compensation will be prior to beginning the transaction. This system of cooperation and sharing fees is the envy of many other countries and something we need to protect. That being said, the bigger issue here stems from listing agents frustration that other cooperating buyer agents aren’t pulling their weight. The listing agent doesn’t feel like the buyer’s agent should be paid the full BAC if certain things aren’t being done by that agent. While I can understand that frustration it still doesn’t allow putting conditions on the BAC in the agent remarks. Either the cooperating agent is the procuring cause of the sale or she isn’t. Either the cooperating agent is entitled to the full BAC offered, or is not. As Realtors® we are all in this together and we all need to work in the spirit of cooperation, especially in this busy market. Please do your part when representing your client through to the closing process and help raise the level of professionalism in our industry.


Earnest Money: Brokerage or Title Company?

Q: What are the issues to consider when deciding whether to deposit the earnest money in the brokerage trust account or with a title company?

A: The standard REPC contains default language indicating that the Earnest Money will be held in the brokerage trust account. However, some brokers and agents will often have the earnest money deposited with their preferred title company. When doing this, there are a few points to consider. First, if the earnest money is going to a title company, step No. 1 will be to put this in writing on an addendum to the REPC. This is an important thing to do as it will ensure that both parties and their agents are aware of where the money will be deposited. The second issue is to consider that if the transaction fails for whatever reason, in most cases, the title company will almost always require further signatures from both parties before releasing the funds, notwithstanding the language and signatures already contained in the REPC. So it is important to know that a certain level of control over those funds is given over to the title company. On the other hand, when the earnest money is held in the broker’s trust account, the funds may be released in a variety of situations “without the requirement of further written authorization” from the other party. The advantage to some brokers in depositing the funds with a title company, however, is that the broker does not have to worry about the accounting aspect of holding the money in their brokerage trust account, and also does not have to be concerned about potentially getting in the middle of an earnest money dispute should the transaction fail. In the end, no matter where the earnest money is deposited, the key thing to remember is that both the buyer and seller and their agents should understand where the money is being held and what that means. This should be given thorough consideration during the negotiation stage of the transaction. Either approach is acceptable as long as all parties understand what the implications are in each case.


The Importance of the Buyer Due Diligence Checklist

Q: Suppose you recently represented the buyer on the purchase of a new home. Suppose further that shortly after closing on the transaction, the buyer discovers that the fence that runs along the south side of the lot is off by 10 feet, meaning that the new home owner has a much smaller yard. She is upset and calls you. What document, and what conversation are you hoping you had with this client during the due diligence phase of the transaction?

A: This scenario is intended to emphasize the importance of the Buyer Due Diligence Checklist. In that document, there is a variety of issues that the buyer should consider during their due diligence. Obtaining a survey, among other things, is described in some detail on that form. This form helps you educate the Buyer on what to look out for when purchasing a home, but also helps minimize the potential risk for you, the Realtor®. I would recommend that this form be signed by your buyer on every transaction, and that you spend a few minutes going through the form with the buyer so any questions they have could be answered. This form has been used successfully by practicing attorneys in Utah to defend brokerages on cases similar to the one described above.


Earnest Money: Missed Deadlines and NSF Checks

Q: Your Buyer has just gone under contract with the Seller for the purchase of a new home. Now the time clock is ticking and your buyer is required to deliver the earnest money within four calendar days after acceptance according to the REPC. In the event your buyer does not deliver the $2,500 earnest money within the four calendar days, what legal obligations do you, the buyer’s agent, have to the seller? What are the legal ramifications for the buyer?

A: According to the standard REPC, when the buyer agrees to deliver the earnest money to the buyer’s brokerage within four calendar days of acceptance, this must be done in a timely manner – if not, the buyer may be in default on the REPC. If the four- day time frame is not met, the buyer’s agent MUST disclose to the listing agent that the money has not been received. At that point, the seller does have the rights that are outlined in the “default” section 16 of the REPC. The same would be true if the earnest money check bounced. It would be critical for the buyer’s agent to disclose this fact to the listing agent and allow the seller to decide what the next steps will be. Ultimately, the buyer’s agent must disclose to the listing agent if the check is not delivered in a timely manner, or if the check has bounced. Not doing so could also result in disciplinary action against the buyer’s agent at the state regulatory level. Buyer’s agents should stress to their buyers the importance of a timely delivery of the earnest money check to avoid these types of problems.


The MLS Listing vs. the Real Estate Purchase Contract (REPC)

Q: Let’s suppose you represent a buyer and have just made an offer on a property. The property proceeds to closing and the buyer discovers that the washer and microwave have been removed. The buyer is upset and asks you whether those items should have been left on the property. Your opinion is that since the MLS included those items, they should have been left behind and included in the sale. However, as you go back a review your file, you notice that the REPC is silent on this issue. In section 1.2 of the REPC where it determines whether “other included items” are included in the sale, all of the boxes are left blank. In other words, none of the appliances are contractually included in the sale. Which of the two documents control the outcome – the MLS listing, or the REPC?

A: The REPC trumps what is stated on the MLS and is legally binding. The MLS is not a contract and not legally binding. So in this case, the washer and microwave are not included in the sale because the REPC did not specifically include those items in section 1.2. The MLS listing information is not a binding agreement since neither party signed it. If however, the parties had included the MLS printout and incorporated it into the REPC, then it would have become part of the REPC and the legal answer here would have been different. Having said that, it is critical as a listing agent to make sure what is represented across the MLS is accurate. Listing agents must make reasonable efforts to verify the content and accuracy of their listings. Equally important, the listing and buyers agents should make sure the REPC and MLS are coordinated with each other so this problem doesn’t happen.


Always Disclose You Are a Real Estate Licensee

Q: Suppose a Realtor® member decides to purchase an investment property. The property will be used as a rental. When writing up the offer, is it necessary to disclose that the person is a real estate licensee?

A: Yes, both the National Association of Realtors®’ Code of Ethics and Utah law require such disclosure. Utah Admin Rule 162-2f-401(a)(5) indicates that the licensee must — prior to executing a binding agreement — disclose in writing to clients, agents for the other parties, and unrepresented parties the licensee’s position as principal in the transaction. This applies whether the licensee is on active or inactive status with the Division of Real Estate. One of the purposes of this simple disclosure rule is to make sure the person the licensee is dealing with is aware that he/she has a real estate license.


Never Share Your Key

Q: Suppose you represent a Buyer who is interested in looking at several homes in Sandy, Draper and South Jordan. You have shown several homes to the Buyer but nothing that has captured their interest. Over the weekend, the Buyer finds a home online and wants to see it. You are busy with family but invite the Buyer to come borrow your Realtor® ActiveKEY for the afternoon. Is this a good idea?

A: Under no circumstances should you share your key with a client or even another Realtor® member. There are several reasons for this simple rule. One is that sharing your key can create significant liability and ethical problems for you. Imagine what could happen if your client who has your key forgets to lock the home up after they leave. It is important to remember that in the key lease agreement that you signed when you received your key, there is a provision that does not allow the sharing of your key to anyone. The Salt Lake Board of Realtors® key and keybox system is one of the finest, most secure, and most used key systems in the country — so remember this important tip and good luck out there!


Counter Offers

Q: Suppose you receive an offer on your listed property. Your seller decides to make a counter offer. Is it permissible under Utah law to simply strike out, use white out, or substitute other language as part of your counter offer?

A: The short answer is – no. Utah Administrative Rule 162-2f-401 prohibits the striking out, whiting out or substituting new language in place of the boilerplate provisions of the REPC or language that has been inserted to complete the blanks of the REPC. Instead of making changes in a counter offer in this fashion, the better approach is to simply use a standard blank addendum to the REPC. In that addendum, include all necessary changes your seller would like as part of the counter offer. This makes for a much cleaner and easier to understand contract. From a legal standpoint, this will minimize the risk of confusion between the parties and/or problems with the Utah Division of Real Estate.


Closing and Possession

Q: Hypothetical: Let’s suppose the property is under contract and the REPC states in Section 4 that possession will be “Upon Closing.” Buyer and Seller each attend Settlement late on Friday afternoon. It is too late Friday for the Title Company to record the documents that day and Monday is a holiday. The Buyers have moved in from California and have ABC Trucking Company waiting in front of the property to begin unloading. The Buyer is told that they will have to wait until closing occurs (i.e., funding and recording) and that it might not be until Tuesday that they can get the keys to move in. The Buyers are extremely upset. They have no place to stay and are paying a substantial fee to the trucking company just to wait. Could this situation have been avoided?

A: Answer: The best way to avoid this problem is to first understand the difference between Settlement and Closing. Settlement occurs when the buyer and seller sign the documents at the Title Company according to Section 3.1 of the REPC. Closing is when funding and recording happens as referenced in Section 4 of the REPC. Closing can occur up to four calendar days after settlement. The next step in the process is to understand how Possession, as referred to in Section 4 of the REPC, relates to Closing. When Possession takes place it is directly related to when Closing (not Settlement) occurs and is dependent on how Section 4 of the REPC was filled out. Communicating all of these important details to both the buyer and seller well in advance of this type of the situation illustrated above will ensure you don’t end up with an upset buyer. So be sure to have this conversation and educate your buyer before they make the move from California to Utah.


Confusing Offer & Counteroffer

Q: Let’s suppose the Buyer sends over an offer. The offer has an financing and appraisal (F&A) deadline of Nov. 1. In response, Seller sends over Addendum #1 countering the purchase price and changes the F&A deadline to Oct. 25. Buyer then sends over Addendum #2 changing the purchase price and also checks that the deadlines in Section 24 “remain unchanged.” Seller accepts Addendum #2. What is the F&A deadline?

A: This type of contractual question seems to come up on a daily basis. The confusion comes up when multiple addenda go back and forth during the negotiation stage of the transaction, and when a deal is finally struck, confusion arises over a provision that was not restated in the most recent addendum. In this case, the Buyer sent Addendum #2 back to the Seller that changed the purchase price, but then indicated that the deadlines remain unchanged. Does this mean the Buyer is in agreement with the Nov. 1 or Oct. 25 deadline? The answer most likely will be that the Oct. 25 deadline is what controls. Over the years, I have noticed that some agents will become confused and argue that Nov. 1 is the correct F&A deadline. I’ve even seen two attorneys argue this point. With that in mind, I’ve come to the conclusion that the best way to avoid a problem, is to simply re-state in the body of the most recent Addendum (Addendum #2 as in this situation) what has been agreed upon. In this case, in the body of Addendum #2, it could have said “we accept the F&A deadline of XXX.” Then, in the space below where it asks whether the “deadlines remain unchanged, or are changed as follows” – a notation that says “see above” would be appropriate. This would refer to the statement above that reiterates the Settlement deadline. Following this simple approach will most likely avoid any confusion on this issue. Good luck!