Chap03

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MANDATORY DISCLOSURESCHAPTER 3

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These Disclosure laws apply to residential properties of one to four units.

WHAT MUST BE DISCLOSED?

Agency Disclosure

Real Property Transfer Disclosure

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Full Disclosure means disclosing all material facts in a transaction.

A material fact is any fact that would affect the decision of the buyer or seller in completing a transaction.

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Full Disclosure will:

1. Protect the principals

2. Establish and build trust and confidence.

3. Satisfy the law.

4. Protect the agents.

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A Mandated Disclosure is an item of information required by law to be conveyed from one entity (buyer. seller or agent) involved in a real estate transaction to another entity in the same transaction.

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The phrase required by law means some obligation imposed by a legal authority.

OTHER TERMS

Information means some type of material data, facts, news or figures.

An agent’s fiduciary responsibility to his/her principal is one of binding trust.

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FIDUCIARY RESPONSIBILITY AND DISCLOSURES

A salesperson always works under the authority of a designated broker.

The word agent is synonymous with the employing broker.

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AGENCY DISCLOSURE

A relationship that is created between agent, broker and principal is referred to as an agency.

Agent – One who represents another, called the principal, in dealings with a third person.

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A real estate broker acts as an agent for the principal who wishes to sell to, buy from, or exchange real property or a business opportunity with a third party.

The licensee who lists the seller’s home is called the listing agent.

The licensee who brings the buyer into the transaction is called the selling agent.

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Designated broker may be held legally liable for misdeeds of associate licensees per legal theory of respondent superior.

Brokers may choose to work as associate licensees under the authority of another broker.

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Any licensee must disclose his or her agency.

Department of Real Estate (DRE) regulation mandates a written employment contract between all sales associates and the employing broker.

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The agent who represents the buyer is called the buyer’s agent.

TYPES OF AGENCY

An agent who represents the seller is called the seller’s agent.

When an agent represents both buyer and seller it is known as a dual agency.

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SINGLE AGENCY

Exclusive representation of the buyer.

Or

Exclusive representation of the seller.

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DUAL AGENCY

Representation of the buyer and seller in the same transaction.

Informed and consensual dual agency is lawful

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The licensee who lists the seller’s home is called the listing agent.

The licensee who brings the buyer into the transaction is called the selling agent.

NOTE: An agent can receive a commission from a seller but still be the buyer’s agent.

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AGENCY RELATIONSHIP

SELLER BUYER

Listing Agent

1. Seller’s Agent

2. Dual Agent

Selling Agent

1. Seller’s Agent

2. Buyer’s Agent

3. Dual AgentSub-Agent

MLS

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Undisclosed dual agency is unlawful.

All Disclosures should be in writing.

AGENCY DISCLOSURE

Any licensee must disclose his or her agency and it must be in writing.

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SUB–AGENT

Refers to other brokers who are appointed by an agent to help carry out the purpose of the agent.

Agents must have the authority of the principal to appoint sub–agents.

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UNLICENSED ASSISTANTS

Hired by licensees to assist in the business of Real Estate.

Great care must be taken NOT to permit unlicensed assistants to perform licensed activities.

A licensed assistant can do any task that you can do.

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EXPRESS AUTHORIZATION

Power of Attorney (two types):

1. Special power of attorney. A listing is a special power of attorney.

2. General power of attorney. Has to be recorded.

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ORAL AGREEMENT

Lawful, and just as binding as a written agreement.

As per Statute of Frauds, oral commission agreements are not enforceable.

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DISCLOSURE

Compliance With Agency Law Requires Three–Step Process

STEP 1 DISCLOSE

Licensee will educate the his/her principal on the different types of agency. This step will be in writing (on the disclosure form).

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Seller:

1. Receives unsigned statutory disclosure regarding agency relationships mandatory form from listing agent before entering into listing.

2. Receives unsigned statutory disclosure regarding agency relationships form from selling agent before offer is presented, if from another office.

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Buyer

Receives unsigned statutory disclosure regarding agency relationships form from listing broker before entering into offer.

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STEP 2 ELECT

The agent and principal decide on which type of agency will be used.

Because circumstances may change throughout transaction, this should be an informed mutual decision between seller and agent, as well as buyer and agent.

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STEP 3 CONFIRM

The confirmation of the type of agency elected in Step 2 must be in writing.

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1. Buyers and sellers confirm agreed-upon agency relationships in writing.

2. May be on separate confirmation form.

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LISTING AGENTS NOT SELLING THEIR OWN LISTINGS.

In these cases agents should provide the disclosure to the seller before entering into the listing agreement, elect as soon as is practical and confirm the agency prior to or coincident with the seller’s acceptance of the purchase contract.

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LISTING AGENTS SELLING THEIR OWN LISTING

In this case the agent should disclose, elect and confirm to the seller and buyer.

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SELLING AGENTS WORKING WITH A BUYER

Selling agents who are not listing agents always should disclose as soon as is practical and prior to a buyer’s making an offer. They should elect as soon as is practical and confirm prior to or coincident with a buyer’s and a seller’s execution of the purchase contract.

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SELLING AGENTS WORKING WITH A SELLER

Selling agents who are not listing agents should remember to disclose to sellers as soon as is practical. They should elect as soon as is practical and confirm prior to or coincident with a buyer’s and a seller’s execution of the deposit receipt.

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TRANSFER DISCLOSURE STATEMENT

A real estate transfer disclosure statement must be given by the transferor (seller).

The term transfer applies to a sale, exchange, sales contract, installment sale, option, lease option, and so forth.

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If two agents are involved, it is the responsibility of the selling agent to deliver it to the buyer.

THE FORM

A copy of the form must be delivered to the buyer. If only one agent is involved, that agent must deliver it to the buyer.

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The disclosure statement should be delivered as soon as practical and before the execution of the offer to purchase.

If the seller has not filled out the disclosure statement, the buyer should be notified in writing of the buyer’s right to receive such a statement.

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Part ICOORDINATION WITH OTHER

DISCLOSURE FORMS

This Real Estate Transfer Disclosure Statement is made pursuant to Section 1102 of the Civil Code. Other statutes require disclosures, depending upon the details of the particular real estate transaction (for example: special study zone and purchase–money liens on residential property).

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Part IISELLER’S INFORMATION

The seller must fill out Part II of the form. The seller must disclose all of the known defects in the home.

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The following are representations made by the seller(s) and are not the representations of the agent(s), if any. This information is a disclosure and is not intended to be part of any contract between the buyer and seller.

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Part IIIAGENT’S INSPECTION

DISCLOSURE

The agent(s) uses Part III. If the seller uses an agent to sell the property, the agent must fill out Part III.

Pass out a copy of the following problem and blank form [Transfer Disclosure Statement (TDS)].

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TRANSFER DISCLOSURE STATEMENT – (TDS 11)

Mr. & Mrs. Henshall are selling their home at 123 Bailey Court, Greenville, CA 12345, for $300,000. Mr. & Mrs. Jameson are making a full price offer on the home. The selling broker, Ronald DeClair needs to have the Sales fill out a Transfer Disclosure Statement (TDS–11). The Sellers are represented by broker Grace Wilko. The Sales fill–out their TDS. The buyer’s agent: Dave Simpson, who works for Redfield Homes, Inc.

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You are given the following information:The subject property has the items checked blow: Range, Washer and Dryer Hookups in the garage, Burglar alarm, Central Heating, Patio/Decking, Hot Tub with Locking Safety Cover, Security Gates, Attached Garage, Pool/Spa Gas Heater, Water Heater with Gas Supplied by the City, Water Supplied by the City. All window have screens, Oven, Trash compactor, Smoke Detector(s), Satellite Dish, Central Air, Sprinklers, Pool with Child Resistant Barrier, Automatic Garage Door Opener(s), and Water Heater.

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Window Security Bars with Quick Release on the bedroom windows , Microwave, Garbage Disposal, Rain Gutter, Fire Alarm, Intercom, Public Sewer System, Spa with Locking Safety Cover, the number of remote controls are 3, Exhaust fans in the Kitchen, Down Stairs Bathroom, The home has a 220 volt line in the garage and Patio, there is a fireplace in the living room with a gas starter, the roof is tile type roof, which was replaced 2 years ago. All above is in operating order.

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Are you (Seller) aware of any significant defects/malfunctions in any of the following? The seller answers No.

In section C: Are you aware of any the following? The answer to all of these questions is “NO”.

Complete the Transfer Disclosure Statement (TDS).