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Legal Hotline Attorney Vern Jarboe answers frequently asked questions from Kansas REALTORS® about their transactions.
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Contract - Strategy for Listing Future Payment of Amount Due
Question: You have a question about how to show a requirement on the buyer to make a $15,000.00 payment in one year.
Answer: Most logical answer concerning your set of facts is to show $15,000.00 earnest money deposit by way of promissory note. The contract needs to reflect that it is, in fact, a promissory note. You would then set up the due date on the promissory note to appear when the money comes from the trust fund that is causing the problem. Both sides should get legal advice as to rights with this arrangement.
Contract - Prior Files Affidavit of Interest
Question: You have a situation where buyer and seller had been exchanging offers by email. The buyer has not accepted the seller's last offer. However, the buyer has filed an affidavit of equitable interest allegedly at the instructions of an attorney.
Answer: Based on the facts as you describe them it does not appear a contract exists. However, the seller needs referred to independent legal advice if they don't want to do business with this buyer because someone is going to have to evaluate the claims of the buyer. A strong letter to the buyer suggesting there is a cloud on the seller's title arising from the acts of the buyer might be sufficient to resolve the matter. However, that letter should come from an attorney operating on behalf of the seller.
Disclosure - Calculation of Square Footage
Question: You asked about methodology for calculating square footage. Specifically, you are interested in a situation where a condominium is involved.
Answer: I would suggest utilizing the square footage calculation for the unit that is on file in the Declaration of Restrictions. I would also reveal that as the source. Sometimes, condominiums are not built as planned and therefore the exact square footage may not be revealed by looking at the declarations or plans. In the context of a condominium the calculation of square footage is more complicated because sometimes the square footage includes the thickness of the walls or in cases of shared or parting walls, it may go to the middle of the wall.
Miscellaenous - Transaction Fees and RESPA
Question: You have a question about a case recently reported in the National Association of Realtors® magazine. They revealed a case from another state where transaction fees were being questioned as a violation of RESPA.
Answer: I am aware of the case, but do not think it stands for the proposition that transaction fees are inherently illegal. It seems rational to me that if the transaction fee is simply a part of the cost charged by you to a consumer and assuming that cost is revealed prior to providing service, which in the case of your listing agreement it is, then it would not violate RESPA's prohibitions on fees charged without the rendition of services.
Contract - Risk of Losing House During Renegotiation
Question: You have a situation where buyer and seller have entered into a contract and the buyer has asked for certain repairs to be made by the seller. You fear another offer has come in and that the seller may refuse to do the repairs and the buyer doesn't want to risk losing the home.
Answer: Asking to renegotiate the contract always places the risk of losing the house back on the table. The buyer needs to evaluate the risk of losing the house versus the need for the repairs requested.
Contract - Inspection Language
Question: You have a situation where the inspection language requires elements of the home to be in "working order." The inspector has indicated that the roof is old but it is not currently leaking. The seller doesn't want to fix the roof and the buyer wants it fixed.
Answer: The seller probably has the better argument but based on what you have said, it sounds like the buyer has a reasonable claim. Both sides need referred to lawyers for legal advice if they are unable to resolve their differences.
License Law - Letter to Existing Agents
Question: You have a situation where you would like to solicit agents currently working for other agents. You wonder if there are license law implications. I do not believe there are any license law implications.Answer: Generally, licensed sales people are not indentured in any way to their current broker. However, you need to consider the ethical rules regarding the Golden Rule and decide how you think that impacts the conduct you are thinking about.
Contract - Errors and Omissions Insurance
Question: You asked about the need for errors and omissions insurance for a new brokerage firm. Kansas law does not require real estate brokers to have errors and omissions insurance. However, you should consider whether or not it is possible that you would ever make a mistake.
Answer: If we assume you might make a mistake, then you should consider how much money your mistake might cost your clients and customers. If that is more than the check you would like to write, then you should have errors and omissions insurance.
Contract - Lead Paint Disclosure
Question: You asked about whether the rules in lead paint disclosure are any different for real estate owned by banks.
Answer: The lead paint disclosure rules do have an exception for the sheriff's sale when a foreclosure occurs. I do not believe that ruling has any application to the question of selling property owned by a bank after a foreclosure. Apparently, some problems have arisen about whether or not the buyer can sign the lead paint disclosure first. I don't believe there is any way, just from the language in the form, that the buyer can sign the lead paint disclosure before the seller.
