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Legal Hotline Attorney Vern Jarboe answers frequently asked questions from Kansas REALTORS® about their transactions.
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License Law - Earnest Money Release
Question: You have a situation where earnest money was placed in your firm's trust account. The earnest money was inadvertently released to the seller. You asked how best to cure the circumstance.
Answer: Obviously, because the buyer cannot close, it would appear the buyer is entitled to the earnest money and you are therefore well advised to go ahead and refund the money back to them. The contract still needs to be cancelled. The seller would appear to owe the money back and you can attempt to collect it back from the seller, but it is probably not worth the effort if it is uncollectible. In that circumstance, the firm will simply stand to lose the money and be at some risk for an audit violation.
Contract - International Sale
Question: You have a situation where a client has had a property listed with you for some time. There has been internet negotiation over a proposed purchase and a proposed sale contract is being agreed upon.
Answer: The seller needs to be very careful not to bind themselves to a contract that does not have precise ending date. A failure to close on the part of the buyer may end up with the seller tied up in a contract that would keep them from marketing the property to others. Independent legal advice to establish or avoid this contract may be required.
Agency - Agent Buying for Themselves
Question: You have a circumstance where you have a listing as a designated seller agent. One of your agents wants to buy the property for themselves.
Answer: They should enter into a designated buyer agency agreement with themselves and indicate on a contract that they are licensed and a designated buyer agent.
Contract - Buyer is not Yet Owner
Question: You have a situation where you had a property listed and then sold it at auction to a buyer. That buyer now wishes to resell the same property even though they have not yet closed as a purchaser. You asked whether or not you need to tell the potential buyers from this buyer that he just recently purchased the property.
Answer: That is not necessarily an item of disclosure. However, you need a contract contingency that is based on the buyer turns as seller closing. Obviously, he can't sell something he doesn't own unless the sale is contingent on him being able to close. Even in a cash sale stranger things have happened and you don't want your buyer turned seller obligated to sell something he cannot sell.
Miscellaneous - Referral Fee on a Loan
Question: You have a situation where someone wants to pay you a referral fee for helping them get a loan.
Answer: A bird dog fee for making a loan referral violates RESPA and probably violates various laws regulating the lending industry.
Contract - Title Problem
Question: You have a situation where the current owners have taken bankruptcy. You have been told they did not put the home into the bankruptcy; however the owners did not pay off the home. There are some problems with the apparent title.
Answer: On that basis, it would be unwise to get into a listing until an attorney on behalf of the owners had looked at the ability to quiet the title. The sellers need referred to independent legal advice.
Contract - Backup Offers
Question: You have a situation where a home is currently under contract but another offer has come in. You asked whether or not to present that offer while the first buyer is within their inspection period.
Answer: There is no problem in presenting offers to sellers. However, the seller needs to be advised that they should not enter into a second contract for sale without language indicating it is a backup and closing cannot occur on the second contract until the first contract has closed.
Miscellaneous - Landlord Use Restrictions
Question: You have a situation where a property is being used as a rental. An insurance agent has suggested to the lessor that they not rent to anyone that is a daycare provider. The insurance company's concern is the likelihood of a lawsuit and if the provider is not covered adequately, then the landlord may become a natural target.
Answer: I think it is generally true that anytime a business is operated on the property of a landlord that the landlord has increased risk. A general restriction that tenants be prohibited from operating any business on the premises would be the best defense. Rather than simply picking on daycare providers, a landlord with this concern should prohibit the operation of all businesses or alternatively require that any business operation have adequate insurance, proof of insurance be provided, and that the landlord be listed as an additional insured.
Disclosure - Murder Suicide in House
Question: You have a situation where you have bank owned property through a foreclosure. A murder suicide in the house is a known fact. You asked whether or not that needs to be disclosed.
Answer: Unfortunately, Kansas law does not have any particular rule which mandates disclosure nor does it have a rule which protects you if you don't make disclosure in these circumstances. Obviously, some buyers would care about these circumstances. Further, it is highly likely that any buyer will find out about the circumstance. On that basis, you are running a risk of getting sued and have no clear defense is you do not disclose this problem. This is a risk that both you and the seller have if you decide to engage in nondisclosure.
Ethics - Competing Realtor® Talking to Your Client
Question: You have a situation where you took a listing. The seller was immediately confronted by another broker in your small community trying to interfere not only with the listing, but also with a sale to that same client.
Answer: On the hotline we cannot become embroiled in debates between two Realtors® over conduct. Obviously, there will be another side to the story and the proper venue is to resolve through an ethics complaint. You should review Articles 15 and 16 of the code of ethics to evaluate the conduct you have experienced.
