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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 - Direct Negotiations with a Consumer
Question: You have a situation where you are working in a coop environment. The buyer has sent you an email directly indicating an opportunity for you to visit with them without going through the agent they are working with. You do not indicate whether this buyer is working with a buyer agent or a transaction broker.
Answer: Interestingly, the license law specifically prohibits direct negotiations with another client's customer if the other agent has an exclusive agency agreement with the customer. Obviously, in that context, that agent's customer is in effect a client and therein lies the distinction. The license law does not prohibit direct negotiations with the customer of another agent where that customer is in a transaction broker relationship.
Contract - Nonrefundable Earnest Money Deposit
Question: You have a situation where the seller wants the earnest money deposit to be nonrefundable without having to sign a cancellation agreement. You asked whether or not there is something you can write into the contract to create this environment.
Answer: The only way I would know to do this without needing a cancellation agreement would be to give the earnest money to deposit to the seller directly. If you write the contract such that the earnest money deposit is given to the seller rather than being placed in third party escrow, then obviously, there would be no need for a cancellation agreement to get the earnest money deposit to the seller. There are obvious risks to handling it in this way. The biggest risk is that if the seller cannot perform the contract, then the buyer may well have lost their earnest money despite having performed all of the terms of the transaction on their side. Since you are a seller agent, that would not be your responsibility.
Agency - No Listing Agreement
Question: You have a situation where you are working on a commercial real estate deal. In effect, you have found a buyer without ever having had the property listed. You asked whether or not a listing agreement is required.
Answer: So long as the parties understand that you are working as a transaction broker and the contract is written to reflect that circumstance, then no listing agreement is required. You may want to verify the nature and extent of your compensation agreement with the parties by placing it in the contract.
Agency - Sale Without a Listing Agreement
Question: You have a situation where you sold a house without ever having it listed. The seller has agreed to pay a commission on the transaction.
Answer: The contract should reflect that you are a transaction broker on both sides of the transaction. You may want to place the obligation to pay a commission in the contract so the parties clearly understand who is paying.
Contract - Foreclosure Auction
Question: You have a situation where a property will be involved in a foreclosure auction.
Answer: It is important in that circumstance to determine what rights the current owner has by looking at the Journal Entry of Judgment. A foreclosure auction happens, in the normal process of a foreclosure case, after the lender has taken a judgment against the debtor. The Journal Entry of Judgment will reveal what rights the seller has vis-a'-vis the redemption of the property. In addition, you need to use the new foreclosure addendum required by state law if you end up writing an offer on this property.
Contract - Multiple Offers
Question: You have a situation where you are on the listing side of a transaction. You have a potential situation where there may be multiple offers on the property.
Answer: Before taking any action you should tell the seller what their choices are with respect to multiple offers. All offers need to be presented. The seller can then decide whether or not to let the two offerors know about each other to create a bidding war, negotiate only with one of the two not letting the other one know that this process is going on or to simply reject both offers. The seller should decide because if you let the two offerors know about each other, one of them may withdraw from the process and in effect the seller loses the choice.
Contract - Adverse Use of the Property
Question: You have a situation where an owner has used property adjoining their home for over 20 years. It now appears that the title to this property may be held by a third party.
Answer: You need to refer the seller to an attorney for independent legal advice. They may be entitled to an ownership claim on the property through what is known as adverse possession. However, evaluation of the rights one has through adverse possession is very factually oriented and depends upon the law in a very detailed analysis.
