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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 - Providing Assistance to For Sale By Owners
Question: You have a question about the potential posting of for sale by owner listings on your website.
Answer: Under the license law you are working with consumers as a transaction broker unless you are only performing purely ministerial acts. Some of the consulting you would be doing with a consumer in your fact pattern would constitute more than ministerial acts and therefore you would be working as a transaction broker. You need to look at K.S.A. 58-30,113 to make sure that you are performing all of the duties assigned to transaction broker. Payment for services such as listing property on a website is certainly legal. You need to define what services you are providing and when those services are complete. You need to take care to look at the definition of an advanced listing fee because such fees must be placed in your trust account and then regular accountings provided. In your example, it sounds as though all of the services would be earned relatively speaking at the front end of the transaction. In such a case, the safest answer would be to deposit them in your trust account and once the last of the services in your list are complete, then provide an accounting to the consumer indicating the services are complete, that the fee has been fully earned and disgorged to your operating account.
License Law - Minimum Service Brokerages
Question: You have a situation where you are concerned about minimum service brokerage firms. Under Kansas law, you are either an agent because you have a written agreement establishing an agency relationship or your are working as a transaction broker.
Answer: Even a firm working as a transaction broker has certain minimum services they are obligated to provide under K.S.A. 58-30,113. A listing form which describes itself as an exclusive right to sell listing but then offers services which are in effect an exclusive company listing because the seller can avoid further commissions by negotiating directly with consumers would seem to be somewhat misleading. However, the Real Estate Commission will likely not know of the conduct until and unless someone complains. You will have to decide whether or not the services being provided match up with transaction brokerage and the supposed agreement is actually being performed and then decide whether or not you wish to file a complaint.
Contract - Multiple Short Sale Offers
Question: You have a situation where the proceeds from sale will be inadequate to pay the outstanding liens.
Answer: This is the classic definition of a short sale. Apparently there are multiple buyers interested in this single property. No short sale can be accepted without a short sale addendum which clearly warns the buyer of the potential that the lender will not approve the short sale. If there are multiple offers, it seems you should also let the buyer know that there are multiple buyers further increasing their risk of non-approval and that any monies expended in the buyer trying to comply with their side of the transaction may at the end of the day be lost and not recoverable.
License Law - Referral Fees to Local Companies
Question: You have a situation where you would like to use advertising with local companies and pay them for the referrals you receive.
Answer: The license law specifically prohibits paying referral fees for real estate services to unlicensed persons. The definition of real estate services comes under the definition of broker in the Real Estate Brokers and Salespersons Licensing Act and you can review the ten or so elements that constitute brokerage. Creating referrals is one of those elements. This conduct would therefore not be legal unless payments were being made to persons with real estate licenses.
Contract - List Back Agreement
Question: You have a situation where a developer sold land to a builder that has been subdivided into multiple lots. A part of the agreement in the original sale required that subsequent listings be with a particular agent. The builder is dissatisfied with that agent's performance and you are asking about the enforceability of the list back agreement.
Answer: This is a problem for the builder not for you. If the builder has concerns about the enforceability of these agreements, then the builder should consult with her or her own attorney. On the hotline we cannot provide advice to the consumer through you. You would be the one practicing law and they are not our clients.
License Law - Payment to Unlicensed Person
Question: You have a situation where a builder wants to offer a finder fee payment to unlicensed persons for finding buyers.
Answer: This would violate the license law. The activity described requires a real estate license and the payment would therefore be in breach of the license law.
Agency - Helping the Buyer
Question: You have a situation where the buyer has entered into a contract to buy one of your listings. The buyer needs some help selling their home and has asked you to simply sit the open house.
Answer: You will need a written agreement in order to put a sign on the property, market the property, or to describe the price and terms of purchase. The license law clearly indicates that you have to have a written agreement to have a sign and you are prohibited from offering the property on terms and conditions other than those authorized by the owner. On that basis, a written agreement should be required. You probably don't want to enter into a traditional listing agreement because you will likely be promising things that are different from what you normally offer in a listing agreement.
License Law - Sale by Corporate President
Question: You have a situation where the president of a corporation who owns less than 5% of the stock in that corporation is acting as real estate broker for the corporation. There is some indication that the president may hold a power of attorney for the corporation.
Answer: I do not believe this comports with the license law. The license law clearly indicates that a corporate officer is exempt from the license law only when they own more than 5% of the stock. The power of attorney is irrelevant if we assume the president of the corporation is being paid. There is a power of attorney exception for those who are not being paid for the services. However, if selling real estate is part of the services of the president then it would violate the license law.
