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Legal Hotline Attorney Vern Jarboe answers frequently asked questions from Kansas REALTORS® about their transactions.
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Contract - Tax Benefit to Buyer
Question: You had someone that you believe qualifies as first time buyer. He wants to buy a home with the seller being lender which would then balloon and he would refinance. You are contemplating a full closing at this time including title insurance, closing at the title company, a recorded affidavit of equitable interest, and a deed signed but not recorded. You are assuming that this would qualify as a sale and the buyer would then qualify for the $8,000.00 income tax refund.
Answer: You are probably correct. However, neither you nor I should offer tax advice to a buyer. He should ask his own tax person because that is who signs his return. You and I are not in a position to tell him it will work and that may or may not be correct for reasons that we are unaware of. It is unsafe to offer tax advice to third parties unless you are aware of all of the circumstances on their tax return.
Contract - Multiple Amendments
Question: You are in a situation where you entered into a contract. A series of amendments have made a full circle so that you are back where you started from. You asked whether or not you should just shred the intervening documents, type a new amendment, or start over.
Answer: I think you could do it by starting over or by a new amendment. I would not do it by shredding the initial amendment. Legally it will work in any way so that someone tracking the document through its changes can tell what the deal is.
License Law - Crossing a Broker's Listing
Question: You have a situation where you have a listing in place. The buyer and seller have negotiated toward a contract but been unsuccessful. The seller's sister who is a realtor in another state has been talking directly to the buyer. This is occurring during the term of your listing.
Answer: It would seem likely that the licensee from the other state is in violation of both Kansas License Law for being involved in real estate transaction within the state of Kansas without being licensed here, the Code of Ethics for crossing another broker's listing, and Kansas License Law for crossing another broker's listing. Filing of an ethics complaint would be an appropriate way to resolve this.
Contract - Joint Ownership of Property
Question: You have a question where a daughter and mother are going to own some property together. The ownership is a combination of one party's cash and the other party's credit. You asked how to title the property.
Answer: How to title property is a difficult legal issue with some strong ramifications to doing it wrong. The appropriate thing is to refer the parties for independent legal advice. It may be appropriate that they enter into a joint ownership agreement identifying what rights each may have. The death of one party or the other could certainly foul up the contemplated way of titling this.
Agency - Switching from Seller Agency to Designated Seller Agency
Question: You have a situation where a contract was entered into with a real estate agent on each side being a transaction broker. The selling agent has now switched buyer agency and you asked about your ability to switch to seller agency.
Answer: The license law does specifically allow agency to be changed after the original contract was entered into. This has to be done in writing and the other side needs to be notified and I would amend the contract as well.
License Law - Reduction of Commission
Question: You have a situation where a commission included a bonus to a selling agent. You are willing to give up part of the commission in exchange for a price reduction that will result in the transaction working.
Answer: Commissions are always negotiable between the real estate broker and their respective client. A reduced commission based upon renegotiation does not create a problem. All parties need to be informed.
License Law - Referral Fee to Out of State Broker
Question: You have a situation where you have been asked to pay a referral fee to an out of state broker.
Answer: It is legitimate to pay a referral fee to a broker licensed in another state. This is on the condition that you have no reason to believe the result of paying the referral fee will be for an unlicensed person to receive part of the fee.
Disclosure - Special Assessment
Question: The law requires disclosure by sellers of existing special assessments when they sell property. Another agency has a particular form for doing so. You asked whether or not a particular form is required.
Answer: There is no particular form required for this disclosure. Some Boards and individual brokers have developed specific forms and that is probably a good idea in that it calls it to the attention of the buyer. It makes it much less likely that the buyer will buy the property unaware of the existing special assessments. However, a special form is not required.
Miscellaneous - Possible Mortgage Fraud
Question: You have a situation where you are on the listing side of the transaction. The seller is using an attorney. Some of the buyer's conduct appears odd and may be evidence of mortgage fraud on the part of the buyer. However, you are not being asked to assist, prepare documents, or otherwise participate in anything that the buyer is doing. You have reported this to the lawyer for the seller.
Answer: The law does not require you to report this kind of suspicious conduct. Obviously it is, at this point, merely suspicious since you are only generally aware of what is happening. If you blow up the deal over attempting to disclose something which is in fact not a problem then you are probably doing a disservice to your seller. Because you are not being asked to participate in what may or may not be mortgage fraud, I do not see that you have a particular risk.
Contract - Expiration of Closing
Question: You have a situation where a property went under contract. The closing date has now passed. The buyer has come back expecting to close.
Answer: It seems to me that there is in effect no contract and buyer and seller are free to negotiate a new deal or not. The seller should be referred for independent legal advice if the buyer insists on a closing.
Miscellaneous - $8,000.00 Buyer Incentive
Question: You have a question about whether or not someone who has lost their home in divorce or foreclosure may qualify for the first time buyer incentive.
Answer: The law does have some exceptions which may permit the incentive to be paid to the buyers you are working with. However, tax law is very complicated and very dependent upon an individual's circumstances. On that basis, you should not provide tax advice to a buyer but rather should refer them to their tax preparer. Neither you nor I know about their individual circumstances sufficiently to give them sound tax advice.
