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Legal Hotline Attorney Vern Jarboe answers frequently asked questions from Kansas REALTORS® about their transactions.
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Question: You asked about a situation where a deal has fallen through and the contract has not closed. The contract provides that the purchaser will be responsible for the costs of inspections if the transaction fails through no fault of the seller. You wanted to know if the earnest money could be used to pay the inspectors, because the buyer is not responding to any calls or requests for payment.
Answer: The contract does not provide that the earnest money can be used to pay the inspectors and therefore the earnest money can only be released upon mutual agreement of the parties or by court order. The contract does provide for sending a certified letter to the buyer which the buyer must respond to or the money will be released. This may be the fastest way to obtain release of the money to pay the inspectors.
Question: You asked whether persons who were not citizens of this country could sell and buy real estate in this country.
Answer: Any person, regardless of nationality, can buy and sell property in this country. Generally disclosures are signed concerning nationality during the closing. Whether you can represent a person who may not be legally in the country is another matter and is the subject of much legislative debate. There is not statute at this point that prevents such a person from buying or selling land.
Question: You asked about a situation where your company was going to buy a moving van and offer it for free use to buyers and sellers.
Answer: This would fall under the gifts and gratuities rule. The KREC guidelines for gifts and gratuities specifically allows a broker to provide a moving van to clients. You also asked about advertising the van. As long as the advertisement complies with the statute which requires the broker to be clearly identified and makes no misrepresentations, then you can advertise the van in any way you want, including painting the company logo on the van.
Question: You asked about a situation where a seller was going to list his house for sale. The property had been involved in a class action lawsuit involving masonite. The owner was paid $2,500 to settle. The owner, however, did not see any problems with the house and therefore made no repairs. He is concerned about what must be disclosed in the disclosure statement.
Answer: He needs to disclose there was a class action law suit involving the property and that he has settled with the defendant. He also needs to disclose that no repairs were done in regard to the amazonite siding. He does not need to necessarily disclose the amount of the settlement.
Question: You have a situation where you were concerned with a need for lead paint disclosure in a multi-family residential property.
Answer: Residential property includes multi-family. Even though we commonly think of multi-family residences as being dealt with as commercial, and they are for sale purposes worried about agency issues, that does not change the residential status under the lead paint disclosure rules. Lead paint disclosure is still required.
Question: You asked about a situation involving a real estate transaction which has closed. The earnest money was deposited with one title company. The buyer wanted to use another title company. The seller's agent stated that another title company could not be used without an addendum to the contract, which the agent said the seller would never sign.
Answer: If the buyer wanted to use a different title company for title insurance, the agent was incorrect. RESPA specifically states that a buyer has the right to choose the title company the buyer wants to use for title insurance. If the issue is merely a matter of where the transaction is closing, then the seller may be entitled to determine where he wants to deposit the earnest money and where he wants to close.
Question: You asked about a situation where you had an option on a piece of ground. You have now entered into a contract for purchase of the property, although the contract contains some back out clauses. You have been approached by a person wanting to buy a lot and wanted to know if you could enter into a contract to sell.
Answer: You could enter into a contract for sale as long as you fully disclose to the purchaser that you do not currently own the ground, that you are in the process of purchasing it, and that you cannot close on the sale of the lot to them until and unless you close on the purchase of the property.
Question: You have a situation where a buyer no. 1 caused an inspection to be prepared. You asked about disclosure to subsequent buyers.
Answer: The license law clearly requires the real estate broker to disclose what the real estate broker "actually knows." This definitely includes inspections which may have been prepared by and/or for a previous buyer. This is even true if you do not believe the results of the report. If you decide to disclose the information because you do not believe it to be true, then you are substituting your judgment for that of the first inspector. Obviously, there will not be a problem if you are correct.
Question: You have a situation where listing agreements may be dated for effective date purposes one date but not signed until several days later. You asked about the "effective date" of such a listing.
Answer: It seems to me that if the seller desires a property to be placed on the market and enters into a contract designating the particular effective date and the broker accepts that, then the effective date will be the date agreed upon by the parties even though it is not signed until later. There are some problems with this conduct in that you cannot be a seller's or buyer's agent without a written agreement. On that basis, any conduct prior to having a written agreement would have to be in the form of being a transaction broker. However, from a contract standpoint, it seems to me the effective date agreed upon controls between the parties.
Question: You have a situation where you would like to use a sealed bid.
Answer: The license law doesn't speak one way or another to the appropriate methodology. However, you need to make sure that any advertising is accurate. This necessarily means that you need to resolve whether the sealed bids are being taken with reservation, meaning that the seller does not have to accept the high bid; or, without reservation, where the seller agrees to take the highest bid offered. The latter form is normally known as an absolute auction. Any opportunity for buyers to inspect is not waived just because the property is being sold under these conditions. As a real estate broker you are obligated to try to get people to get inspections and you must disclose what you know regardless of the sale methodology.
