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Legal Hotline Attorney Vern Jarboe answers frequently asked questions from Kansas REALTORS® about their transactions.
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Inspections
Question: You asked about a situation where you had a contract pending and you were in the inspection period. The buyer does not want the seller or the seller's agent present during the inspection.
Answer: There is nothing in the real estate contract which prevents the seller or his agent from being present. You can ask that they not be present, but it is the seller's property and you cannot prevent him from being present on his own property.
Short Sale
Question: You asked about a situation where a client listed a property for $89,000. The actual payoff of the mortgage would be close to $91,000. An offer has been made for the property for $85,000.
Answer: Because the offer is less than is needed to pay off the mortgage, the mortgage company may not agree to sale of the property unless the owner can work out some arrangement with the mortgage company of the deficiency. The mortgage company may be willing to work out some arrangement with the seller rather than go through foreclosure on its mortgage.
License Law
Question: You asked about a situation where a property had been placed on the MLS and at the bottom of the listing it states "no buyer's agents." The issue is complicated by the fact that you have an agent who wants to show her boyfriend the property and would do so as a buyer's agent.
Answer: A seller can refuse to accept offers from a buyer's agent but a broker may not and must present all offers. It would put your agent in a difficult situation to represent her boyfriend as a transaction broker and try to remain neutral.
Contract-Listing Agreement and Sales Contract
Question: You asked about a situation where a client listed a property with you and you are acting as a seller's agent for the client. The client's husband is deceased. You have now learned that there is a court order which gives the two stepchildren each a one-eighth interest in the property. The stepchildren have been making various demands about the listing and sale of the property.
Answer: The stepchildren are co-owners and should be a party to any listing or contract to sell the property.
Contract-Inspections
Question: You asked about a situation where a contract had been executed by all the parties in November. Closing is set for January 25. All of the original inspections which were requested have been done and repairs resolved. Now the buyers are indicating they would like to have a termite inspection done. The contract merely says that the inspection shall be done "as soon as possible."
Answer: Since the contract does not specify a date by which the termite inspection must be done, the buyers are probably entitled to have the inspection done even though it is close to closing. Refusing to allow such an inspection may send up unnecessary warning signals which could lead to additional problems.
Contract - Legal Description
Question: In the local board forms, there is a special addendum for legal description.
Answer: That would generally be used when you have a long legal. The other alternative is to put a short legal in the contract in paragraph 1. It is unwise to put fill in the blank with "as per title work" or "as per county record" because you don't really know for sure what property is being sold. As a buyer, I would be very uncomfortable with that language. A contract is probably not void with this kind of language if you can figure out what property is being sold and if there is reason to believe that the parties have a mutual understanding. On the other hand, you are certainly creating a loophole for the buyer to walk away from the deal if they don't like what they find out.
Contract - Full Price Offer
Question: You asked whether or not a seller must sell if a full price offer is received.
Answer: Generally, we think a full price offer is one which matches the MLS offering price. However, there are obviously other terms and conditions not spelled out in the MLS and which are necessarily included in the offer which include terms of financing and closing date. It is conceivable that the seller would not accept those terms. Further, an MLS listing is an invitation for offers. Buyers make offers to sellers which are complete and therefore susceptible to being accepted. On that basis, the seller need not accept an offer which is "full price."
Contract - Builder Warranty Claims
Question: You have a situation where a buyer that you worked with is having difficulty with a builder on a new home. The builder is seemingly refusing to take care of warranty work as required by the terms of the contract. The terms of the contract indicate only that there will be "a standard one-year new home warranty."
Answer: That language has no independent meaning. However, in your market it would appear likely that this term could be interpreted. Whether or not the builder has complied with the terms of this warranty or whether or not the buyer has properly complied with the notice requirements of Kansas law for construction defects is something that an attorney for the buyer would have to measure. You should avoid giving advice about the buyer's appropriate next step and specifically avoid authorizing them to go forward with hiring independent repairs because the buyer may not have complied with the terms of the warranty or new construction claims process. They need to consult an attorney.
Contract - Requirements in Independent Contractor Agreement
Question: You asked about requirements of a real estate company in taking a driver's license and requiring automobile insurance as an additional insured.
Answer: Many brokerage firms make these kind of requirements on their licensees. There are very valid reasons for these requirements which include making sure that agents who drive your customers and clients around actually have a valid license. There is no perfect science here. However, many companies require proof of insurance and driver's licenses on an annual basis even if their independent contractor agreements otherwise have longer terms.
Commissions-Disclosure
Question: You asked about a situation where property was being sold through auction. The auctioneers were being paid a commission by the seller, but the fliers concerning the auction indicated that buyers would be charged a 10 percent buyer's premium which would be paid to the auctioneers. You wanted to know if this premium needed to be disclosed in the final contract to purchase the property.
Answer: Any type of payment, including a buyer's premium to the auctioneer, should be disclosed in the final contract so that everyone understands the actual cost of the property and where the money paid is going.
Contract-Cancellation
Question: You asked about a situation where you had listed a property. The transaction was scheduled to close on a certain date. The buyers were unable to close, but have not agreed to sign a cancellation agreement. You now have another buyer for the property.
Answer: You should advise the buyer that there is a prior contract on the property and that they may need to consult with their attorney as to how this might affect their rights if they proceed with purchase of the property.
License Law - Sign on Property
Question: You have a situation where you question how other brokers have a sign on a particular property without having a listing.
Answer: Pursuant to K.S.A. 58-062(a)(8) it is required that you have written permission of the owner to put a sign on property. Typically that permission comes from the listing. Without knowing more it is difficult to say how the other broker may or may not have such permission.
Contract - Buyer Wants Out of Deal
Question: During a home inspection the buyer sees certain illegal conduct within the residence. The buyer reported that to the buyer agent and now wants out of the contract. The buyer agent has contacted you and described the illegal conduct.
Answer: As a listing broker and a seller's agent I think you owe undivided loyalty to the seller. On that basis, I do not think you are obligated to report the illegal conduct but you certainly should visit with the seller about the ramifications of the buyer having seen this conduct. The seller would probably be well advised to let the buyer out of the deal rather than get into a fight with the buyer in this circumstance. You should refer the seller to independent legal counsel.
Contract - Garnishment of a Salesperson
Question: You have a situation where a salesperson is being garnished.
Answer: Obviously, you do not hold wages. However, if you have money owed to the salesperson as of the date of the garnishment then you should respond accordingly. The simple fact that the salesperson is an independent contractor does not protect them from garnishment.
Contract - Charging a Transaction Fee
Question: You have a question about whether or not an agent within your company can charge their own transaction fee.
Answer: There is certainly no requirement in the license law about how you are to be paid for services offered. However, as the broker you are in charge of fees and can therefore dictate to salespeople how their charges are assessed. If the salesperson wants to charge a transaction fee it first of all has to be okay with you and secondly needs to be understood and agreed by the consumer. If those two things are true then the fee would need to pass through the broker but it could be charged.
