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© 2013 Rockwell Publishing
Washington Real Estate Practices
Lesson 3:
Listing Regulations
© 2013 Rockwell Publishing
Real Estate Law
Washington real estate law determines:how commissions are paidwho “owns” a listing
© 2013 Rockwell Publishing
Real Estate Law How commissions are paid
Agent’s commission must come from her brokerage.Seller pays brokerage and brokerage
pays agent a portion of that amount.
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How Commissions Are PaidDifferent brokerages
If buyer was represented by different brokerage:buyer’s brokerage will receive part of
commission, andbuyer’s agent will be compensated by his
brokerage.
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How Commissions Are PaidSame brokerage
If two agents working for one brokerage share credit for sale, brokerage must arrange commission split.One agent cannot compensate another.
© 2013 Rockwell Publishing
Real Estate LawSuing for a commission
If seller owes commission but refuses to pay it, brokerage may sue to enforce listing agreement.
Agent can’t sue seller directly, but can sue brokerage if designated broker fails to pay agent part of commission.
© 2013 Rockwell Publishing
Real Estate LawOwnership of listing
Only brokerage can deal directly with principal, so listing agreement “belongs” to brokerage.
When signing listing, agent should fill in brokerage’s name, and then sign his name as agent for brokerage.
© 2013 Rockwell Publishing
Real Estate LawOwnership of listing
If agent quits working for brokerage and begins working for another brokerage, listing stays with first brokerage.
SummaryReal Estate Law
Paying a commissionCommission splitSuing for a commissionOwnership of listings
© 2013 Rockwell Publishing
© 2013 Rockwell Publishing
Distressed Property Law
In 2008, Washington passed the Distressed Property Law.The law protects homeowners in financial
distress from exploitive foreclosure rescue schemes.
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Distressed Property Law
Generally, real estate agents providing routine real estate brokerage services are exempt from the law’s requirements.This exemption doesn't apply if an agent
actually participates in a distressed home conveyance.
© 2013 Rockwell Publishing
Distressed Property Law
Distressed home conveyance: when buyer:buys property from distressed homeowner
(one facing foreclosure), allows homeowner to stay in home for more
than 20 days past closing, and promises to convey property back to
homeowner (or promises homeowner a share of the proceeds from property’s resale).
© 2013 Rockwell Publishing
Distressed Property Law
If agent participates in this type of transaction, he must complete a distressed home consultant agreement with homeowner that describes the additional services to be provided. An attorney should draft the consultant
agreement. It should be attached as an addendum to the listing agreement.
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Distressed Property Law
Many standard listing agreement forms now include clause stating that licensee will not assist in a distressed home sale without a separate written agreement.
SummaryDistressed Property Law
Distressed homeownerDistressed home conveyanceDistressed home consultantDistressed home consultant
agreement
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© 2013 Rockwell Publishing
Antidiscrimination Laws
Important fair housing laws:Fair Housing Act (federal)Washington Law Against DiscriminationWashington Real Estate License LawAmericans with Disabilities Act
© 2013 Rockwell Publishing
Federal Fair Housing ActProtected classes
Federal Fair Housing Act enacted in 1968 to prohibit discrimination in housing based on:
racecolorreligionsex
national origindisabilityfamilial status
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Federal Fair Housing ActProtected classes
Disability: any physical or mental impairment that substantially limits one or more major life activities.
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Federal Fair Housing Act Residential transactions
Act applies to sale or lease of:residential propertyvacant land for construction of residential
buildings
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Federal Fair Housing Act Residential transactions
Along with transactions, applies to:advertisingfinancingreal estate brokerage activities in
connection with residential real estate transactions
There are several exemptions, but never applicable when real estate agent is involved.
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Federal Fair Housing Act Prohibitions
Act prohibits the following when based on protected characteristics:refusing to rent or sell residential property
after receiving bona fide offerrefusing to negotiate for sale or rental of
residential propertychanging terms of sale or lease for different
buyers or rentersusing advertising that indicates preference or
intent to discriminate
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Federal Fair Housing Act Prohibitions
representing property is not available for inspection, rent, or purchase when it is available
discrimination by residential lenderlimiting participation in MLScoercing or intimidating anyone for exercising
her rights under Fair Housing Act
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Federal Fair Housing Act Blockbusting, steering, redlining
In particular, Fair Housing Act prohibits: blockbustingsteeringredlining
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Federal Fair Housing Act Blockbusting
Blockbusting: agent encourages people to list homes by predicting members of another race (or another protected group) are moving into neighborhood.
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Federal Fair Housing Act Blockbusting
Agents profit from blockbusting by:purchasing vacated properties at reduced
prices, orcollecting commissions on induced sales.
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Federal Fair Housing Act Steering
Steering: channeling buyers or tenants to or away from particular neighborhoods because of race (or another protected characteristic).
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Federal Fair Housing Act Steering
Agent cannot advise buyer to buy or not buy based on neighborhood’s racial or ethnic composition.Avoid unsolicited statements about
neighborhood’s racial or ethnic composition.
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Federal Fair Housing Act Redlining
Redlining: lender’s refusal to make loan, based on ethnic or racial composition of property’s neighborhood.
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Federal Fair Housing Act Redlining
Lender may reject loan application for property in neighborhood where values are declining.Decision must be based on objective
economic criteria.
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Federal Fair Housing Act Enforcement
Fair Housing Act enforced:by Department of Housing and Urban
Development through its Office of Fair Housing and
Equal Opportunity
HUD may refer cases to state’s Human Rights Commission.
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Federal Fair Housing Act Enforcement
Violations of act may result in:injunction ordering stop to violation,payment of damages and attorneys’ fees
to injured party, andpayment of civil penalty to government.
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Federal Fair Housing Act Enforcement
Civil penalty as high as:$16,000 for first offenseup to $65,000 for subsequent offenses
SummaryFair Housing Act
Fair Housing ActBlockbustingSteeringRedliningPenalties
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Washington Antidiscrimination Law
Real estate agents must comply with state antidiscrimination laws, which include:Washington Law Against DiscriminationWashington Real Estate License Law
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WA Law Against Discrimination
Washington Law Against Discrimination is stricter than the federal Fair Housing Act. Covers a broader range of activities and
protects more classes of people.
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WA Law Against Discrimination
Law prohibits any discrimination based on:
race creed color national origin sex marital status
sexual orientation familial status disability use of trained guide or
service dog military status
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WA Law Against DiscriminationProhibited acts
Law prohibits wide range of discriminatory practices in:employmentinsurancecredit transactionsplaces of public accommodation and
amusementin regard to all types of real property
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WA Law Against DiscriminationProhibited acts
It is against the law to:refuse to engage in a real estate transactiondiscriminate in terms/conditions of real
estate transactiondiscriminate in providing services/facilities
related to real estate transactionrefuse to receive or fail to transmit a bona
fide offerrefuse to negotiate
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WA Law Against DiscriminationProhibited acts
claim property is not available for inspection, sale, rental, or lease when it is available
fail to tell prospect about property listingpublish an ad, notice, or sign that indicates an
intent to discriminateuse application form or make any record or
inquiry indicating intent to discriminatetake a listing with an understanding that
someone may be discriminated against
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WA Law Against DiscriminationProhibited acts
expel a person from occupancydiscriminate in negotiating, executing, or
financing a transactionengage in blockbustinginclude a condition, restriction, or prohibition
based on a protected class in a written agreement
discriminate in any credit transaction through different terms and conditions
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WA Law Against DiscriminationExemptions
The law has very few exemptions, and none of them apply to a real estate agent engaged in professional activity.
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WA Law Against DiscriminationEnforcement
The Washington Human Rights Commission enforces the state antidiscrimination laws.Individual may file complaint with the
commission within one year of discriminatory action.
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WA Law Against DiscriminationEnforcement
Commission investigates all complaints and will try to resolve problem by conference, conciliation, and persuasion. If cannot be resolved, a hearing is
scheduled with administrative law judge.
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WA Law Against DiscriminationEnforcement
Administrative law judge can:issue cease and desist order,provide affirmative relief,award compensatory damages, and/orimpose civil penalty.
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Washington Real Estate License Law
Real estate agents must also comply with antidiscrimination provisions of license law and regulations.
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Washington Real Estate License Law
Licensee’s violation of fair housing or civil rights law is grounds for disciplinary action.
The Department of Licensing can suspend or revoke the license of a brokerage that discriminates against protected class member in sales or hiring activity.
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As with any license law violation, individual licensees face a fine of up to $5,000 for each offense.
Licensee may also be required to complete educational course on civil rights laws and nondiscriminatory real estate practices.
Washington Real Estate License Law
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Americans with Disabilities Act
Americans with Disabilities Act is a federal law requiring places of public accommodation and other commercial facilities to provide equal access to disabled persons.
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Americans with Disabilities ActPublic accommodations
Public accommodations = facilities open to public, including:brokerages and other office buildings storesrestaurantshotels
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Americans with Disabilities ActModifications
May require modifications to facilities, such as:ramps or elevatorsspecial bathroom stallsdesignated parking spaces
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Americans with Disabilities ActCommercial properties
Brokerage working with commercial property should:be aware of ADA requirementsinform prospective buyers or tenants of
modifications they may have to make
SummaryAntidiscrimination Laws
Washington Law Against Discrimination
Washington Real Estate License LawAmericans with Disabilities Act
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Fair Housing Law ComplianceSteering
Never direct members of minority groups to minority neighborhoods.Even if done with good intentions,
steering is always illegal.
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Not illegal to truthfully answer client’s questions about residents of neighborhood, even if he decides not to look at that neighborhood because of type of residents.
Fair Housing Law ComplianceSteering
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Agent can’t discourage buyer from looking within a neighborhood, but doesn’t have to show properties buyer doesn’t want to see.
Fair Housing Law ComplianceSteering
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Fair Housing Law ComplianceBlockbusting
When listing property, never imply presence of minorities will:lower property values,make neighborhood less safe, orlower quality of neighborhood schools.
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Fair Housing Law ComplianceRefusal to list
Never refuse to list property because of presence or absence of particular group.
Never imply house will be easier or harder to sell because of presence of particular group.
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Fair Housing Law ComplianceRacial jokes
Agent should not remain silent if potential clients or customers make such discriminatory statements.
If client’s jokes or comments indicate willingness to discriminate, agent should clarify position on fair housing.
© 2013 Rockwell Publishing
Fair Housing Law ComplianceExplain the law
In any listing presentation, agent should explain fair housing laws to seller.
Comments by seller that aren’t discriminatory but refer to “preserving character of neighborhood” are red flags; agent may be better off refusing listing.
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Fair Housing Law ComplianceAdvertising
Advertising flyers should be sent to diverse sample of potential buyers.Don’t limit mailing flyers to persons or
neighborhoods predominantly of particular race.
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Ads shouldn’t suggest recipient can control what type of person will buy property.Phrases such as “uphold standards of
community” or “preserve character of neighborhood” are suspect.
Fair Housing Law ComplianceAdvertising
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Advertise in newspapers of general circulation instead of limiting ads to neighborhood or foreign-language newspapers.
Fair Housing Law ComplianceAdvertising
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Use diverse images in choice of photos and clip art.
Include Equal Housing Opportunity logo.
Fair Housing Law ComplianceAdvertising
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Never suggest discriminatory preference.
Ads containing information with religious significance may be considered to convey religion-based preference.
Fair Housing Law ComplianceAdvertising
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Okay to describe accessibility features.
Don’t suggest preference for adults or limitation on children.Unless property qualifies as housing for
older persons under federal guidelines.
Fair Housing Law ComplianceAdvertising
SummaryFair Housing Law Compliance
Avoid blockbusting and steeringDon’t refuse listingsAvoid racial jokesExplain the lawAdvertising
© 2013 Rockwell Publishing
© 2013 Rockwell Publishing
Antitrust LawsSherman Act
Federal antitrust laws require fair business practices among competitors.Sherman Act, passed in 1890, prohibits
any agreement that unreasonably restrains trade.
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Sherman ActPenalties
Penalties for violating Sherman Act:for individual, fine up to $1,000,000 and
up to 10 years in prisonfor corporation, fine up to 100 million
dollars
© 2013 Rockwell Publishing
Sherman ActProhibited acts
Antitrust laws prohibit four specific practices:price fixinggroup boycottstie-in arrangementsmarket allocation
© 2013 Rockwell Publishing
Price fixing: competitors cooperating in setting prices.
Competing real estate brokerages may not set uniform commission rates or publish mandatory fee schedules.Commission rates must be freely
negotiable between brokerage and seller.
Sherman ActPrice fixing
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Agent should not: say commission rate is fixedsay government, Association of Realtors®,
or MLS sets commission ratesay standard rate exists in communitymention rates that competitors charge
Antitrust LawsPrice fixing
© 2013 Rockwell Publishing
Agents should avoid discussing commission rates with competing agents.
Designated broker may, however:discuss commission split with cooperating
brokeragediscuss commission rates with her own
agents
Antitrust LawsPrice fixing
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Antitrust LawsGroup boycotts
Group boycott: agreement between two agents to exclude another agent from participation in real estate activities.Violation of antitrust laws.
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Group boycott can be based on:formal agreement carried out by large
groupcasual discussion between two people
Antitrust LawsGroup boycotts
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Because of group boycott prohibitions, MLS cannot deny membership to particular brokerage.
Even agreement among several agents to not refer business to an agent perceived as unethical would be considered group boycott.
Antitrust LawsGroup boycotts
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Antitrust LawsTie-in arrangements
Tie-in arrangement: agreement to sell one product only on condition that buyer purchases different product as well.
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Example: Builder wants to buy vacant lot from developer, but developer will sell only if builder lists completed property with him.Known as list-back agreement.
Antitrust LawsTie-in arrangements
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List-back agreements are legal if parties enter into them voluntarily.Illegal if a mandatory condition of sale.
Antitrust LawsTie-in arrangements
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Market allocation: agreement between competing firms not to sell certain products or services, in certain areas or to certain customers.
Example: Two real estate firms cannot agree to split up town, one firm taking north end and the other south end.
Antitrust LawsMarket allocation
© 2013 Rockwell Publishing
The Washington Unfair Business Practices and Consumer Protection Act (“Consumer Protection Act”) prohibits anticompetitive practices.Covers same practices as federal
antitrust law.
WA Unfair Business Practices and Consumer Protection Act
© 2013 Rockwell Publishing
Act bans “unfair or deceptive acts or practices in the conduct of any trade or commerce.”Also prohibits misleading or deceptive
advertising.
WA Unfair Business Practices and Consumer Protection Act
© 2013 Rockwell Publishing
Under the Consumer Protection Act, the builder/seller of a new home gives the buyer an implied warranty of habitability.Latent defects affecting safety and
livability of home violate the implied warranty.
WA Unfair Business Practices and Consumer Protection Act
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Private party suing under act may recover damages, court costs, and attorney’s fees.
Court is allowed to triple the damages award.
State may also bring suit against a company or individual.
WA Unfair Business Practices and Consumer Protection Act
SummaryAntitrust Laws
Sherman ActPrice fixingGroup boycottsTie-in arrangementsConsumer Protection Act
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© 2013 Rockwell Publishing
Environmental Laws
Federal and state environmental regulations may affect real estate transactions:NEPASEPAShoreline Management ActCERCLAClean Water ActEndangered Species Act
© 2013 Rockwell Publishing
Environmental LawsNEPA
NEPA (National Environmental Policy Act) requires federal agencies to provide environmental impact statement for any action with significant effect on environment.Applies to federal development and
private actions requiring federal agency approval.
© 2013 Rockwell Publishing
Environmental LawsSEPA
SEPA (State Environmental Policy Act) requires environmental impact statement for all acts of state and local agencies that may have a significant effect on environment.
Applies to private development since construction requires building permit (granting permit is local agency action).
© 2013 Rockwell Publishing
Environmental LawsShoreline Management Act
Shoreline Management Act regulates development within 200 feet of the high water mark.
© 2013 Rockwell Publishing
Environmental LawsShoreline Management Act
Shoreline Management Act applies to:coastal shorelinesshores of lakes larger than 20 acresstreams that flow at certain rates
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Environmental LawsShoreline Management Act
Developers of shoreline property required to obtain a substantial development permit before work begins.“Substantial” means development in
excess of $6,416 or that materially interferes with normal public use of water or shoreline.
© 2013 Rockwell Publishing
Environmental LawsShoreline Management Act
Violators of the act may be fined up to $1,000 per day.
Court may order shoreline restored to its original condition.
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Environmental LawsCERCLA
CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) is federal law regulating liability for environmental cleanup costs.
Parties responsible for cleanup of property contaminated by hazardous waste may include both current and previous landowners.
© 2013 Rockwell Publishing
Environmental LawsClean Water Act
Section 404 of Clean Water Act prohibits development of wetlands without permit from U.S. Army Corps of Engineers.
Wetland development may be permitted if developer creates new wetland areas elsewhere or pays into government fund that restores wetlands.
© 2013 Rockwell Publishing
Environmental LawsEndangered Species Act
Endangered Species Act limits property development where endangered or threatened species are present.Development may be allowed if property
owner agrees to Habitat Conservation Plan and takes measures to limit harm to protected species.
© 2013 Rockwell Publishing
Environmental Hazards
Possible environmental hazards on property: asbestos urea formaldehyde radon lead-based paint underground
storage tanks
water contamination illegal drug
manufacturing mold geologic hazards
© 2013 Rockwell Publishing
Environmental HazardsAsbestos
Asbestos was commonly used as insulation, in floor tile, and in roofing material.Harmless in original state but can cause
lung cancer as it disintegrates and turns to dust.
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Environmental HazardsAsbestos
Asbestos can be dealt with through:enclosure (placing barrier between
asbestos and rest of space)encapsulation (covering asbestos with
adhesive that seals it off)removal
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Environmental HazardsUrea formaldehyde
Urea formaldehyde can cause illnesses such as cancer and breathing problems.May be found in pressed wood building
materials and foam insulation.Urea formaldehyde materials emit
dangerous gases for only a few years.
© 2013 Rockwell Publishing
Environmental HazardsRadon
Radon is gas that can cause lung cancer.Can seep into basements or foundations.Found wherever uranium is deposited in
earth’s crust.
Radon can be dealt with by sealing holes or cracks that allow it to enter house.
© 2013 Rockwell Publishing
Environmental HazardsLead-based paint
Lead is toxic material particularly harmful to young children who may ingest it.Many homes built before 1978 contain
some lead-based paint.Paint may be removed or covered with
non-lead-based paint.
© 2013 Rockwell Publishing
Environmental HazardsUnderground storage tanks
As underground storage tanks grow old, they may rust and leak oil into groundwater.Federal and state laws regulate storage
tank removal and cleanup.
© 2013 Rockwell Publishing
Environmental HazardsWater contamination
Contaminated water may expose people to health hazards:bacteria or virusesnitrateslead or mercurypesticides or fertilizersradonoil from underground storage tanks
© 2013 Rockwell Publishing
Environmental HazardsIllegal drug manufacturing
Properties used for manufacture of illegal drugs may retain residues of highly toxic chemicals.These properties should be thoroughly
tested.
© 2013 Rockwell Publishing
Environmental HazardsMold
Mold is a common problem with no ill effects for most people, but can cause serious respiratory problems for some.
Cannot be totally eliminated, but may be limited by:scrubbing away current growthlimiting sources of moisture to prevent
future growth
© 2013 Rockwell Publishing
Environmental HazardsGeologic hazards
Home buyers should be aware of potential geologic hazards for certain properties:landslidesfloodingsubsidence (collapse of ground into
underground cavities)earthquakes
© 2013 Rockwell Publishing
Environmental HazardsAgent’s role
Agent should be on lookout for potential environmental problems when viewing the property.
© 2013 Rockwell Publishing
Environmental HazardsAgent’s role
Advise seller to consult environmental attorney, engineer, or other professional if problems are suspected.
Buyers shouldn’t buy property until necessary cleanup is completed.
SummaryEnvironmental Issues
NEPASEPAShoreline Management ActCERCLAClean Water ActEndangered Species ActEnvironmental hazardsAgent’s role
© 2013 Rockwell Publishing