Chapter 25. Georgia Real Estate An Introduction to the Profession Eighth Edition Chapter 25 Georgia...

Chapter 25

Georgia Real Estate An Introduction to the Profession

Eighth Edition

Chapter 25

Georgia Practice

Key Terms• boycotting• BRRETA• CAM• Commercial Real

Estate Broker Lien Act

• Georgia Property Owners’ Association Act

• Georgia Time-Share Act

• good-faith estimate• HUD-1• listing presentation• monopoly• price fixing• RESPA• tie-in agreement

© 2015 OnCourse Learning

Working with Clients and Customers

Brokerage Relationships in Real Estate Transactions Act (BRRETA) provides guidelines and protections for the consumer and the licensee.


BRRETA

Every person a licensee comes in contact with in a real estate transaction is a customer until they become a client.

The only way to become a client is through a written brokerage engagement agreement.


BRRETA

The client we work for.

The customer we work with.


BRRETA

The client has the right to expect confidentiality.

A customer does not.


BRRETA

Material facts are facts that a party does not know, could not reasonably discover and would reasonably want to know.


BRRETA

Licensees must disclose all material facts to clients.


BRRETA

Georgia rules and regulations require a licensee to present all signed offers


BRRETA

Present all offers until closing, including oral, and give the seller-client the opportunity to negotiate a back-up contract.


BRRETA

The relationship between the broker and the client is not deemed to be a fiduciary relationship unless the parties agree to such in writing.


BRRETA

Georgia defines a fiduciary relationship as one that requires extraordinary skill, knowledge and ability.


BRRETA

If the seller is being asked to provide the financing, the broker must disclose to the seller all material facts concerning the buyer’s financial ability to perform the terms of the sale.


BRRETA

A broker is required to disclose:• Adverse material facts pertaining

to the physical condition of the property

• The existence of adverse physical conditions in a neighborhood, limited to within one mile of the property


BRRETA

A broker is only liable to disclose if the broker possesses actual knowledge of the defect.


BRRETA

Brokers are not liable for false information if they did not know the information was false at the time of providing it and they supply the source of information.


BRRETA

The engagement continues until performance, expiration or agreement to terminate.

If there is no expiration date, the agreement shall terminate in one year.


BRRETA

If a broker is in conflict between their duty to maintain confidentiality and their duty not to give false information, the duty not to give false information is the greater duty.


BRRETAAll brokerage engagement agreements contain an office brokerage policy. This includes:• Advising the prospective client of the

types of agency relationships available

• Advising the prospective client of any brokerage relationship that would be a conflict


BRRETA

• Advising the prospective client of compensation and whether the broker will share any compensation paid to another broker

• Advising the prospective client of the broker’s obligation to keep information confidential


BRRETA

If a broker seeks to act as an agent for both parties in a transaction, there must be an informed, written consent of the client.


BRRETA

The principals to the dual agency must sign stating they do not have to consent to the dual agency and that they are doing so voluntarily.


BRRETA

In designated agency, there is one broker and two clients, but the broker designates different associates to represent each client.


BRRETA

If the firm does not represent either party in the transaction, the broker is acting as a transaction broker. The licensee owns only ministerial acts and the disclosure of adverse material facts to the parties.


Single Agency Seller Agency

The firm would exclusively represent the seller and not have a brokerage engagement with the buyer.


Single Agency Buyer Agency

The firm enters into a brokerage engagement with the buyer, in pure buyer agency.


Single Agency Co-op

Many firms have a policy that the firm will represent both buyers and sellers, but not both in the same transaction.


Dual Agency

Licensees must be mindful of situations that could cause a dual agency and have policies and procedures to handle the conflict.


Designated Agency

Designated agency is not dual agency.


Sub-agency Co-Op

In sub-agency co-op, there are two brokers, both representing the seller. The listing agent is the primary agent for the seller, and the selling broker is an agent of the listing broker.


Sub-agency Co-Op

Sub-agency is legal, but it is almost never seen in the field today.


Transaction Brokerage

As a transaction broker, the firm has no client. They treat everyone as a customer.


Working with Sellers

The process of listing property begins with prospecting for property owners who desire to sell their properties and need the services of a real estate broker.


Listing Presentations

Once a lead has been obtained, the agent should make an appointment with the property owner to conduct a listing presentation.



A Seller’s Net Worksheet helps the seller understand how much money to expect to receive at closing after any loan payoffs and expenses.



If the property is owned by a husband and wife, a man has no automatic authority to sign for his wife, nor does a woman have automatic authority to sign for her husband.


Seller’s Property Disclosure FormThe Seller’s Property Disclosure Form informs the potential buyer of the history of the property and makes a written disclosure of any known latent defects.


Seller’s Property Disclosure Form

When a property is sold “as is,” that means there is no warranty or guarantee of the condition of the property being made by the owner.



“As is” has no effect on the seller or seller’s agent’s duty to disclose defects.


Seller’s Property Disclosure FormThe Stigmatized Property Act protects the owner, broker and licensees from responsibility to disclose such psychological defect.

If asked, the question should be answered truthfully to the best of that person’s knowledge.



Federal law has made disability a protected class under the Fair Housing Act, and a person with AIDS has been defined as having a disability.

Questions about people of a protected class cannot be answered.


Commercial Real Estate Broker Lien Act

The Commercial Real Estate Broker Lien Act allow a broker to file a lien on a commercial property if the seller refused to pay earned commissions.


Working with Buyers

When representing the buyer as a client, the duty is to advocate for the buyer, make full disclosure and maintain confidentiality.


Working with Buyers

A broker should create and implement a policy that allows agents of the company to provide valuable services and at the same time manage risk.


Working with Buyers

Buyers you must represent:1. Yourself2. Buyers requirement

anonymity3. Current clients


Working with Buyers

Buyers you should represent:1. Former clients2. Referrals from a

former client3. Friends and relatives4. Business associates


Working with Buyers

Buyers who need representation:1. First-time

homebuyers2. Relocating buyers


Working with Buyers

Buyers you should not represent:1. Unmotivated buyers2. Unrealistic buyers3. Unqualified buyers4. Buyers that present a conflict to

represent5. Buyers who expect something

unethical or illegal


Working with Buyers

The first step in working with a buyer is setting up an interview before showing property.

If a client relationship is desired, a brokerage engagement agreement is signed, with copies given to all parties.


Working with Buyers

It is important to clearly identify the buyer as a client or a customer and to proceed in a manner consistent with that choice.


Working with Buyers

Clients we advocate for, provide loyalty, obedience, confidentiality and full disclosure.

Customers only receive information, basic fairness and limited disclosure.


Writing an Offer

1. Real estate licensees are not attorneys and cannot draft legal forms.

2. Sales contracts and leases require a sufficient legal description


Writing an Offer

3. License law requires that the offer contain a sufficient method of payment.

4. Earnest money, while common, is not the consideration in a contract. It is not required in order to have a valid agreement.


Writing an Offer

5. Avoid conflicting information in the contract.

Handwritten language controls typewritten language and typewritten

language controls pre-printed language.


Writing an Offer

If there is a conflict between a written agreement and a verbal agreement, the written agreement controls.


Writing an Offer

If the wording in the agreement is vague, courts will often construe the words most harshly against the party who wrote them.


Writing an Offer

6. When filling out the lines of a preprinted form, no line should be left blank.

7. When adding additional pages to the agreement, reference the additional pages as an exhibit or addendum.


Writing an Offer

8. Most contracts can be assigned to someone else unless there is a stipulation prohibiting such assignment.

9. The presentation of the offer to the seller is controlled by the agent representing the seller.


Writing an Offer

It is typically a law violation for the buyer’s agent to negotiate with the seller without the listing agent present, unless the seller has opted out of negotiation services from the listing agent.


Writing an Offer

10.A seller who is not satisfied with the buyer’s offer may counteroffer.

11.An offer does not become a binding agreement until the acceptance has been properly communicated back to the offeror.


Contract to Closing

The primary duty of the agent is to write a good contract, explain the obligations to the parties and maintain an open line of communication with all parties until closing.


Contract to Closing

Once the contract is signed by all parties, a copy must be provided to the buyer, seller, listing broker, and the selling broker.

The lender and the closing attorney also need a copy of the contract.


Contract to Closing

With time being of the essence, the time limits must be faithfully followed.


Contract to Closing

The buyer has time to conduct inspections during the due diligence period. If the inspections expose conditions that are not acceptable, the buyer has the right to terminate and receive their earnest money, or they can negotiate with the seller for repairs.


Contract to Closing

The salesperson should also follow up with the lender and make sure everything is going smoothly.


Contract to Closing

The agents should prepare cost and net worksheets for the buyer and the seller.


Contract to Closing

The closing is governed by the Real Estate Settlement Procedures Act (RESPA).

RESPA requires disclosures to the buyer to allow them to make informed decisions.


Contract to Closing

A borrower should receive a good-faith estimate with the approximate settlement costs.


Contract to Closing

The lender and closing attorney must also use the HUD-1 Uniform Settlement Statement.


Contract to Closing

RESPA prohibits kickbacks for settlement services.

If a person is receiving a fee, they must be providing a service.


Contract to Closing

In Georgia, only a licensed attorneycan conduct a closing.


Property Management

Property management services the needs of the owner, the needs of the asset and the needs of the tenants.


Property Management

The relationship between the broker and the owner begins with the property management agreement.


Property Management

As with all signed documents, the signing party must receive a copy for their files.


Property Maintenance

The property manager typically maintains the property to maximize income and economic life.



Custodial maintenance is the day-to-day cleaning and maintenance of the property.



Preventative maintenance is the periodic care for items to extend the economic and useful life.



Corrective maintenance is the as-needed repair or replacement of items.


Marketing

The goal of marketing is to expose the property to the right people, at the right time in a manner that is both effective and efficient.


Market Analysis

The ultimate challenge for the property manager is to maximize the net income and economic life of the property by keeping the property as fully occupied as possible with tenants paying the highest rent possible.


Budgeting

The estimated projected income for a property is documented by analyzing the past performance of the subject property and competing properties in the area.


Budgeting

There are three common expense categories:• fixed expenses• variable expenses• reserves for replacements.


Tenant Selection

Tenant qualification should include procuring a credit report, checking personal references, and verifying employment and banking information.


Negotiating the Lease

Leases for more than one year must be in writing to be enforceable according to the statute of frauds.


Rent Collection

The property manager usually collects rents, pays bills and remits remaining income to the owner.


Retaining Tenants

The primary statistic used to assess the effectiveness of a property manager is probably the turnover rate.


Georgia Real Estate Finance

Lenders prefer to make secured loans.

Georgia uses a security deed to secure debt.



The security deed conveys legal title to the lender, which is defeasible upon satisfaction of the debt. The borrower retains equitable title with the right of redemption.



The borrower can redeem the legal title by fulfilling the obligation and paying off the debt.



The primary reason for the security deed is to allow for non-judicial foreclosure.

The lender can foreclose with a power of sale.


Georgia Real Estate FinanceIn a foreclosure, the property must be advertised in the local paper for four consecutive weeks prior to the public sale at the county courthouse on the first Tuesday of each month.


Georgia Real Estate FinanceSome investors have negotiated with lenders to buy property at a discount if the lender will accept less than the amount of the debt.

This is called a short sale.


Community Association Management

A community association is essentially a homeowners association.

These associations are not-for-profit corporations with property owners as members and an elected board of directors.



Unless the manager is a member of the association, the community association manager must be licensed by GREC.



Community association license (CAM) requirements;• 18 years old• Georgia resident• 25-hour CAM course• Pass the state exam



The CAM licensee must affiliate with a broker.


Price Fixing

When two or more brokers work together to raise prices, that is known as price fixing and is a violation of antitrust laws.


Price Fixing

A broker can set pricing policies for their own firm without violating antitrust.


Boycotting

Boycotting is the act of eliminating competition by refusing the competition access to materials or information needed to compete.


Monopolies

When a company becomes so big that no one can compete, it is called a monopoly.


Tie-in Agreements

When a business requires that a customer enter into a second contract as a condition of the first contract, that “tying in” of the second contract to the first may be illegal if there is no competition and substantial commerce is affected.


Tie-in Agreements

Violation of Sherman is a felony and punishable with a fine up to $350,000 and up to three years in prison for an individual. The penalty for a corporation is up to $10 million.


Fair Business Practices Act of 1975

The Fair Business Practices Act (FBPA) is the primary consumer protection law in Georgia. The act regulates unfair or deceptive practices in consumer transactions.

It applies primarily to advertising.


Fair Business Practices Act of 1975

To prosecute, an actual transaction must have taken place and it must have impacted more than one person.


Uniform Deceptive Trade Practices Act

The UDTPA does not require more than one person impacted nor do they have to prove there was an actual transaction.


Timeshares

The Georgia Time-Share Act governs the sale of all timeshare properties located within Georgia and out-of-state properties that are marketed in Georgia.


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Chapter 25. Georgia Real Estate An Introduction to the Profession Eighth Edition Chapter 25 Georgia...

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