Dan Bradley

Appraiser assistants have until October 1 to complete 75 hours of education and apply to become an appraiser trainee if they want to continue working in the appraisal business, according to Dan Bradley, chair of the State Board of Certified Real Estate Appraisers.

The board is introducing new regulations that define an “appraiser trainee” and the requirements for the new trainee license on the PA Bulletin website tomorrow.

“There are multiple reasons for the changes,” Bradley said. “In the past, we’ve had assistants who weren’t licensed or regulated in any way. The board didn’t require them to be registered so there was no way to regulate them.

“In the interest of protecting the public, we wanted to create tighter requirements for people who assist in appraisals. Ideally, we don’t want people with serious criminal records having access to people’s homes,” Bradley added.

The board is sending notification about the change in regulations to all certified appraisers and registered assistants next week.

To apply for an appraiser trainee license, applicants will be required to have 75 hours of education including:

• 30 hours of basic appraisal principles
• 30 hours of basic appraisal procedures
• 15-hour Uniform Standards of Professional Appraisal Practice (USPAP) course.

To become an appraiser, 200 hours of education and 24 months of experience are required for residential appraisers and 300 hours of education and 30 months of experience for general appraisers.  The 75 hours of trainee education counts towards meeting these requirements.

The regulation also will require appraisers to use the new Trainee Checklist when a trainee works on an appraisal. The appraiser must keep a copy of the checklist in the workfile and a copy must be sent to the client as part of the report. “It’s now mandatory for appraisers to send this checklist to the client so the client is aware that a trainee has worked on the appraisal,” Bradley explained.

During this transition period, appraisal assistants can work to get the required education needed before applying for the trainee license. After October 1, if an assistant hasn’t obtained a trainee license, he can’t assist with appraisals.

Q. How does Megan’s Law work?

To be registered, an individual must be convicted of one of several crimes related to the abuse or kidnapping of minors or various sex crimes. Registered offenders are required to keep the State Police updated on the location of their residence, their place of work and any schools at which they are enrolled. Although registration under Megan’s Law is commonly associated with being a convicted sex offender, some individuals who are registered offenders have been convicted of non-sex crimes against children.

Q. Do licensees have a duty to disclose information on sex offenders?

As a real estate licensee, while you do not have an affirmative duty under Megan’s Law to investigate and disclose the presence of registered offenders, you should be mindful that this does not serve to absolve you of all responsibility. For a buyer agent to conform to the standards of practice applicable to selling residential real estate, the buyer agent should at least be advising the buyers of their ability to determine the presence of registered offenders in adjacent and nearby properties. 

As you may know, the first “Notices” page of the Standard Agreement of Sale includes a Notice Regarding Convicted Sex Offenders. This Megan’s Law notice encourages buyers to research whether any registered offenders live or work near the property they anticipate purchasing. This notice to buyers is important because Megan’s Law specifically states that there is no duty imposed on real estate licenses to disclose information regarding offenders.

Q. Can a licensee refuse to represent a buyer who is registered under Megan’s Law?

By refusing to represent a registered offender, the licensee does not violate anti-discrimination laws as long as he is not at the same time discriminating against the person by reason of some other status that would constitute a violation of law. 

Because registration under Megan’s Law is based on criminal status and there is no protected class based on criminal convictions or criminal status, it is not unlawful to refuse to represent an individual based on the fact that he or she is registered under Megan’s Law.

(When discussing the topic of discrimination, you will often hear people use the term “protected class.” This term is used because anti-discrimination laws prohibit discrimination based on an individual’s membership in a “class” or category that is designated for special protection. Protected classes include: race, color, religious creed, ancestry, age, sex, national origin, non-job related handicap or disability or the use of a guide or support animal because of blindness, deafness or physical handicap.)

James L. Goldsmith  and Douglas M. Oberholser are attorneys with Caldwell & Kearns.  Mr. Goldsmith serves as general counsel to PAR.  He and Mr. Oberholser routinely provide advice and counsel to real estate licensees as two of the voices on the PAR Legal Hotline.  A substantial portion of their practice is dedicated to providing counsel on real estate matters and representing real estate salespersons and brokers in civil lawsuits.  They may be reached at CKLegal.net or realcompliance.com.

HUD said that under Section 8 of RESPA, brokers/REALTORS® offering a home warranty are making a referral to a settlement service provider. Once HUD concluded that the “sales pitch” offered by licensees to consumers about the benefits of a home warranty is a referral, it logically invoked RESPA’s restriction of compensating real estate professionals for such referrals. HUD noted that REALTORS® are in a unique position to refer business and influence a homebuyer’s or seller’s selection of a home warranty company (HWC).

Offering home warranties to buyers is a common practice in residential real estate transactions.  As part of “selling” the home warranty, real estate salespersons and brokers can earn fees.  The question arose whether a payment from a HWC is an “earned” fee and permissible or does it fall within the “guise of payments for services rendered when no or nominal services were actually provided,” as was suggested in December by Ivy Jackson, former director of the Office of RESPA and Interstate Land Sales.

Is there ever an occasion when a real estate licensee may be compensated for “selling” a home warranty?  Yes.  HUD has offered some guidelines:

First and foremost, HUD requires actual service to be performed. The services must be actual, necessary and distinct from the primary services performed by a broker or agent.  HUD has suggested that recording serial numbers of equipment, inspecting equipment to be covered for pre-existing conditions or photographing equipment to be covered might attain the level of investment needed to be considered an “actual, necessary and distinct” service that would be compensable under RESPA.  HUD’s guidance in identifying what constitutes “actual, necessary and distinct” services is helpful but not necessarily determinative.  One must give careful thought to the service performed before taking a fee.

HUD would also consider contractual relationships between licensees and HWCs in which the HWC assumes responsibility for statements made by licensees to be indicative of a relationship through which a licensee may perform compensable services. HUD has suggested it will examine these relationships on a case-by-case basis to determine whether the licensee is truly the agent for the HWC and to ensure that the relationship is disclosed to the consumer as is also required under RESPA. 

These types of relationships are probably uncommon in today’s market, though some brokers and HWCs have moved in this direction in anticipation of an adverse ruling by HUD.   These progressive brokers have moved from arrangements with HWCs that pay fees only for successful transactions and have gone to marketing or administrative service agreements with HWCs where fees are earned for providing services distinct from the normal warranty sales pitch delivered when the agreement is negotiated.

The last factor to consider when evaluating whether your practice (or your office’s practice) of receiving compensation from HWCs complies with RESPA is to ensure that the fee is reasonable. Any fee lawfully paid under RESPA must be reasonably related to the actual service performed.

This is a provocative rule that will have a far-reaching impact on residential real estate practices.  Interpretive rules are typically exempt from public comment, however, HUD has invited comment from those who are interested.

If you have questions about how this rule will affect your office or if you seek to protect yourself from liability that may arise from accepting fees deemed illegal by HUD, please contact your counsel promptly.

James L. Goldsmith, Esq. and Brett M. Woodburn, Esq. are attorneys with Caldwell & Kearns and serve as general counsel to PAR. A substantial portion of their practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. They routinely counsel employers on employee relations issues as voices of the PAR Legal Hotline. They may be reached at realcompliance.com.

The National Association of Home Builders (NAHB) quickly brought a lawsuit against HUD, asking the Court to prohibit HUD from changing those prohibitions against “required use.” The conflict was avoided when HUD agreed to withdraw the proposed change. It was clear, though, that the agency intended to return to the issue in the future.

Fast forward to today. Early this month HUD announced it is requesting information, including personal experiences, empirical studies and other data that specifically address “incentivized” affiliate referrals and penalties, in an effort to strengthen and clarify RESPA’s prohibitions against “required use.”

HUD is seeking data that will allow it to assess claims that builders’ incentives have lead to artificially inflated appraisals and lower underwriting standards or that has created situations where home buyers are at greater risk for being “upside down.” The agency wants to tailor its prohibition of “required use” so that it further reduces the schemes that increase buyers’ settlement costs without prohibiting beneficial discounts or packages. 

There are three specific questions HUD is asking: 

(1) Are the values of the incentives offered by builders too difficult for consumers to quantify, thereby limiting their ability to effectively shop for mortgages?

(2) Are consumers required to commit to use a builder’s affiliated lender so early in the process that consumers never have an opportunity to compare the loan terms offered by the builder against other lenders?

(3) Are builders pressuring consumers to commit to a contract before the consumer has time to consider alternatives and to comparison shop?

The issues of “incentivized” referrals and penalties are frequently raised by REALTORS® across the Commonwealth. If this is an issue that motivates you — and if you have facts, statistics or empirical data that you can offer in support of your position –  now is the time to bring it to PAR’s attention.

Doug Marsico, Esq.

A cooperating broker’s entitlement to a share of the listing broker’s commission arises from the offer made by the listing broker in the MLS. By virtue of membership in the MLS, the listing broker agrees to offer a portion of his commission to a cooperating broker who is the procuring cause of a sale. The keyword is “sale.” Here, the buyer broker was not entitled to a portion of anything because there was no sale. The buyer produced by the buyer broker was not a ready, willing and able buyer, at least not so at settlement.

Entitlement to a fee as the procuring cause requires a successful transaction. A successful transaction is defined in NAR’s Code of Ethics and Arbitration Manual as “a sale that closes or a lease that is executed.” When the buyer defaults, absent any written agreement between the listing broker and the cooperating broker to the contrary, the listing broker’s obligation to pay a cooperating broker a commission split is excused. 

The buyer broker can seek to enforce the buyer agent contract and try to recover her fee that was lost by virtue of the buyer’s breach. This remedy is provided for in the standard PAR Buyer Agency Contract.

U.S. Census workers now are knocking on doors, recording information about people who failed to return their census forms earlier this year.  But what happens when nobody is home?

PAR has received calls from members who’ve been asked by Census enumerators to verify who, if anyone, lives in their listings. During a recent session at the PAR Business Meetings in Harrisburg, nearly 80 percent of those attending said they had already been contacted by a Census worker about their listed properties.

Hank Lerner, PAR Member and Legal Services director, said REALTORS® generally aren’t legally required to provide any information about the property owners of properties they’ve listed.  “After consulting with NAR legal staff, we’ve been advising REALTORS® to explain to the Census employee that you’re going to contact the property owner to ask if you can provide the requested information or pass the contact information to the owner, rather than to immediately provide information,” he said.

NAR confirms that after contacting the Census Bureau, it appears that listing agents aren’t obligated by law to provide information. NAR has provided additional information on its Census Bureau research.

Property owners and manager of multi-unit buildings are, however, expected to cooperate with Census takers. “If you manage or own an apartment complex or multi-unit properties, you do need to provide the Census with the names of residents, and you need to provide access to the buildings if asked,” Lerner said.

Brett Woodburn, Esq.

Buyers sued the Sellers, listing broker and listing agent under a theory of fraud. Buyers learned that several years before listing the property for sale, Sellers had the property appraised and that appraisal showed the home having 2,468 square feet.  Sellers and licensees argued there was no fraud because the local tax assessor’s office identified the property as having 2,890 square feet.  Sellers and licensees asked that the suit be dismissed on the basis that there was no evidence of fraud and even if there was fraud, there were no recoverable damages. Buyers appealed and lost and then appealed to the Oklahoma Supreme Court, which reversed both the trial court’s and the first appellate court’s decisions and sent the case back for trial.

The licensees argued that they were justified to rely on the square footage identified by the tax assessor’s office.  They argued that the MLS listing contained the language that the “information is deemed reliable, but not guaranteed.”  They argued that the terms of the agreement of sale, which contained language similar to the PAR Standard Agreement of Sale, clearly stated that the buyers understand they purchased the property as is – and in doing so released the licensees from liability (the Oklahoma agreement contains a specific provision for square footage); the release was intended to survive settlement.  The licensees even argued that the lender’s appraisal (the one that showed the property having only 2,187 square feet) valued the property at almost $147,000, so there was no financial harm.

The Supreme Court was not persuaded by any of these arguments. The Court concluded that buyers are entitled to rely on positive representations made by sellers and their agents regarding the property’s size. According to the Oklahoma Supreme Court, representations about square footage are statements of material fact and not expressions of opinion; therefore, a buyer does not need to independently verify the truth of those statements. If buyers later claim they were victims of fraud, then it is for the jury to decide if fraud was committed and if buyers suffered compensable damages because of the fraud.  The Supreme Court was even willing to allow the Buyers to present evidence that they calculated their offer based on a dollar-per-square-foot, even though the agreement of sale was silent on the method of calculation.

The Real Estate Licensing and Registration Act (RELRA), the regulations and the Real Estate Seller Disclosure Law in Pennsylvania, along with some recent case law, might provide Pennsylvania licensees with some protections in Pennsylvania that were not available to them in Oklahoma. But the Court was not deciding who was right and who was wrong; rather, the Court determined that the decision on liability was appropriately left to a jury. A similar result could occur in Pennsylvania. The Court’s conclusion that representations about size are “material facts” is a valuable lesson. If a Pennsylvania court were to reach the same conclusion, then listing agents and sellers should take care before representing square footage or quantum of land. Certainly a licensee who bases the square footage on tax- or other public records might reference the source of his information (some MLS’s have a field calling for the “source” of the square footage where “public record” can be inserted). Of course, such a finding would also heighten a buyers’ agents’ responsibility to their clients to ascertain how much size matters and to take steps to protect their buyers accordingly.

The decision of the Oklahoma Supreme Court is not a binding precedent for Pennsylvania,  however, our courts can find these conclusions to be constructive.  Remember, there is no industry standard on determining square footage; exercise caution when identifying it.

PAR has translated many of its forms, including the new Agreement of Sale (ASR) into Spanish for REALTORS® to use as a reference when working with Spanish-speaking clients. These reference copies may not be used in transactions but can be used to allow Spanish-speaking clients to read the forms in their language.

Tamer Gomaa with Weichert REALTORS® in Lancaster gives his Spanish-speaking clients PAR’s Spanish Consumer’s Guide (Form SCG).  

“I try to explain different sections of the Agreement of Sale as we go through the buying process. The Spanish Consumer’s Guide is a service to the consumer and something they can reference. It really makes a difference in helping them feel more respected,” he said.

Gomaa himself speaks several languages. “The Agreement of Sale can be confusing for people who speak English. Legal language is legal language – no matter what language it appears in,” he added.

Michelle Nestor with Prudential Thompson Wood in the Harrisburg area said she often works with clients who speak Spanish as their first language. Even though she speaks Spanish she says the translated material is extremely helpful.

“The Spanish translation forms and Consumer Guide make the client feel more comfortable signing such a complicated agreement and help them understand every part of the transaction. Every agent who’s working with Spanish-speaking clients should be using these,” she said.

The Spanish Consumer’s Guide is available to purchase through Business Services for Real Estate (BSRE). All translated forms will have the words “Reference Copy” screened in the background. Reference copies are available on PAR’s website and in electronic format through our E-Forms Vendors.

Facts: Our caller, a listing agent, was having trouble finding a qualified buyer for her client’s property. Shortly before the listing expired, a buyer offered to purchase the property on an installment sales contract and agreed to pay $2,000 down and $500 a month beginning with the first of the following month. Buyer and seller decided they would wait until the expiration of the broker’s listing so they would not have to pay a commission and the listing salesperson was in accord! In fact, not only did the listing salesperson agree for herself and her broker not to take a commission, she also offered to prepare the installment sales contract for free.

The installment sales agreement was signed and the $2,000 paid. The buyer delayed in moving into the property and failed to pay the first month’s installment. With the aid of the listing salesperson, buyer and seller orally agreed that seller would waive the first installment and the buyer could move into the property in advance of the first day of the second month.

The details are insignificant and to make a long story short, the buyer never took possession and refused to pay any of the installments. In fact, she demanded her initial deposit of $2,000 back and agreed that upon receipt of the money she would release her interest in the property so that the seller could list and sell it. As the seller contemplated buyer’s position, the listing salesperson encouraged her to accept it. In fact, the listing salesperson offered to pay the $2,000 for the seller who would, over a period of a few months, reimburse her. Seller agreed, but after the listing salesperson told the buyer that she’d be repaid her $2,000 deposit, seller renounced her prior promise to pay.

Q:  With the seller refusing to abide by the oral agreement to reimburse the buyer’s $2,000 and with the listing agent having extended the promise of reimbursement to buyer, what responsibility does the listing agent now bear? 

A: What a mess!  Was the listing agent’s promise to buyer clearly contingent on seller’s entry into the agreement to reimburse the $2,000 or was the agent’s offer independent? It really doesn’t matter because the listing agent is so inextricably involved in this transaction that there is no simple out.

First, the agent had no right to waive her broker’s commission. Clearly the agreement to sell on an installment basis was reached during the listing period regardless of the date it was signed and broker should have had the opportunity to determine whether she would waive her commission.

Second, no salesperson or broker should ever draft an installment sales contract. Assuring that both parties are secured in the transaction is a difficult balancing act and requires precise draftsmanship and review of the risks with the parties. Each should have independent counsel. Drafting an installment sales contract constitutes the unauthorized practice of law given the lack of a standard contract and the relative inability of standardizing such a transaction.

Third, while the agent’s liability to pay $2,000 to the buyer is less than certain, it makes sense that the agent make payment. It could be argued that the agent will receive no consideration for the payment and therefore her offer was gratuitous and not enforceable. All it takes, however, is for the buyer to complain to the Real Estate Commission and this agent is going to have more than $2,000 worth of defense fees, fines and possible lost income due to suspension.

Need I go on? Apparently, yes. This is not the first time I have written on the subject of licensees drafting installment sales contracts. The consequences can be disastrous, both for the parties and the licensees. Yet we continue to receive calls on the Hotline where licensees are allowing the unusual transaction to proceed without legal intervention. Installment sales agreements and other non-standard agreements should not be drafted by licensees. You can earn your full commission without taking on the added liability of drafting agreements and counseling clients in unusual agreements.

Janik will highlight recent national cases involving disclosure, agency law, fair housing, anti-trust and RESPA violations. “These topics seem be issues across the country,” Janik said. “For example, we’re seeing disclosure cases that deal with the obligation to disclose a defect that the homeowner has fixed but has resurfaced with the new owner.”

She will also highlight cases that have been brought to court as a result of the decision in the Busby case last year. The decision handed down on Busby v. JRHBW Realty Inc. d/b/a /RealtySouth found that a $149 “Administrative Brokerage Commission,” often referred to by brokers as an “ABC fee,” was not related to any specific settlement service and was therefore in violation of the Real Estate Settlement Procedures Act (RESPA).

Dale Ross, CEO of NAR’s REALTOR® Property Resource (RPR), will speak at 10 a.m. on Tuesday, May 25. RPR is a nationwide database of all property being created by NAR as a resource for its members.

At 2 p.m. Tuesday, Paul Bishop, NAR vice president of research, will present an economic update.

All REALTORS® are invited to attend the PAR Business Meetings, May 24-26 at the Harrisburg Hilton. There is no cost to attend but online registration at parealtor.org is suggested.