Had the broker used the PA Association of REALTORS® Standard Agreement – all of it – she would probably not have been involved in this suit.  Well, perhaps she would have been involved in the suit — but my chances of getting her out of the suit early would have been better!

During a deposition a few weeks ago, I asked the buyers whether they thought it was important to read the Agreement of Sale that contained all of the terms and defined the rights of the buyers and seller. Didn’t they think that their initials on each of the pages signified their review? When I got to the question about reviewing the Notices provisions relating to inspections, environmental conditions and specifically mold, I got a surprise: the buyers were out of town when they signed the Agreement of Sale and transmission of the form to and from the broker were by fax. The buyers never received the reverse sides of the Agreement and therefore could honestly say that they were not provided with the opportunity to read the mold notice. 

Based on the buyer’s testimony, we know that had they received it they would have read it, called the EPA, undertaken further research, tested for mold, etc.  (Plaintiffs in litigation will always say they would have availed themselves of all of the testing and assessment opportunities had they been properly advised.  In real life, very few people who receive this Notice test or assess for the presence of mold. )

Paragraph 11 (Inspections) specifically addresses the buyers’ right to assess the property for mold.  A more comprehensive discussion of mold is found in the Notices section.  There, mold is identified as a contaminant, the presence of which may be confirmed by tests.  It is this provision to which I will frequently direct the buyer during the course of litigation by having them acknowledge that yes, they received this information and had the opportunity to read and follow the advice given. 

This suit is not going to be won or lost as a result of the agent’s failure to assure that all pages of the Agreement of Sale were reviewed by the buyers with copies provided.  But the failure to prove delivery of the Notice provision pulled from our grasp one very useful defense.  I would be much happier arguing to the jury that not only did the buyers sign the Agreement of Sale with an inspection contingency that allowed for the testing for the presence of mold but also were provided with a lengthy disclosure of the hazards associated with mold and the advisement of having the appropriate qualified expert test for its presence.

The Notices of the Agreement of Sale are not merely inserted for the purpose of giving you a pre-fabricated defense to hold in your back pocket.  The reason the Notices serve as a defense is because they do what agents should be doing: advising buyers of the common pitfalls that may be encountered when purchasing a home and of their ability to choose a course that will eliminate such pitfalls to the extent possible.  One would think that all buyers understand that the presence of mold in any home is a possibility.  Do not, however, overestimate what the average layman understands about environmental hazards or other issues that relate to a home purchase.  The Notices provisions were included in the Agreement for a reason.  Take the time to fax or scan all pages.  By the way, one reason the new Agreement is longer is for the very purpose of accommodating faxing and scanning.  The larger font assures clearer legibility for those on the receiving end of the scan or fax.

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.

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.

“First the homeowner should make sure lead-based paint is present in the home using an EPA-approved kit before hiring a contractor,” Kemery said. “If it’s present, the homeowner must work with a contractor who has been certified. The contractor will have a certification with an EPA logo and a registration number.”

Kemery said sanding, scraping and sawing can release lead into the air when home repairs are done. Homeowners who do repairs themselves are not required to have training.

According to Kemery, lead-based paint is still the primary source of lead poisoning for children in the United States.

Lead-based paint can be an issue during a sales transaction. Based on EPA recommendations, PAR has changed how lead-based paint disclosure is handled with the introduction of the new Lead-Based Paint Hazards Disclosure form (LPD).

Mike Barth, PAR’s standard forms specialist, said federal law states that a lead-based paint disclosure has to be completed by all homeowners who are selling properties built prior to 1978. PAR had previously handled that disclosure in an addendum to the Agreement of Sale, but the new Lead-Based Paint Hazards Disclosure Form should be completed by the seller when the listing agreement is signed or when the seller disclosure form is completed.

“The new Agreement of Sale allows the buyer to elect a lead-based paint inspection, along with any other inspection that might be selected in the Agreement,” Barth added.

PAR staff has recently seen an increase in the number of questions regarding the handling of deposit monies. Let’s look at some of the common myths about deposits and set them straight.

Myth #1:  “A buyer must make a deposit for an Agreement of Sale to be binding.”

Not true. Contract law says there must be “consideration” for a contract to be binding. In essence, each party has to have some skin in the game. But consideration in a real estate contract is generally the mutual promises made by the parties – the seller promises to transfer the property to the buyer and the buyer promises to pay the purchase price to the seller. The deposit is a mechanism that (theoretically, at least) shows a buyer is serious about the deal but it isn’t consideration. One might argue that a listing broker isn’t adequately protecting the interests of his seller by counseling the seller to accept an offer with no deposit but that’s a practice issue rather than a legal requirement.

Myth #2:  “The option to keep deposits as liquidated damages harms sellers because deposits are so low.”

While this may be true in areas where deposits are low, the fault does not lie in the text of the agreement. In some areas of the state it is common to have larger deposits – sometimes as much as 5-10 percent of the sales price  – paid in two to three stages during the transaction. In short, if a listing broker feels that the deposit offered by a buyer is insufficient to protect the seller’s interests in a transaction, the broker can counsel the client to demand a higher deposit as a condition of accepting an offer.

Myth #3:  “Deposit disputes can’t be mediated under the mediation paragraph of the Agreement of Sale.”

I was shocked when I first heard this and continue to be shocked as it is repeated. The mediation paragraph has stated for many years that it applies to “all disputes or claims that arise from this agreement.” Since deposit money disputes certainly “arise from” the agreement there is no reason why they couldn’t be mediated. Just to make that crystal clear, the 2010 Agreement (paragraph 23) now states that mediation applies to “all disputes or claims that arise from this agreement, including disputes and claims over deposit monies….”

Myth #4: “If the parties don’t agree to a release of the deposits I’ll have to keep them in my escrow account forever.”

This was true until late last year when a change to the Real Estate Licensing and Registration Act (RELRA) went into effect. This change allows the buyer and seller to agree to a contract term that instructs brokers how to distribute the funds if the parties can’t resolve a dispute. Paragraph 22(C) of the 2010 Agreement now states that if the parties have a deposit money dispute that isn’t resolved within a year of the stated closing date, the broker holding the deposit monies will distribute them to the buyer after receiving a written request to do so unless the dispute is in litigation. This should encourage sellers who feel they have a valid claim to the deposits to move forward with mediation and, if no settlement is reached, to litigation within a year rather than letting the deposits linger with the broker.  For more detailed information on how this works, see the Guidelines for Preparation and Use on the PAR web site.

“We’ve had some last-minute changes and we want to ensure the form is legally compliant and meets the needs of our members,” said Mike Barth, PAR’s standard forms specialist.

Electronic vendors have started to post the e-forms and all vendors are expected to have the new form online by March 1. The previous ASR is still acceptable to use for transactions.

A sample of the new form and the Guidelines for Preparation and Use (PAR login required) are available on PAR’s web site.

The revised Agreement of Sale incorporates some major changes: an expanded broker box; updated mortgage contingency paragraph and a new format for handling inspections. It also has a reduced default time for inspections of 10 days. In response to the new Real Estate Licensing Registration Act (RELRA) changes, the form incorporates a change in language to dictate what will happen to escrow monies in the event of a dispute.

The Lead-Based Paint Disclosure Form (PAR Form LPD) is being released with the Agreement of Sale and replaces the previous Lead Paint Addendum. The Oil, Gas and Mineral Rights Addendum (PAR Form OGM), which was developed to explain what surface and subsurface rights are included in the sale, is available now.

The new Agreement of Sale

The new PAR Standard Agreement for the Sale of Real Estate (ASR) is set for release in mid-to-late January. Print forms are now available for preorder and the electronic version will be available from the electronic form vendors around January 15.

The revised Agreement of Sale incorporates some major changes and REALTORS® who have reviewed the new form are ultimately giving it the thumbs up, according to Mike Barth, PAR’s standard forms specialist.

REALTOR® offices can continue to use the 2005 version of the  Agreement of Sale; it is still legally compliant. That version will also be available for REALTORS® who may be in the middle of a transaction and want to be consistent with the form. Electronic forms vendors will have both versions available for several weeks to assist in the transition.

Barth says one of the most substantive changes in the new Agreement of Sale is an expanded broker box. The front page of the form outlines the relationship between the broker, the agent, the buyer and the seller.

The form includes an updated mortgage contingency paragraph to include an appraisal contingency clause. The form has a new format for handling inspections to include more inspection contingencies and allow for a variety of circumstances. It also has reduced the default time for inspections to 10 days.

In response to the new Real Estate Licensing Registration Act (RELRA) changes, the form incorporates a change in language to dictate what will happen to escrow monies in the event of a dispute.

The Agreement of Sale also now has mandatory buyer/seller mediation as compared to the previous agreement where the buyer/seller can waive mediation.

Guidelines for the new Agreement of Sale, which explain how to use the ASR form, will be available at parealtor.org by January 15.

Barth has also been speaking at local association meetings to explain the changes and what they mean to REALTORS®.

Last updated in 2005, the new Agreement of Sale includes:

• Expanded and reorganized broker blocks which have been changed for clarity and ease of use
• Updated mortgage contingency paragraph to include an appraisal contingency clause
• Changed format for handling inspections to include more inspection contingencies and allow for a variety of circumstance
• Reduced default time for inspections to 10 days
• Change in language to dictate what will happen to escrow monies in response to the new Real Estate Licensing Registration Act (RELRA) changes
• Mandatory buyer/seller mediation as compared to the current agreement where the buyer/seller can waive mediation.

The revised form was recently approved by the PA Association of REALTORS®’s Standard Forms Oversight Committee and will require final changes prior to its publication.

As in the past, Guidelines for the Agreement of Sale, which explains how to use the ASR form, will be available when the form is published.

Do you check to see if your potential buyers are actually motivated to buy and that they’re qualified to purchase the homes they’re looking at? Or do you just sign a buyer agency contract (you do sign one, right?), load them in the car and hope they eventually purchase something?

Or to put it differently: are you chicken?

PAR publishes a form called the Non-Exclusive Buyer Agency contract Form NBA. The basic purpose of Form NBA is to help brokers and consumers “get their feet wet” with each other on a non-exclusive basis while ensuring that the broker is entitled to payment if he/she is the procuring cause of a purchase.

Many brokers object to the use of Form NBA because they believe it provides too much of an opportunity for a consumer to walk away from the brokerage. And it does. What many brokers and agents don’t always see, though, is that it also provides an opportunity for a broker to walk away from a consumer.

So maybe if you’re too “chicken” (hey…not my words, OK?) to aggressively qualify a buyer from the moment he walks into your office you might prefer to work with that person for a few weeks under a non-exclusive buyer agency contract instead. Then if it turns out that maybe he isn’t that motivated, or he’s not able to qualify for a loan, or he’s just somebody you dread spending time with, it is much easier to end that professional relationship and move on rather than being locked into a long term exclusive agency agreement.

Just a thought.

The first change allows licensees to be paid through “qualified associations” that are established by one or more licensees affiliated with the same broker. Up until this change, the law required that brokers pay licensees directly and not through any sort of a corporate entity. Now, brokers can pay to (and licensees can be paid as) certain entities as laid out in the law.

There are a number of issues to be considered when deciding whether or not to establish a qualified association. These include:

The second change clarifies a number of issues relating to escrow requirements. The biggest change to the escrow rules now permits brokers to release escrow where there is a dispute between the parties if the parties agreed in advance how the money should be distributed in the event of an unresolved dispute. The PAR Standard Forms Oversight Committee will be working on appropriate forms language to assist members in handling this issue.

Read detailed FAQs and review the full text of the changes in the Issues Resource Center of the PAR Web site