Usually I try to point Book Scan readers to the written word, but occasionally I find a piece of audio worth recommending. Last time I pointed you toward a wonderful novel about a real estate agent, but this time I’m suggesting a podcast. Yesterday, I was listening to This American Life, an NPR radio show produced by my local station, WBEZ. The show produces one hour of radio a week, usually with several segments organized around a central theme. If you have never listened before, the Nov. 22 episode is a great place to start if you’re in real estate. The show, titled “House Rules,” addresses the idea of “destiny by address” through an examination of the 1968 Fair Housing Act.
One might argue that real estate professionals know more than the average bear about the Fair Housing Act, since it’s so integral to the housing industry in this country. But here are a few items that you might not know about fair housing in America and the legislation itself.
1. The federal government pretty much invented redlining. Many associate this practice with private lenders, but they weren’t the ones to popularize the now-illegal practice. In the 1930s, the Roosevelt administration began backing loans to encourage home ownership… but only among the “right” groups. The government actually drew red lines on maps around certain neighborhoods and refused to back home loans in those areas. And it wasn’t just predominantly minority neighborhoods either; according to ProPublica reporter Nikole Hannah-Jones, the government sought to disincentivize living in integrated neighborhoods as well.
“Your property values were going to go down because the government had decided that integrated neighborhoods were automatically less valuable,” Jones says in the “House Rules” episode. “Between 1934 and 1964, 98 percent of the home loans that were insured by the federal government go to white Americans.” She added that banks and other government programs, such as the GI Bill, simply followed the federal government’s lead. Continue reading »
Real estate legal expert Barbara Nichols, author of The No-Lawsuit Guide to Real Estate Transactions (McGraw-Hill, 2007), responds to your questions.
What’s the most common reason agents get sued?
NICHOLS: The most common reason agents get sued is failure to disclose material facts related to the transaction. These usually relate to physical defects. Buyers do not like surprises. They want to know what they are buying before the deal closes.
Is there a statute of limitations after completing a transaction where a buyer or seller can no longer bring a lawsuit against you?
NICHOLS: In most states buyers or sellers have two years after the deal closes to sue for misrepresentation. If the accusation is fraud, they have three years after the fraud is discovered. I recommend holding all transaction files at least five years.
Can you really get sued if you don’t tell a buyer the house is rumored to be haunted? Would that really stand up in court?
NICHOLS: When I ask agents attending my risk management course if they have haunted houses in their area, they almost always say yes. However, I have never consulted on a lawsuit which involved non-disclosure of a haunted house. I don’t think most courts would consider that claim reasonable or provable. Continue reading »
By Melissa Dittmann Tracey
One in five real estate practitioners will be involved in a lawsuit during their career, says real estate broker Barbara Nichols in The No-Lawsuit Guide to Real Estate Transactions (McGraw-Hill, 2007). The effects can be just as damaging to your reputation as it is to your pocketbook. So how do you make sure you don’t end up in court? There are some obvious lines you know to never cross, but there are far more gray areas that can land you in trouble for nondisclosure, steering, or even false advertising. Nichols gives advice on navigating these potentially risky situations. Buy the Book
FROM THE BOOK: 5 WAYS YOU COULD END UP IN COURT
Real estate lawsuits often stem from what you say — or don’t say — to your client. Bottom line: You’re obligated to report any property information, both onsite and offsite, that could impact the property’s price or a buyer’s decision to buy. Nichols outlines these common legal mishaps for practitioners:
1. Not disclosing property stigmas. Prospective buyers need to be told if a anything in a home’s past could potentially scare off future buyers or hurt the property’s resale value. What counts as a stigma? It could be a murder that once occurred in the home, a rumored haunting, or a history of foundation problems (even if the seller spent thousands of dollars fixing the foundation, future buyers could be hesitant to make an offer). If you don’t disclose any potential stigmas, you could be held liable when the clients find out. So do your research and be sure you know the home’s history. Continue reading »
By Christopher M. Leporini, REALTOR® Magazine
Doing the Right Thing: A Real Estate Practitioner’s Guide to Ethical Decision Making, Third Ed. By Deborah H. Long
(Gorsuch/Prentice Hall) 137 pp., $17.95
Buy this book from Amazon.com.
This workbook-style book helps real estate practitioners develop their ethical decision-making skills by using case studies from real estate trade publications, daily newspapers, and hypothetical questions. It explains many of the laws and regulations that real estate professionals might encounter in their daily practice—from fair housing rules to lead-based paint disclosure requirements.
The first half of the book provides background on the ethical dilemmas that real estate professionals face as well as general information on developing personal values, principles, and ethics. The second half examines specific ethical issues, such as agency, stigmatized properties, and environmental hazards. The book provides easy-to-understand explanations of these legal and ethical considerations. It largely deals with ethical considerations for seller’s representatives but also includes some information for buyer’s reps as well.
Each chapter includes a “How Would You Respond?” write-in exercise that poses hypothetical questions that require readers to apply what they’ve learned. Possible answers to the situations also are offered.
Author Deborah H. LongCRS, GRI is a real estate broker, writer, and instructor who frequently speaks about ethics. She is the author of other real estate books, including Now That I Have My Real Estate License, What Am I Going to Do With It? and Owning and Managing a Florida Real Estate Office.
Tips for Real Estate Professionals
- Never reveal to buyers whether a house has any outstanding offers or what the sellers paid for the property without the sellers’ express consent. You can tell buyers, “Since I represent the sellers and I am trying to get them the best price and terms, I can’t disclose that information. However, I would be happy to submit any offer you would like to extend to the sellers,” the author suggests.
- Advise buyers to be upfront about past credit blemishes. If you represent a buyer with a spotty credit history, you can’t be dishonest with sellers about this fact—even if these problems were resolved several years ago. Advise the buyers that concealing the truth today could end up in a lawsuit tomorrow. At the same time, you can help the buyer to assemble information, such as credit reports and audited tax returns, to show how they have improved their situation.
- Reject demands from buyers or sellers to discriminate or make any other judgments that violate fair housing rules. “Practitioners can legally use no form of discrimination other than discriminating against the inability to afford a home,” the author writes. Any time that your actions or words indicate assumptions based upon ethnicity, race, gender, religion, national origin, or family status, you are putting your career in jeopardy. If a seller refuses to sell to certain minority groups, immediately inform them that the Civil Rights Act of 1968 prevents any real estate professional from doing so. If the seller persists, tell the seller that you can’t take the listing—it’s not worth the consequences. Buyers could file suit with the U.S. Department of Housing and Urban Development against you and the seller, which could result in you losing your license. If buyers ask what kind of people live in a neighborhood, you can only respond in terms of economics. Never describe a neighborhood in terms of a predominant ethnic, religious, or racial group. You can advise them that the best way to figure out whether they’d be comfortable in the neighborhood is to speak with the neighbors themselves.
- Disclose latent home defects to buyers, even if they don’t inquire about them. It’s your moral responsibility and, in some cases, a legal responsibility to do so. Likewise, if you question the truthfulness of information provided by your seller, you are obligated to investigate. Always tell buyers to consult their own experts, such as home inspectors, to alleviate the liability that the seller may have toward repairs. “If the buyer’s inspector discovers problems that the seller did not disclose, it’s better to negotiate this issue before closing than to face a lawsuit after closing,” the author writes.
- Learn the laws in your state governing disclosure for crimes that have taken place on a property. Approximately half of the states have laws ruling that sellers don’t have to tell buyers about psychological stigmas attached to properties, such as suicides and accidental deaths. Check with your broker’s attorney regarding the legality of disclosing such information. Even if state law doesn’t explicitly require you to do so, discuss the matter with the seller. Explain that although your fiduciary relationship means that you must keep the matter confidential, sooner or later the buyers will find out and could potentially sue them. Have the seller instruct you in writing to disclose this information to the buyer.