New Questions from this Week…

Back, by popular demand, here are some of the questions we’ve fielded this week that you might find interesting. Wow, a lot of complaints about quick, backroom deals  happening during this crazy market surge. Below are some technical answers to interesting questions about signs, escalation clauses and more, but if you could all take a brief pause to consider how we ALL should be working to support our clients wholeheartedly, it would help to make the market work much more effectively (and ethically) for all. 

Q. So again, when is the Active UA flag or Pending status used? I’m confused.

A. You have to update the status of any listing under contract in the MLS, but you have two options … (1) Leaving a listing status as “Active, but adding a Contingency flag of U/A Show or Yes or, (2) Changing the status to Pending.  You can leave it active with a contingency flag only if you will continue to show the property because contingencies have not been met. The listing is marked on syndication sites, but down in the body of the “additional info”. You should report it as pending if you will NOT continue to show the property, regardless of the status of Purchase and Sale contingencies. This is marked on syndication as pending up top and usually with a different colored pin. Note: The fine for failing to report a contingency is $100!!

Q. I saw a lawn sign and called the board to report that the listing wasn’t in the MLS, but then found it was a coming soon listing. Isn’t that confusing to the public?

A. In order for a “coming soon” to be marketed properly, it needs to have a sign rider to clearly say “Coming Soon” so that there is no confusion to the public. Any advertisement must contain the indication of ‘coming soon’ and for those with text, a date when it will be made available for showing. In the MLS it will populate it based on the entry information, you can add it to the REALTOR remarks and you must add it social media posts should make the date the listing will be available is clear. Yes, there is a fine for that 😉

Q. To get around the clear cooperation policy, is it ok to just have my sellers post-date or wait to sign an agreement so I can get my own buyers in first?

A. Well, if you don’t have an agreement with the seller then the clear cooperation rules don’t apply, as discussed last week… but when you had your first substantial discussion with the seller about listing the property, hopefully you explained the benefits to exposing the home to as many potential buyers as possible through the MLS.  Are you a facilitator in this example; or a buyer’s agent?  You need to be very clear that you aren’t representing the seller or their best interests (as stated, your buyers came first in this scenario) before it was listed. Be careful to check the appropriate status on the agency disclosure!

Q. Do I have to disclose a sex offender for someone currently living at the property, not next door?

A. You should have a conversation with your broker to make sure you are following all office policies and safety procedures, but the same disclosure rules apply as this is a “transient condition” –  will change with time and is not “rooted in the land”.  REALTORS have an obligation to disclose “any latent or material defects, if known” and this is not material to the home or property. All buyer’s agents may (and seller’s agents may too) provide the Sex Offender Registry form that indicates all buyers are responsible for checking the registry, if concerned.  You should establish that the resident won’t be present for showings, and if they plan to be, seek legal guidance.

Q. An agent I know keeps sharing listings from Flex directly to their facebook page. I didn’t think that was legal?

A. License law requires that you advertise only with the permission of your broker – so not only do all agents need that approval from their broker, they also need to share on a business page that is clearly marked with the name of their agency in the title, according to recent conversations with the Commissioner of the Board of Registration.  So, Sandy Carroll…. no! Sandy Carroll, ABC Realty (business page) is a-ok (as long as my “boss” Linda says it’s ok.) If I then occasionally make a personal post about where I am or what I am doing on my personal page with a link to the business page listing… it has the required business branding and you’re covered (and cross marketing!).  We let agents know when reported, but we aren’t the police of this – you can have action against your license for advertising without the name of your broker and Facebook terms of service allow them to transition your personal account to a business account and you lose the friend connections you’ve accumulated along the way. It’s happened, and agents were not able to ever reach a human to change it back!

Q. My buyer submitted a very good offer, but I later learned there were several on the table that the seller considered – they didn’t select ours and that’s ok. But, they never asked for last and final or let us know it was a multiple offer situation.  My buyer would have gone higher than the agreed upon final price, but didn’t realize there would be no opportunity to negotiate.  Is that right?

A. If that was the decision of a fully informed seller, it is right.  In this case, the seller’s agent should have explained options for negotiating multiple offers, including a popular strategy to give buyers a chance to rebid (highest and best) knowing the multiple offer situation. There are no shortcuts when you owe your seller client undivided loyalty and diligence to their best interests. It is the agent’s responsibility to inform, suggest and provide options – but Sellers do have the power to choose to execute any agreement they are comfortable accepting. I’ve heard of situation where the seller was just anxious to move on, felt confident the buyer was solid and didn’t want to haggle.  Other times, the seller had no idea that the buyers were not informed of the multiple offers or given any negotiation strategies by their agent… and that could mean a fiduciary issue / liability for the listing brokerage if they are seller’s agents.

Q. Can still give my network of Realtors that I commonly do business with a heads-up that I have an agreement for a property that will be put on the market shortly?

A. Sure, but you’ve now marketed the listing and you have only 24 hours (or less) to share it with the rest of the MLS membership, or be subject to a big ole fine.  As a member of the MLS, you cannot give some agents an advantage over others… this is against the fundamental purpose of the MLS.  And, it would be up to you to defend how limited exposure helped your seller get the best price and terms in a hot market like this. Check out the video explaining! Don’t forget, this is a national shift to protect the interests of both seller’s and buyers nationwide. It’s about fairness to them.

Q. I am receiving contracts with escalation clauses that don’t really make sense. What is the Board’s guideline on these types of offer structures?

A. Great question, but first to explain what we’re talking about: An escalation is when a the buyer makes an offer, and then adds an escalation clause or addendum that indicates the price offered could increase by a XX dollars if the seller receives a higher, competing, bona fide offer.  Anyone who used to bid on ebay knows about escalations!  And in this face-paced market, I’d imagine this technique might be considered. 

MAR provided an example to illustrate: Suppose Buyer One offers $400,000 for a property. Buyer One’s offer contains an escalation provision that will automatically increase Buyer One’s offer by increments of $2,000 above any competing offer. Buyer One’s escalation clause also sets a maximum purchase price (“cap”) of $410,000.  If no other offers are submitted, Buyer One’s offer will remain $400,000. If Buyer Two offers to pay $403,000, then Buyer One’s offer would automatically escalate to $2,000 above that amount, bringing Buyer One’s offer to $405,000. If Buyer Two offers $406,000 for the home, then Buyer One’s offer will increase to $408,000. If Buyer Two (or any other buyer) were to offer $411,000 or more, then Buyer One’s maximum of $410,000 will be eclipsed, and the other buyer will have the highest priced offer. (there are other factors to include especially about financing, this is a basic description)
From reading the language from the question received, I know that the agent probably wrote the language without proper legal vetting because it was missing some important elements.  Please understand, making up contract language without legal guidance can be considered the unauthorized practice of law and probably a breach of your fiduciary duties for failing to protect your client. 
If you’re considering this strategy – talk to your broker!  As MAR legal counsel states, “While an escalation clause sounds straightforward, it is complicated and requires that many details be addressed. Therefore, we recommend that the buyer consult an attorney before including an escalation provision.”  MAR also provides a standard form in Zipforms called ESCALATION PROVISIONS IN OFFER, but only with your broker’s involvement and your clients complete understanding – this too should be run by legal counsel. Proceed wisely!
Q. I have a listing that I sold before I put it in the MLS, and I know I can’t put it in MLS since it is already pending. Do I need to get anything else signed? 
A. Yes, you should have your seller sign an office exclusive form, so that you are not obligated to market it publicly, to make sure they understand it won’t be in the MLS and confirm they are fully informed about the limitations of accepting an offer without market exposure. Without that, you are violating the MLS rules and potentially your fiduciary duties as you’ve promised to list and market the property in the MLS as part of your Exclusive Right to Sell Agreement. That addendum must be on file with the MLS within 2 business days.
Q. I have a listing that was on the market for one day and already pending, and I got an email from Linda saying it will be removed from the MLS. No fair, I showed the heck out of it!
A. If you offered cooperation and showed it to other brokers, you’re fine and the listing can and should stay in the MLS – it had market exposure (albeit brief), and you cooperated with others. Perfect, just share that info with Linda. To clarify, the only listings accepted into the MLS after May 1st are those that are actively on the market, and where offers of cooperation and compensation to other brokers can be made. The primary purpose of the MLS is to share listings with other brokers for the sale, so it is not appropriate that the MLS be used when that offer is not available. On the other hand, if you listed the property for a few hours, never answered your phone during those hours and sold it to a private buyer of your firm without really giving anyone else a chance to see it / sell it, that’s when it’s not allowed in the MLS.
Q. It’s been a really stressful and confusing time. Is there anything I can do to make it better?