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Alabama Law Test Outline 40 Questions 28% of test Steve McTyeire, Broker 205-807-5200 SteveMcT@gmail.com NewLocationRealty.com Slide 2 Update Advertising Points http://www.arec.alabama.gov/pdf/Update/update-fall-2009.pdf CAN_SPAM Law http://www.ftc.gov/bcp/edu/microsites/spam/business.htm Do Not Call List https://www.donotcall.gov/faq/faqbusiness.aspx Slide 3 Rebates & Kickbacks http://www.arec.alabama.gov/legal/briefly-legal.asp#GiftsRebatesKickbacks License Law Deadlines http://www.arec.alabama.gov/pdf/deadlines-for-commission-may2009.pdf Home warranty payments to agents http://www.arec.alabama.gov/pdf/Update/fall-2010-update.pdf Commissioners http://www.arec.alabama.gov/about/commissioners.asp Slide 4 NewLocationRealty.com Class Files http://newlocationrealty.com/School.html Alabama Real Estate Commission http://www.arec.alabama.gov/index.asp Law Book http://acre.cba.ua.edu/license_index/License_Law.html Slide 5 Slide 6 Slide 7 Slide 8 1.The Real Estate Commission A. Purpose 34-27-1 B. Composition (Commissioners, Administrative, Staff) 34-27-7 Slide 9 1.The Real Estate Commission A. Purpose Protect the public Regulate the business Require license as proof of qualification Slide 10 1.The Real Estate commission B. Composition (Commissioners, Administrative, Staff) 9 members = 1 from each Congressional District (7) 1 person not licensed 1 Black person - rotates among Districts Appointed by governor Confirmed by Senate 5 year term 2 term limit 21 years old Resident of state at least 10 years No real estate law, or felony convictions Owner of real property Slide 11 Link to Commissioners Slide 12 2. Definitions 34-27- 2 Associate Broker Any broker other than a qualifying broker Broker Any person licensed as a real estate broker under this article Commission The Alabama Real Estate Commission Or a fee paid to a broker Slide 13 Commissioner A member of the Commission Company Lawful business organization Engage Contractual relationship between qualifying broker and salesperson May be employee or independent contractor Slide 14 Inactive License License being held By the commission office by law By order of the commission By request of licensee License is not valid because it was not renewed Licensee Any Broker, Salesperson or company License Period Oct 1 to Sept 30 renews on odd years Must renew by Aug 31 or $150 penalty Slide 15 Person A natural person Place of Business Rural broker may operate from home if: Separate entrance, phone and signage No other salespersons Business in city limits Separate office, phone, and signage Zoned commercial Records shall be kept at office Slide 16 Qualifying Broker Broker under whom a lawfully constituted business organization operates Recovery Fund The Alabama Real Estate Recovery Fund Salesperson Any person licensed under article 1 or 2 Slide 17 3. Licensing Requirements A. Activities that require a license and Those who are exempt B. Co-brokering C. Qualifications for a license D. Renewal of license E. Continuing Education F. Post License Education G. Temporary and Original Salesperson license Slide 18 License required if performing for another in Alabama: B Buy A Aid R Rent N Negotiate S Sell A Auction L Lease E Exchange Slide 19 3. Licensing Requirements A. Activities that require a license if performed for another Sell, exchange, purchase, rent, or lease real estate situated within Alabama Offer to sell, exchange, rent, or lease real estate situated in Alabama Negotiate or attempt to negotiate the listing, sale, exchange, purchase, rental, or leasing of real estate situated in Alabama Slide 20 3. A Required List or offer or attempt or agree to list real estate for sale, rental, lease, exchange, or trade situated in Alabama Auction, offer, or attempt or agree to auction real estate situated in Alabama Buy or sell or offer to buy or sell, or otherwise deal in options on real estate situated in Alabama Slide 21 3. A Required Aid, attempt, or offer to aid in locating for purchase, rent or lease any real estate situated in Alabama Procure or assist in procuring of prospects for the purpose of effecting the sale, exchange, lease, or rental of real estate situated in Alabama Present himself or herself as being able to perform these acts Slide 22 License not required: Sell or manage personally owned property or that of a spouse, child or parent Attorney performing attorney duties Acting without compensation under a power of attorney Receiver, trustee, executor, or guardian; or acting under court order, or authority under a will or trust Slide 23 License not required: Public officers performing their duties Persons performing administrative duties for broker No BARN SALE Persons acting as apartment manager Exception: Condominium manager needs license Slide 24 License not required: Persons licensed as time share sellers Different license Transactions involving sale or lease of cemetery lots Slide 25 3 B Out of state co-brokerage Alabama broker shall require joint listing Specifying terms (file with Commission 10 days) Showing and negotiating shall be supervised by Alabama broker Advertising shall have Alabama brokers name Alabama broker shall be liable for acts of out of state broker Alabama broker to determine license status of out of state broker Earnest money to be held by Alabama broker may except this in writing Slide 26 3C Qualifications for license Registered to specific real estate office Trustworthy Person whose application has not been rejected or revoked in another state within 2 years except for failing exam 19 years old US Citizen or legally present If non Alabama resident, Agree to Alabama jurisdiction Slide 27 3C Qualifications for license High school graduate or equivalent Proof of 60 hour real estate class Application for company license shall be made by qualifying broker Company must maintain a place of business Second company location must have separate Broker Company license Slide 28 3C Qualifications for license No person may serve as qualifying broker for more than one company unless: All companies consent in writing File this consent with Commission Must be in same location Slide 29 3D Renewal of a license License period October 1 to September 30 Must renew by August 31 or incur $150 penalty License period is 2 years renewing in odd years Salesperson $85 / year Broker $95 If notice not received about renewal: It is the responsibility of licensee to notify Commission Slide 30 3E Continuing Education (CE) Active status renewal requires 12 hours of elective credit 3 hours of Risk Management Must be completed by September 30 of renewal year or License will become inactive No exam required for CE Can stay inactive, but must complete Continuing education to reactivate Slide 31 3F Post License Education Must complete post license 30 hour class Before applying for Original License In class or online Covers application of business Sellers, Buyers, Financing, ect. Slide 32 3G Temporary and Original License New licensee must get temporary license Within 6 months and Before attending Post License class Temporary license expires at the end of the sixth month following issuance Example License Issued January 5 th Expires end of February plus 6 months Expires at the end of August Must complete Post License 30 hours Before license goes inactive September 1 st in this example, your date may differ If Post License not completed, then Temporary License becomes inactive and will expire 6 months later Slide 33 4License Status A. Transferring a license B. Inactive Status C. Reactivation of License Slide 34 4A. Transferring a license Must notify current broker in writing AREC.gov to change online Go inactive Activate with new broker $25 + $4 service charge $25 charge for any change to license Inactive to Active, name, firm Slide 35 4B Inactive Status Automatic Inactive for failing to meet September 30 deadline to renew If not renewed within next 12 months License Lapses Must start over May stay inactive, but must renew and pay Continuing Education need not be done Slide 36 4C Reactivation of License May stay inactive as long as you want To activate: Must meet current 15 hour CE Get broker $25 Slide 37 5. Broker & Company License Place of Business A.Issuance of company and branch office licenses B.Issuance of broker licenses C.Who may serve as a qualifying broker (QB) D.Responsibilities of qualifying broker (QB) E.Termination of QB status F.Serving as QB for more than one company G.Temporary QB H.Associate broker status I.Operating from home Slide 38 5A Issuance of company and branch office licenses Each company location must have a Company license QB at location Company QB and branch QB share responsibility Slide 39 5B Issuance of broker licenses Been salesperson 24 of last 36 months High school or equivalent 60 Broker Course Original broker license Registered to specific real estate office Reciprocal license 6 hour of Alabama Law & 40 question test Slide 40 5C Who may serve as a qualifying broker (QB) Meet all broker qualifications, plus Must be principal business In position to supervise full time Slide 41 5D Responsibilities of qualifying broker (QB) Responsible for all acts of salespersons Responsible for damages caused by salespersons Duty to see all transactions comply with law Does not create employer- employee relationship Slide 42 5 E Termination of QB status QB may terminate status with written notice to: Parent company Commission QB may terminate agent by: Notifying in writing: Licensee Commission (AREC) Return license to AREC Slide 43 5F Serving as QB for more than one company QB may serve at only one company; Unless: All companies consent in writing File consent with AREC Must all be in same location Sales or property management Salespersons licensed under broker may work with all companies in that location Slide 44 5G Temporary QB Company license becomes invalid upon Death or disability of QB Within 30 days company may designate a Person to act as Temporary QB may be a salesperson with 1 year experience May operate under Temporary QB for 6 months Slide 45 5H Associate broker status Any broker other than QB Slide 46 5 I Operating from home Company or broker license must maintain Place of business Broker living in a rural area may operate from home IF Set up and maintain a office to conduct business May not be used for living purposes Separate telephone, entrance, signage Broker only No salespersons may operate from office Slide 47 Real Estate Blues Slide 48 6 Recovery Fund A. Purpose of the fund B. Payment into the fund C. Payment from the fund Slide 49 6A Purpose of the fund An aggrieved party may recover actual or compensatory damages As a result of conduct in violation of RE law not interest or court cost will not pay broker or salesperson where acting on own behalf N/A to time share Slide 50 6B Payment into the Recovery Fund At application for original license for Salesperson or broker, each applicant shall pay $30 into the Recovery Fund One Time A salesperson who has paid into the fund will not be required to pay again when obtaining a broker license When balance of fund drops below $500,000 Each active licensee will pay additional $30 Slide 51 6C Payment from the Recovery Fund When an aggrieved person recovers a valid Judgment against a licensee Will file claim in court and request payment From Recovery Fund 10 days Payment will be limited to $50,000 in the aggregate (total claim against a licensee) Limit of $25,000 per transaction License will be revoked until money is repaid By licensee Slide 52 7Disciplinary Actions and Process A.Complaints B.Hearings C.Disciplinary Actions D.Rehearing E.Appeals Slide 53 7A Complaints AREC will investigate a verified complaint for probable cause Requirements for complaint: Is person licensed What violations may have occurred Complaint will include Name of persons whom complaint is made Legal authority and jurisdiction Type and date of issue of license Section violated 34-27-10 Brief description of acts or omissions Slide 54 Slide 55 7B Hearings If probable cause is found: AREC will hold a hearing on the complaint Accused will be given 15 days notice May issue subpoenas (cost apply) Pays mileage AREC will issue ruling within 30 days Slide 56 7C Disciplinary Actions Any violation of this act is a Class A misdemeanor Punishable by a fine of: $100 up to $2500 Suspend or revoke license May require Risk Management class Require restitution Slide 57 7D Rehearing If Accused or other party is not happy with decision They may: Ask for a rehearing within 30 days If no response in 30 days, request is denied Rehearing does not modify the effective date of decision Slide 58 7E Appeals Findings of AREC are final after 30 days unless An appeal is filed during this time Put up $200 appeal bond Decision may be stayed during appeal Within 30 AREC will file with court Court will hear without jury Losing party pays cost Slide 59 8Estimated Closing Statement Net Sheet The licensee who procures a written offer in a single family residence shall prepare an itemized statement of all cost associated with the sale based on best estimates Seller or Buyer your side only No need to have other parties net sheet Signed and kept on file for 3 years Licensee also required to furnish a detailed Closing statement HUD1 at closing Slide 60 Slide 61 9Trust Funds Deposit and accounting of all funds at all times belonging to others Unless relieved in writing In a separate account in a federally insured bank in Alabama Broker shall be a customer of bank and have authority to write checks and make deposits Salespersons pay over to broker all funds immediately Records must be kept for 3 years Slide 62 9Trust Funds Funds held in trust under contract May be held by either broker Cash deposit immediately Check may be held by either broker Check to be deposited when contract states Or Check to be deposited when offer becomes contract Slide 63 9Trust Funds Other trust funds shall be disbursed within 7 days If transaction fails to transact or dispute arises, Written agreement required before broker may disburse Property management has 21 days to account for security deposit at end of lease Property management company gets new broker Must account for and transfer trust to new broker Slide 64 10RECAD Real Estate Consumer Agency Disclosure Definitions: Agency Agreement must be in writing Creates fiduciary relationship Consumer person who obtains services Client Agency work for, advise Customer transaction broker, work with Slide 65 10 RECAD Dual agency work for both Limited Consensual Dual Agency Must be in writing Happens when: 1 agent represents both sides Agents with same firm represent both sides Slide 66 10 RECAD Informed consent - consumer acts based On full disclosure Material Fact- One that is significant to a reasonable person affects sale Slide 67 10 RECAD No implied agency Transaction Broker if no signed agreement As soon as reasonably possible, before licensee Discloses confidential information to another, Shall provide written disclosure form describing Different forms of representation including Those offered by firm After disclosure consumer may choose Slide 68 10 RECAD Transaction broker assist the transaction Single agent works for one side Dual agent works for both sides consensual Sub agent pre RECAD representation where everyone worked for the seller Slide 69 10 RECAD Duties to all : Provide service honestly and in good faith Exercise reasonable care Keep confidential information confidential Account for all property that belongs to others Present written offers timely and truthful Licensees interest must be disclosed Slide 70 10 RECAD Duties to clients: In addition to duties to all, Loyalty clients interest first Disclosure tell client what you know Good and Bad Better decision No duty to discover information Follow lawful instructions of client Slide 71 10 RECAD All RE firms use same form Slide 72 Slide 73 Slide 74 10 RECAD Office policy Broker will adopt written policy for Services offered under RECAD Policy will be explained every year and Signed by agent Kept on file for 3 years Slide 75 10 RECAD Exempt Property Management Sales involving artificial entities Government, companies, ect. Slide 76 11 Violations which may result in disciplinary actions A.Misrepresentation and dishonest dealing 1. Failure to disclose known defects that effect Health & Safety B.Inducing a party to break a contract C.Advertising D.Listing Agreements E.Failure to give proper disclosure F.Keeping appropriate records G.Rebates H.Paying or receiving commissions from unlicensed persons I.Bad Checks J. Failure to inform Commission of suit and disposition K.Lotteries L.Handling of documents M.Violation of rule or order of Commission N.Offers Slide 77 11A Misrepresentation and dishonest dealing Conduct that constitutes or demonstrates Dishonest dealings, bad faith, or untrustworthiness Engaging in dishonest or fraudulent dealings when dealing with own property or that of a spouse, child or parent Misstatement on application about felony Slide 78 11A 1 Failure to disclose known defects that affect health and safety Slide 79 11B Inducing a party to break a contract For the purpose of substituting a contract motivated by the personal gain of the licensee Slide 80 11C Advertising Must be truthful Must contain licensee name Must contain Brokerage name Rule on letter size has been changed to Brokerage name must be prominent in ad Rules apply to all media Additional information required for web Slide 81 11D Listing Agreements May be Agency or Not Must include expiration date No auto renew Must leave copy with seller No net listings Slide 82 11E Failure to give proper disclosure Latent defects Health & Safety Issues Lead Paint Disclosure Net Sheet Personal interest in property Alabama has no law on seller disclosure forms or stigmatized properties Slide 83 11E Failure to give proper disclosure Alabama is Caveat Emptor let the buyer beware Buyer has duty to inspect Exceptions to buyer beware: Written on HAND H Health & Safety (Known) A Assumption of Duty (buyers agent) N New Homes (warranty) D Direct Question (must answer) Slide 84 11E Failure to give proper disclosure This box is in every general residential sales contract Slide 85 11F Keeping appropriate records Keep all records 3 years Slide 86 11G Rebates Illegal to pay or receive rebates in any real estate transaction Also violation of Federal RESPA law Slide 87 11H Paying or receiving commissions from unlicensed persons Licensees may be paid only by their broker Slide 88 11I Bad Checks Presenting a bad check to the AREC will cost you $250 Slide 89 11J Failure to inform Commission of suit and disposition Must inform AREC within 10 days of arrest or suit and its disposition Slide 90 11K Lotteries Illegal to offer free lots or conduct lotteries for the purpose of influencing a party to purchase Slide 91 11L Handling of Documents Illegal to fail to furnish a copy of each document to each party executing such Must keep copies for 3 years Listing must be left with seller at signing Failing without cause to surrender to the rightful owner on demand a document coming into licensees possession Slide 92 11M Violation of rule or order of Commission Illegal to violate any provision of this rule, law or order of the Commission Slide 93 11N Offers Licensee acting as agent shall transmit all written offers to the principal