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Get the Facts is produced by the Washington Association of REALTORS® each Tuesday and is providedas a member benefit to Washington REALTORS® and affiliates.

February 9, 2016 | Weekly MEMBERSHIP Newsletter

www.warealtor.org | Read RE magazine via our native app!

LEGAL HOTLINE Q & A

QUESTION Last week's question asked about a trend in which sellers and listing brokers are providingpotential buyers with an inspection report prepared by an inspector selected by seller/listingbroker. Buyers are then required to forego conducting an independent inspection, insteadentering into a purchase agreement that is not contingent on a home inspection. The answerdescribed risks to seller and listing broker arising from this practice. Would it not also berisky for buyer brokers to encourage buyers to make an offer based on these seller-imposedrequirements?

ANSWER

Yes. It would be risky for a buyer broker to encourage a buyer to make an offer in which buyer

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fails to conduct an independent inspection of seller's property. Certainly, buyers are free tochoose not to inspect seller's property. But, when that choice is made, the consequencesinclude not only a potential failure to know the quality and condition of seller's property but alsoan inability to effectively assert post closing claims against seller that require a showing of duediligence by buyer. Of course, buyer would have no claim against the inspector if buyer did nothire the inspector.

It is always hoped that buyer has no reason to assert a misrepresentation or concealment claimagainst seller after closing. But, when a rare buyer does assert that claim, Washington lawrequires buyer to make some showing of pre-closing due diligence. If buyer simply accepts theconclusions of seller's/listing broker's inspection report without conducting any independent duediligence, buyer may have no effective claim against seller based on the condition of theproperty.

In a highly competitive market, buyers may be willing to assume the risk of entering a purchaseagreement that does not include an inspection contingency. If buyer makes that decisionindependently, so be it. But buyer brokers should not encourage buyers to forego anindependent inspection. To the contrary, buyer brokers should be able to show that buyer wasgiven information regarding the benefits and value of obtaining an independent inspection. Ifbuyer intends to purchase without conducting an independent inspection, either before or aftermutual acceptance, then broker should advise buyer, in writing, to consult with an inspectorabout the advantages to be gained from an independent, buyer-hired inspection and to consultwith legal counsel about the risks associated with failing to conduct due diligence. Anytime abuyer chooses to proceed without an inspection contingency, broker should use Form 35 as partof buyer's offer, marking paragraph 4 "Waiver of Inspection." By including Form 35 in buyer'soffer, broker establishes a basis for asserting that buyer was aware of industry norms withrespect to buyer inspections...printer friendly version.

The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through ourdatabase of past Q & A's, visit www.warealtor.org. Attorney Annie Fitzsimmons writes the Legal HotlineQuestion and Answer of the Week. Please submit questions to [email protected] or call (800)562-6027. Please have your NRDS number ready when you call or e-mail the Hotline with your question.

Sponsors & Advertisers


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TOP STORIES

Campaign Urges Consumers: 'Get Realtor®'(source: realtormag.realtor.org) "The Get Realtor® campaign demonstrates how REALTORS® -members of the National Association of REALTORS® - can help buyers, sellers and investorssucceed. We want today's consumers to understand that having a REALTOR® at their side is theircompetitive advantage in the real estate transaction."

To learn more about the "Get Realtor®" ad campaign and to find campaign materials to use in yourbusiness, click here.

ReadÂ more...

Labor is Top Challenge for Builders(Source: NAHB) Topping the list of problems builders faced in 2015 and expect to face in 2016 isthe Cost/Availability of Labor, an issue for 76% of builders who expect it to increase in 2016 andwhich has increased in importance the past three years. In 2013, 53% of builders rated labor as asignificant problem, followed by 61% in 2014 and 71% in 2015. An expected skilled labor shortagecan constrain an improving housing market.


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CAREER HELP

Latest Friday VideoAnnie's Mailbag: Legal Hotline Letters - Episode 12

In episode 12 of Annie's Mailbag, Annie Fitzsimmons,Washington REALTORS® Legal Hotline Lawyer, discusseswhether or not to disclose a suicide (or death) in a Propertyto future Buyers or Tenants and how the Agency Law'sdefinition of 'Material Facts' impacts the decision.... watch the video.


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8 of the Best Insights from Real Estate Superstars(source: Speaking of Real Estate Blog) What do you say when your client says this? Statutorylaw, the Agency Law to be specific, is very clear. If there is an aspect of the transaction that exceedsbroker's expertise, broker must advise the client to seek the advice of an expert on that aspect of thetransaction. Broker is not required to insure that the client actually seeks or adheres to an expert'sopinion. Broker's sole responsibility, with respect to this requirement, is "to advise".

Read more...

Bridging the Gap Between Relationships & Technology(source: RISMedia) There's a lot of confusion in the real estate industry, and it's time to clear the air.Recent polls show that 70 percent of agents are spending money on some sort of online leadpurchasing tool in hopes of getting in front of millennial buyers and growing their business. Althoughagents are flocking to digital...

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MORTGAGE

Source: Freddie Mac Primary Mortgage Market Survey Results

GOVERNMENT AFFIARS


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House Unanimously Passes Condo Bill(source: NAR) The legislation solves a number of concerns regarding FHA's condo rules:

Reduces owner occupancy ratio to 35%.Directs FHA to streamline condo certification process.Provides more flexibility for mixed use buildings.Mirrors FHFA rules regarding private transfer fees.

Read more...

EDUCATION

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It's time to rethink online education.Try Keynote and experience a different, new generation of CE. Forideas you can use today, click here for a sample video! See whatKeynote can do for you. Watch the VIDEO

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Certified International Property Specialist Designation Offer

The Southeast Valley Regional Association of REALTORS is offering atwo day CIPS designation opportunity on April 20-21, 2016. Join anelite group of less than 1T of REALTORS with the CIPS designation.

More Information

Upcoming Classes


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VIEW ALL CLASSES

BEST OF THE LEGAL HOTLINE

QUESTION... From February 14, 2015: Broker's buyer is his cousin. Cousin looked at an open house. Listing


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broker is now claiming that because buyer first entered the house during an open house and not inthe company of buyer's broker, that any commission earned by the cousin's purchase of the housewould actually belong to listing broker based on the "threshold rule". Is that true?

ANSWER... The Hotline lawyer has never heard of anything called the "threshold rule." It seems that listing brokeris taking a single component of the procuring cause doctrine and attempting to expand it into a rule.The procuring cause doctrine, as instituted by the NAR and the WAR is as follows. Generally, aselling licensee is entitled to a commission when a commission is offered by either the seller or listingbroker and the selling licensee procures a ready, willing and able buyer on the terms of the listing orterms otherwise acceptable to the seller. The determination of whether the activity of a broker is theprocuring cause of a sale is generally a question of fact. Broker's efforts must set in motion a seriesof events which, without a break in continuity, eventually culminate in the sale. Prior case law showsthat it takes more than just showing a property to a prospective buyer or providing the buyer withinformation about the property. Even if a licensee wants to be and tries to be instrumental in the saleof the property, he will not be considered the procuring cause unless there is a clear connectionbetween the licensee's action and the ultimate sale. A few examples may be helpful in theexplanation of this concept. First: the buyer's agent provides the buyer with information about theproperty and schedules an appointment to view the property which is never kept, then the listingagent shows the buyer the property and drafts the offer for the buyer. Although the buyer's agent mayhave initially set the process in motion, the buyer's agent's activities are not continuous and areinterrupted by the activities of the listing agent. If the listing agent's activities eventually result in theculmination of the transaction, the listing agent would be the procuring cause. Second: agent #1shows the property to the buyer. Then agent #2 shows the buyer the property again, drafts the offerfor the buyer and offers assistance throughout the purchase process. Although agent #1 may haveinitially set the process in motion, agent #1's activities were not continuous and were interrupted bythe activities of agent #2. Agent #2's activities eventually result in the culmination of the sale.Therefore, agent #2 is the procuring cause. Therefore, whether buyer's broker is entitled to thecommission depends on whether buyer's broker was the procuring cause in the sale of the property.In this case, it appears that listing broker introduced buyer to the property but then buyer's broker willtake over for all discussions of terms and financing and if it comes to it, writing a unsuccessful offerfor buyer. This information would point to buyer broker being the procuring cause because it appearsthat listing broker's efforts, while setting a chain of events in motion, would be interrupted by thebuyer's choice to seek the independent representation of the broker with whom buyer had beenworking previously. This question illustrates one of the reasons that a listing broker is alwayssupposed to inquire of any buyer as to whether the buyer is already working with another agent, If thebuyer answers in the affirmative, as this buyer presumably would have done, then listing agent knowsthat listing agent should not expend resources to sell any other home to buyer. Of course, listingbroker is hired to sell seller's home and listing broker should work, on seller's behalf to do that. Thatdoes not mean, however, that listing broker will be entitled to a the selling office compensation inthese circumstances. The Hotline suggests broker consult his local REALTOR Association for further


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information on implementation of the procuring cause doctrine because it will ultimately be appliedthrough a local association arbitration, if an arbitration claim is filed by either broker.

The Legal Hotline is a Washington REALTORS Member-only benefit. To access the Hotline or Database, youwill be prompted for your NRDS # and your password before receiving the answer. The Legal Hotline Lawyerdoes not represent Washington REALTORS or its members. To browse through our database of past Q & A's,visit www.wwarealtor.org. Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of theWeek. Please submit questions to [email protected] or call (800) 562-6027. Please have yourNRDS number ready when you call or e-mail the Hotline with your question.

MEMBERSHIP RESOURCES

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