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Chapter 3: Agency, Brokerage, and Ethical Considerations

LEARNING OBJECTIVESWhen you have completed reading this chapter, you will be able to

identify types of agency and fiduciary responsibilities;

describe the broker-salesperson relationships and compensation issues;

discuss the disclosures to sellers and buyers related to creating agency and providing material information; and

describe misrepresentation, Consumer Fraud Act, antitrust laws, ethical considerations, and disciplinable offenses as forms of consumer protections.

KEY TERMS

agent

antitrust laws

attorney in fact

broker

buyer's agent

buyer's broker

client

Cody of Ethics

commission

conflict of interest

Consumer Information Statement (CIS)

customer

disclosed dual agent

disclosure

dual agency

employee

errors and omissions (E&O) insurance

fiduciary

fiduciary relationship

fraud

fraudulent misrepresentation

general agent

Graduate REALTOR® Institute (GRI)

independent contractor

innocent misrepresentation

kickback

latent defect

law of agency

listing agreement

meeting of the minds

Megan’s Law

National Association of REALTORS® (NAR)

negligent misrepresentation

New Jersey REALTORS® (NJR)

off-site conditions

power of attorney

principal

procuring cause

puffing

ready, willing, and able buyer

REALTOR®

salesperson

special agent

standard of card

subagent

transaction broker

universal agent

BROKERAGE DEFINED

The business of bringing buyers and sellers together in the marketplace is called brokerage. In the real estate business a broker is defined as a person who is licensed to assist others in real estate transactions and to receive compensation for those services. A real estate salesperson works on behalf of and is licensed to work under the supervision of a broker.

Years ago in New Jersey and elsewhere, the principal (known as the client) who employed the broker was almost always an owner who wished to sell a property. The real estate broker acted as the seller’s agent, and was usually compensated with a commission if a ready, willing, and able purchaser was procured. In this traditional real estate transaction the seller was the client, to whom specific duties were owed; the buyer was the agent’s customer, whom the agent must only treat fairly and honestly.

Today, however, agency relationships have become more complex than under the old seller-based model. A prospective buyer or a person seeking property to rent can also be a principal and hire a broker to act as a buyer’s broker or buyer’s agent.

In this type of relationship, the buyer is the client (the person to whom specific duties are owed) and the seller is the agent’s customer (whom the agent must simply treat honestly).

It is also possible for a licensee to function as a transaction broker, working with buyer, seller, or both, without representing either one but functioning as the manager of the transaction. In this case, no agency relationship is created. The creation of agency is determined not by who pays the commission but in most cases by a contractual agreement between the broker and the buyer or seller.

AGENCY

The role of a broker as the agent of his or her principal is a fiduciary relationship that falls within the requirements of the law of agency. A fiduciary relationship is one of trust and confidence in which an agent is responsible for the money and/or property of others. It requires putting the principal’s interest above all others, including the broker’s own interest. The agent is also known as a fiduciary.

Types of Agency

A universal agent has authority to represent the principal in all matters that can be delegated. He or she can enter into any contract on behalf of the principal without prior permission.

Other agents may be classified as general agents or special agents, based on the scope of their authority.

A general agent is empowered to represent the principal in a broad range of matters. The general agent may bind the principal to any contracts within the scope of his or her authority. An example of a general agent would be a property manager responsible for running a large building: procuring tenants, collecting rents, and hiring and supervising maintenance personnel, among other duties.

A special agent is authorized to represent the principal in one specific capacity only. A real estate broker is traditionally a special agent hired by a buyer or seller to locate a willing seller of a suitable property or a willing buyer. As a special agent, the broker is not authorized to buy or sell the property or to bind the principal to any contract.

Often one person is authorized to act for someone else in a legally binding capacity. This type of agency is created by a power of attorney, a legal written authorization that stipulates the specific areas of authority in which the agent may act. The agent acting in such a capacity is known as an attorney-in-fact.

FIDUCIARY RESPONSIBILITIES

An agent has a fiduciary relationship with his or her principal; that is, a special relationship of trust and confidence. This confidential relationship carries with it certain duties that the agent must perform:

Care

Obedience

Accounting

Loyalty (confidentiality)

Disclosure

These duties are easily remembered by the acronym COALD.

Care

The agent must exercise a reasonable degree of care and diligence while transacting business on behalf of the principal. Brokers and agents are expected, by virtue of their licenses, to have expertise in real estate matters greater than that possessed by the average person. As a result, they may be liable to the principal for any loss resulting from negligence or carelessness.

Breach of Duty of Care

The duty of care requires the seller’s agent to, among other things, be knowledgeable about all aspects of the property to arrive at a reasonable listing price, discover and investigate material facts, try to negotiate the highest possible sale prices, meet deadlines and closing dates, and advise the seller on ways to effect the sale. The failure to be properly informed about a property’s condition and value, and to effectively navigate the transaction through to closing, constitutes a breach of the duty of care.

A buyer’s agent is expected to inform the client of whatever problems can be discovered in the property, advise on probable market value, help negotiate the lowest possible purchase price, advise on financing options, and monitor the progress of the purchase until transfer of title.

The agent is expected to deliver the quality of service that a normal person would expect of a reasonably prudent agent. Actions breaching this obligation might be failing to present a written offer before it expires, neglecting to mention in the purchase contract any fixtures or personal property desired by one of the parties, neglecting property being managed for another, improperly handling escrow deposits, or failing to obtain all necessary signatures on a contract.

The courts set differing standards of care for brokers and for salespersons. Brokers are held to higher expectations than salespersons. Special training, designations, education, and experience may all increase the standard required of an agent. Brokers are unwise to represent themselves as, for example, experienced syndicators if they are unable to deliver service of acceptable quality. The rookie residential agent confronted with an opportunity to list a shopping plaza should probably approach an experienced commercial broker with a request that they work together to list and sell the property. Otherwise, the duty of observing an appropriate standard of care may be breached by the inexperienced agent.

Obedience

The agent is obligated to obey the principal’s lawful instructions. The agent is not, however, required to obey unlawful or unethical instructions—for example, violating fair housing laws or misrepresenting a property’s condition or a buyer’s finances.

Breach of Duty of Obedience

The agent must obey all the client’s lawful instructions, such as “24-hour notice for showing,” or “all offers through listing broker,” or “all contracts must be accompanied by a preapproved mortgage letter.” Failing to do so constitutes a breach of the duty of obedience. However, some instructions must be disobeyed, such as any order to conceal a hidden defect or to practice discrimination in the sale or rental of a property. An agent may not advertise a property below the price stipulated by the seller; thus, “Try around ninety thousand” or “Make an offer” may be in violation of the duty of obedience. It is also a violation for a seller’s agent to suggest that the buyer offer anything below the asking price unless the seller has authorized the broker to do whatever negotiating is necessary to effect a sale.

Accounting

The agent is obligated to safeguard and account for all money or property entrusted to his or her professional care. Real estate license laws require brokers to give duplicate originals of all documents to all parties affected by them and to keep copies of such documents on file for six years. In addition, the license laws require the broker to deposit all funds entrusted to him or her immediately into a special trust account. It is illegal for an agent to commingle (mix) such monies with personal funds or to retain any interest they earn. An agent may not make any secret profit.

Breach of Duty of Accounting

Any money received from a client or that is being held in trust for a client must be scrupulously accounted for. Handling of earnest money deposits is set forth in New Jersey’s license law, rules, and regulations. A common source of trouble occurs when a prospective buyer who does not keep large sums in a checking account gives an agent a check to be held for a few days. If the seller accepts the purchase offer based on the representation that the earnest money is in the broker’s possession, trouble may ensue. If the licensee informs the seller of the exact form and status of the deposit and has the seller initial an acknowledgment, everyone is protected. The broker clearly owes the seller an accounting of the exact status of the deposit, and disclosure is again the key element.

Loyalty (Includes Confidentiality)

An agent must always place a principal’s interests above those of other persons, including the agent’s own interests. For instance, an agent cannot disclose such information as the principal’s financial condition. An agent also cannot disclose any confidential facts that might harm the principal’s bargaining position. For example, a seller’s agent may not disclose that the principal will accept a price lower than the listing price. A buyer’s broker, on the other hand, cannot reveal the buyer’s readiness to pay more if necessary.

Brokers or salespersons must not buy property listed with them for themselves or for accounts in which they have a personal interest without first notifying the principal of such interest. Neither brokers nor salespersons may sell property in which they have a personal interest without informing the purchaser of that interest. Such a disclosure must be made in writing as part of the purchase contract.

Breach of Duty of Loyalty

Because the agent may not advance his or her interest at the expense of the principals, any attempt to profit from a transaction except through the agreed-on commission signals a situation in which loyalty might be breached. Profiting from a client’s misfortune is forbidden. The agent who subtly discourages efforts by co-brokers in a multiple listing system in hopes of securing a sale within the listing office is not acting in the client’s best interest.

Disclosure (Notice)

It is the agent’s duty to pass on to the principal all facts or information he or she obtains that could affect the principal’s business or decisions. The agent must volunteer pertinent information whether or not the client asks. This includes any information that might affect the object of the agency, the true value of the property and/or possible legal consequences of contract provisions.

In certain instances the broker may be held liable for damages for failing to disclose such information. The fiduciary duty owed by a buyer’s agent to the buyer/principal includes conveying to the buyer any information about the seller’s willingness to accept a lower price, about other offers, or about the value of the property. No confidentiality would apply to the seller’s disclosures if made to a buyer’s broker.

Breach of Duty of Disclosure or Notice

The law considers that any notice given the agent has been given to the principal. The agent therefore has a duty to pass on any material information; all written offers must be presented immediately.

The broker who is a seller’s agent must volunteer any facts that might be of value to the seller. Details of the buyer’s financial condition should be disclosed, as well as any information that the buyer has indicated he or she might pay a higher price. The duty of notice also places on the broker an obligation to explain to the seller matters that might otherwise escape notice or be misunderstood, such as details of proposed financing or drawbacks in a purchase offer.

In similar fashion, the buyer’s broker is obligated to pass on to the buyer any information that might help the buyer’s negotiating position. If the sellers have indicated that they might take less for the house, or that they are facing foreclosure if they don’t get a prompt offer, a buyer’s broker need not keep the fact confidential. On the contrary, the buyer’s broker must relay the information to his or her client.

General Duty of Fair Dealing

Although an agency relationship binds the agent to the principal with certain specific duties, remember that real estate licensees are required to deal fairly and honestly with all parties.

BROKER-SALESPERSON RELATIONSHIP

A person licensed to perform any real estate activities on behalf of a licensed real estate broker is known as a real estate salesperson. The salesperson is responsible to the broker under whom he or she is licensed. A salesperson can carry out only those responsibilities assigned by that broker.

Salesperson and Broker

A broker’s license entitles the broker to enter into contractual agreements and collect commissions for performing his or her assigned duties either as an agent or as a transaction broker. A salesperson, on the other hand, has no authority to make contracts with or receive compensation directly from anyone other than his or her supervising broker. The broker is fully responsible for the actions of all salespeople licensed under him or her. All of a salesperson’s activities must be performed in the name of the supervising broker.

The salesperson functions as an agent of the broker and as a subagent of a principal. In most cases today, sellers and their brokers do not offer subagency to other brokers who may produce a buyer (see Chapter 10). Each agent usually owes fiduciary duties to the party by whom he or she is retained. Unless the buyer has specifically retained his or her agent, it is inaccurate to refer to the buyer as one’s client.

Independent Contractor versus Employee

Salespersons are engaged by brokers as either employees or independent contractors. The New Jersey Real Estate Commission has required the agreement between broker and salesperson to be in writing and to include a termination agreement.

The employer-employee relationship allows a broker to exercise certain controls over salespeople who are employees. The broker can require an employee to adhere to regulations such as working hours, office routine, and dress standards. As an employer, a broker is required by the federal government to withhold Social Security tax and income tax from wages paid to employees. He or she is also required to pay unemployment or workers’ compensation tax on wages as defined by state and federal laws. A broker may provide employees with benefits such as health insurance.

Most real estate salespersons, however, act as independent contractors. Independent contractors assume responsibility for paying their own income and Social Security taxes and must provide their own health insurance if such coverage is desired. Independent contractors receive nothing from their brokers that could be considered an employee benefit (see Figure 3.1). Brokers cannot require independent contractors to work certain hours or attend office meetings, nor can they pay them any salary. The greater the number of broker-imposed controls over an independent contractor’s work, the greater the risk that the relationship will be construed as employer-employee with significant tax and regulatory consequences.

The Internal Revenue Service has provided safe harbor guidelines under which independent contractor status will not be challenged when the associate is licensed, has fluctuating income based on commissions, and works under a written contract specifying independent contractor status.

A suggested independent contractor agreement is shown in Figure 3.2.

BROKER’S COMPENSATION

The broker’s compensation is specified in the listing agreement, buyer-broker agreement, management agreement, or other contract with the principal and is subject to negotiation between the parties. Compensation is often computed as a percentage of the total amount of money involved, but it can be a flat fee or hourly rate. The commission or fee is usually considered to be earned when the broker has accomplished the work for which he or she was hired. Unless there is an agreement to the contrary, after a listing broker procures a ready, willing, and able buyer, the seller technically is liable for the broker’s commission. A ready, willing, and able buyer is one who is prepared to buy on the seller’s terms, is financially capable, and is ready to take positive steps toward consummation of the transaction.

Even though the fee is actually earned earlier, most contracts provide that the fee not be paid until the actual sale (transfer of title).

In some cases, even after the listing broker (or a cooperating broker) has produced a buyer who is ready, willing, and able to meet the listing terms, the deal falls through. If such occurs for any of the following reasons, the broker may still be entitled to a commission:

The owner changes his or her mind and refuses to sell

There are defects in the owner’s title that are not corrected

The owner commits fraud with respect to the transaction

The owner is unable to deliver possession within a reasonable time

The owner insists on terms not in the listing (for example, the right to restrict the use of the property)

The owner and the buyer enter into a contract but later agree to cancel the transaction

In other words, a broker generally is due a commission if a sale is not finalized because of the principal’s default.

Figure 3.1: Employee versus Independent Contractor

Figure 3.2: Sample of Independent Contractor Agreement

Figure 3.2: Sample of Independent Contractor Agreement (continued)

Figure 3.2: Sample of Independent Contractor Agreement (continued)

Figure 3.2: Sample of Independent Contractor Agreement (continued)

The broker is usually entitled to a fee if he or she is the procuring cause of sale; produces a ready, willing, and able buyer; or brings about a meeting of the minds. Where several brokers disagree as to which one brought about a sale, the one with the best claim to be the procuring cause is often difficult to determine. In some cases it could be the one who first introduced the buyer to the property; in others, it would be the one who brought the parties into agreement, as evidenced by the sales contract. A meeting of the minds is said to have taken place when the parties are in agreement on price, down payment, and financing method.

Compensation of the buyer’s broker is discussed later in this chapter.

The rate of a broker’s commission is negotiable in every case, although a particular firm may have its own independent policy of standard rates or fees. Any attempt, no matter how subtle, to impose uniform commission rates among competing firms would be a clear violation of state and federal antitrust laws.

New Jersey’s license laws make it illegal for a broker to share a commission with anyone who is not licensed as a salesperson or a broker except in some circumstances to a buyer. This has been construed to include any form of gift or compensation—for instance, giving a television to a friend for providing a valuable lead or paying finder’s fees and portions of the commission. Kickbacks, the return of part of the commission as gifts or money to sellers, are also prohibited.

SALESPERSON’S COMPENSATION

The compensation of a salesperson is set by a mutual agreement between the broker and salesperson. A broker may agree to pay a salary or, more commonly, a share of the commissions (the “split”) from transactions originated by a salesperson. The salesperson may never accept compensation from any buyer, seller, or broker except the one broker with whom he or she is associated.

The Real Estate Commission requires that a salesperson’s share of commission be paid by the broker within ten days of receipt by the broker, the only exception being a case in which the commission check has not cleared.

AGENCY AND THE CONSUMER

Creation of Agency with Sellers and Buyers

In New Jersey real estate practice, the special agency relationship between a broker and a seller or a broker and a buyer is generally created by a written employment contract. With sellers this is commonly called an Exclusive Listing Agreement (see Chapter 10). With buyers this is called an Exclusive Buyer Agency Agreement, one sample of which is shown in Figure 3.3. Neither agreement is required to be in writing by New Jersey regulation although it is prudent to have such agreements in writing.

A broker has the right to reject agency contracts that, in his or her judgment, violate the ethics or high standards of the office and, in fact, must reject contracts that would cause the broker to violate the law. However, after a brokerage relationship has been established, the broker owes the principal the duty to exercise care, skill, and integrity in carrying out instructions.

Disclosure of Agency

New Jersey regulations require licensees to present a Consumer Information Statement (CIS), a form of disclosure (reprinted in Figure 3.4), to all sellers, buyers, landlords, and tenants on the sale or rental of all one- to four-family residential properties or vacant one-family lots. (Short-term rentals—those held for not more than 125 consecutive days—are excluded from the formal written disclosure requirement, although licensees still must disclose their business relationship in the transaction.) Although a Consumer Information Statement (CIS) is not required for other transactions (commercial buildings or multi-unit apartments, for example), written disclosure of agency can be a prudent precaution for the broker in all situations.

The Consumer Information Statement describes the types of business relationships a real estate agent can enter into with a customer or client and the duties associated with each relationship. A real estate agent can function as (1) a seller’s agent, (2) a buyer’s agent, (3) a disclosed dual agent, (4) a transaction broker, or (5) a seller’s agent on properties on which the firm is acting as a seller’s agent and transaction broker on other properties.

The client or customer should understand in advance, before discussing matters that might injure his or her negotiating position, whether the licensee is legally obligated to keep financial information confidential or legally obligated to pass the information on to another party. Is the licensee able to divulge how much the seller would really take for the property or how much the buyer would really pay if necessary? These are prime examples of what should or should not be discussed with the licensee, depending on the type of business relationship the client or customer has entered into. In short, the public has a right to know whose agent they are dealing with.

Requirements for dealing with sellers and buyers apply also to landlords and tenants.

Figure 3.3: Exclusive Buyer Agency Agreement

Figure 3.3: Exclusive Buyer Agency Agreement (continued)

Figure 3.4: Consumer Information Statement (CIS)

Figure 3.4: Consumer Information Statement (CIS) (continued)

Furnishing the Consumer Information Statement (CIS)

Real estate agents are required to furnish a CIS before any discussion of a seller’s/landlord’s or buyer’s/tenant’s motivation or financial situation is initiated. If the first discussion takes place by telephone or in a social setting, the seller or buyer must still be verbally informed about the possible agency relationships and alerted to their implications. The statement should then be furnished at the next meeting, or included with the first faxed, mailed, or delivered material. If no discussion of motivation or financial situation has taken place, the agent must furnish a CIS before any property (listed or unlisted) is shown.

The regulations do not require that the CIS be signed by the parties as to their acknowledgment of receipt of the CIS or by the licensee as to the declaration of business relationship. However, in the event that a broker’s office policy requires that a CIS be signed, the regulations do provide language that a licensee may use as an option for obtaining the required signatures. If the CIS is signed, a copy of the signed CIS is to be retained by the broker when a sale or rental is consummated for six years. Sellers and buyers must acknowledge receipt of the CIS on all offers, contracts, and leases.

Further Written Disclosures of Agency

Every listing, offer, contract, and lease prepared by a licensee (except on real estate properties exempted from the disclosure requirements) must set forth the broker’s relationship with the parties involved. If a signed CIS is not attached, offers, contracts, or leases (except short-term rentals) must also contain the client or customer’s acknowledgment that the CIS was received prior to the first showing of the property.

In addition, when more than one firm is involved, the licensee preparing the document must include a statement indicating how the other firm has described its agency status in that transaction.

Listing agreements prepared by a seller’s agent must state whether subagency is being offered to cooperating firms and whether the seller has authorized sharing the commission with subagents, buyer’s brokers, or transaction brokers. If so, the agreement must state the amount of the share. An “Addendum to Real Estate Listing/Commission Agreement” must be included with every listing contract (see Figure 10.1). When other licensees inquire about a listing, it is the responsibility of the agent who listed the property to determine first whether the licensee is functioning as a buyer’s broker, a subagent of the seller, a transaction broker, or a disclosed dual agent, in order to judge what confidential information may be shared.

Termination of Agency

The agency relationship may be terminated by any of the following:

Death or incompetency of either party

Destruction or condemnation of the property

Expiration of the term of the agency

Mutual agreement to terminate the agency

Renunciation by the agent

Revocation by the principal

Bankruptcy of either party

Completion or fulfillment of the purpose for which the agency was created

Generally, a seller or buyer, acting in good faith, has a right to fire a broker (for cause) or to rescind the brokerage agreement at any time if he or she decides not to sell. When a broker is discharged, he or she may be entitled to reimbursement for out-of-pocket expenses, such as advertising and multiple listing service fees.

Buyer as Principal

A buyer’s broker should have a written employment contract and may be paid with a retainer, a flat fee, an hourly fee, or even out of the proceeds of the sale. The creation of agency is not determined by who pays the commission. Licensees are prohibited from receiving compensation from both parties under certain circumstances. If a broker represents one party to a transaction, whether a sale or lease, he or she can collect a fee from both parties, provided that the broker gives full written disclosure to and gets consent from both parties. But if a broker represents both parties in the same real estate transaction, he or she can collect from only one of them.

DUAL AGENCY

Dual agency means that the broker represents both parties in a transaction at the same time. While dual agency in itself is not illegal, undisclosed dual agency is. Whenever possible, the broker should avoid any situation that might result in or be considered undisclosed dual agency, that is, representing both parties in a transaction at the same time without the prior knowledge and written consent of all parties. An agent cannot give the highest level of loyalty to two or more principals in the same transaction.

When working with a buyer as a seller’s agent, a licensee must be careful not to give the buyer the impression that he or she is the agent’s client. Simply giving a buyer the mandated Consumer Information Statement is not enough. Salespeople working with customers should be careful at all times not to use such terms as “my buyer,” which could actually be construed as creating an inadvertent dual agency relationship.

Disclosed dual agency is legal in New Jersey if the broker

explains fully the legal duties that will and will not be available from him or her;

discloses any other business relationships that might affect the proposed transaction;

obtains the buyer’s and seller’s written informed consent to the brokers acting as a dual agent (in addition to the CIS); and

advises that each party may want to consult a lawyer.

A Consent to Dual Agency Agreement is shown as Figure 3.5.

Brokers representing sellers and multiple buyers are advised to consult with counsel on how their brokerage agreements and informed consent forms should be revised to cover the simultaneous representation of buyers, and if disclosure must be made to competing buyer clients.

Even when acting with written consent to dual agency, the broker is not allowed to accept compensation from both the buyer and the seller in the same transaction. The dual agent may be paid by either the buyer or the seller, but never by both.

Dual Agency and Conflict of Interest

In recent years surveys have disclosed that a large majority of the buying public thinks they are being represented by a selling broker. Even worse, some brokers have the same impression. Long discussions have been taking place on the question of dual agency, sometimes designated as the subagency question, because of the position of a cooperating broker in a multiple listing system.

In one state after another, legislatures have been wrestling with the problem of informing the public and controlling the agent’s fiduciary position.

New Jersey’s license law forbids an agent to represent both parties except with the informed written consent of both parties (disclosed dual agency; see Appendix B [11:5-6.9(a)4] for the requirements of how such disclosure must be made). A common situation is one in which the seller’s agent comes to identify with the buyer and furnishes encouragement, advice, and assistance to the buyer.

Advising the buyer on how to negotiate with the seller may even put the listing agent in the position of serving two masters. Without some such advice, of course, most transactions would not take place at all. The seller’s broker has been retained to produce a ready, willing, and able buyer; to accomplish this, negotiation and compromise are usually necessary. Nevertheless, an unintended result, commonly known as dual agency, may follow, with the agent now representing both parties. If the transaction falls through, either buyer or seller might claim damages, based on the broker’s conflict of interest.

That the actions are performed with good intentions does not change the situation. The problem is a difficult one, faced daily by licensees, with no simple solution. One remedy might be to obtain the seller’s authorization to divulge normally privileged information, such as the seller’s motivation or lowest acceptable price, in order to secure an offer.

Conflict of interest may occur when the agent is called to a listing interview and finds a seller ready to let the property go at a ridiculously low price. The courts have held that even though the property is not yet listed, the seller is relying on the broker’s expertise and may become a principal. The licensee who decides to buy the property immediately without notifying the seller of its true value is operating under a conflict between his or her own interest and that of the seller.

A more subtle situation occurs when no financial advantage accrues to the agent, but the agent has an indirect interest in the transaction. The agent should disclose, for example, if he is a member of the Boy Scout committee looking for a campsite or if he is trying to locate a home for his mother to purchase.

DISCLOSURE ISSUES

Material Information

In New Jersey, real estate brokers and salespeople are responsible for disclosing to a buyer any defects of a material nature that affect the physical condition of the property. Material information is defined as a physical condition that a reasonable person attaches importance to, or information that the agent knows or suspects a buyer would want to know and would consider important before proceeding. It doesn’t matter whether the agent or any hypothetical “reasonable person” would share that interest or agree that the information is important.

Licensees must disclose defects that are uncoverable by a reasonable inspection. These defects would include such things as water seepage, unused oil tanks in the basement, and sloping floors. Sellers should be aware, however, that courts have ruled that they are responsible for revealing any hidden or latent defects to their real estate agents. A latent defect is one that is not discoverable by ordinary inspection. An example might be EIFS (exterior insulation finish systems), a specific form of stucco that has been linked, in recent years, to water leakage, rotted sheathing, and the growth of mold. The seller of a stucco home should be questioned about whether the finish is EIFS and buyers should be alerted to investigate. Because in such instances buyers have been able to either rescind the sales contract or receive damages, real estate agents should urge their sellers to disclose to them and to buyers any problems not evident but that might affect the buyer’s desire to purchase or the price the buyer would be willing to pay.

An excellent source of information about past problems in any given building is the Comprehensive Loss Underwriting Exchange (CLUE) report, which lists insurance claims for the past five years. The reports are available from ChoicePoint, the company that assembles the data. On rare occasions, CLUE records have made it difficult for buyers to place the homeowner’s insurance required by their mortgage lenders.

In the same fashion, a buyer’s broker is required to disclose any material defect that would affect the buyer’s ability to complete the transaction. This means that despite the fiduciary duty of confidentiality, a buyer’s broker must immediately disclose any financial problem (an earnest money check that bounces, for example) to the seller.

The New Jersey Administrative Code says that social conditions and psychological impairments are not considered physical conditions. For instance, noisy dogs or unpleasant neighbors do not affect the property’s physical condition. Suicide or other unpleasant events associated with a property are also nonphysical conditions. If asked, agents must pass along any information they possess but they are not required to investigate social or psychological conditions. Before the agent decides to pass along any of this kind of information, however, he or she should carefully consider how the communication might impact his or her fiduciary duties.

Figure 3.5: Dual Agency Agreement New Jersey REALTORS® Form-122B-8/15

Off-Site Conditions

In 1995, several families sued a developer and broker, alleging that both had known that the development was located a half-mile from a hazardous waste dumping site and had failed to disclose this fact. The trial court ruled in favor of the developer and broker, stating that there is no duty to disclose to a potential purchaser the conditions of someone else’s property. On appeal, however, the decision was reversed. The New Jersey Supreme Court ultimately held that conditions beyond the limits of a specific property may be considered material facts that must be disclosed to prospective purchasers.

As a result of this decision, two disclosures for off-site conditions are now included in all contracts. One refers to new construction; the other, to resales of existing properties. The new construction notice includes a five-day period in which the purchaser may cancel the contract; the resale notice does not include a similar right of rescission (see Figure 11.1).

Megan’s Law

Megan’s Law requires that a community be alerted to the presence of convicted sex offenders. Megan’s Law was enacted in New Jersey in 1995, and similar laws have been adopted in most other states since then. In February 1998, the U.S. Supreme Court refused to hear a constitutional challenge to the law in which attorneys for convicted sex offenders claimed that it amounted to being punished twice for the same crime (a violation of the Fifth Amendment): once in the original sentencing and again by public notification.

In New Jersey, all contracts and leases on residential real estate that are prepared by a licensee must include a Megan’s Law Statement. This statement advises purchasers and lessees that the county prosecutor has a list of all known sex offenders who live in the area. Buyers and lessees can obtain this information from the county prosecutor after the sale or lease of the property has closed (again, see Figure 11.1). Licensees are not permitted to inquire about or give any information regarding the presence of convicted sex offenders in the neighborhood.

A buyer’s broker can suggest that a concerned client check New Jersey State Police website www.njsp.org for a registry of sex offenders.

MISREPRESENTATION

Licensees must be careful about the statements they or their staff members make about a parcel of real estate. Extravagant statements of opinion (“This house has the most gorgeous view in the world!”) are permissible, as long as they are offered as opinions and without any intention to deceive. Making such statements when selling real estate is called puffing.

Statements of fact, however, must be accurate, and questions must be answered honestly. The broker must be alert to ensure that none of his or her statements can in any way be interpreted as involving fraud, which encompasses all deceitful or dishonest practices intended to harm or take advantage of another person. If a contract to purchase real estate is obtained as a result of misstatements made by a broker or his or her salespersons, the contract may be disaffirmed or renounced by the purchaser. In such a case the broker would lose the commission. If either party suffers loss because of a broker’s misrepresentations, the broker can be held liable for damages.

Misrepresentation covers more than a deliberate lie intended to mislead someone, which is called fraudulent (intentional) misrepresentation. There are two other classifications: negligent (unintentional) misrepresentation covers false statements made by someone who should have known better. Innocent (honest) misrepresentation is a false statement by someone who believes the information to be true but is not expected to have expertise in the subject.

Liability Criteria

For the agent to be liable for misrepresentation there must be

a false or misleading statement (or concealment of a material fact) by

a person who knows (or should have known) that the information is false, with

intent to deceive or defraud (or if, where there is no such intent, the effect is still to deceive or defraud) and

damages suffered by the party who relied on the information.

It is relatively easy for an agent to avoid intentional misrepresentation simply by sticking to the truth. But omissions and half-truths may misrepresent as readily as actual misstatements, and the offense may be committed inadvertently. The buyer looking at rural property may be told “The septic system works well,” when, in fact, it does not. If the agent knows the true state of affairs, intentional misrepresentation has occurred. If the agent does not know the condition of the system, the potential buyer is still being misled by negligent misrepresentation. The half-truth that might mislead is a statement like “Septic systems are normal in this area, and there’s probably nothing to worry about.” True in itself, this skirts the issue in a manner that may be misleading to an ignorant buyer. No mention at all of the septic system may also be misleading, particularly to an urban buyer who may assume sewers are available everywhere.

That the broker knew nothing of the condition of that system will be little defense if brokers in that community should know about such matters. Even if the intention is not to defraud, the buyer who purchases the property and discovers the septic system to be faulty has suffered damages and may seek to recover them from the broker.

In recent years, buyers and sellers have become increasingly aware of the possible danger posed by radon, lead paint, asbestos building materials, toxic pollutants, urea-formaldehyde foam insulation (UFFI), and other environmental hazards.

Among areas where problems frequently arise are statements about the value of property (“Sure to go up 10% a year in this area”), title (“The judgments have all been cleared up”), utilities (“No problem hooking in to the sewers”), boundaries, zoning, and size. In a recent case in another state, the buyer of a house that contained 100 square feet fewer than stated in the listing data was awarded the current construction cost of 100 square feet in that area. The buyer may prefer to sue the broker, who still has an office in town and a vulnerable reputation, rather than the seller, who may have already moved out of town.

To Avoid Misrepresentation

Never present opinions as facts. Not “We can certainly get you $300,000 for this house,” but “I don’t see why we might not . . .” or “It should probably bring as much as these recent sales did.” Absolute statements should be avoided. Not “All copper plumbing,” but “It looks from here as if . . .” The phrases “I believe” or “I was told by the seller” are more accurate than “The roof is five years old,” where the agent has no direct knowledge of its age.

Many requests for information should be met by referring the questioner directly to an expert source: city zoning bureau, mortgage counselor, building inspection engineer, or lawyer. The agent thus shifts responsibility and cuts down the chances of giving faulty information in specialized areas.

CONSUMER FRAUD SCT

New Jersey’s Consumer Fraud Act lists in detail all sorts of misleading, fraudulent, and scam practices, and sets penalties that include a fine of up to $10,000 for a first violation of the Act. Concealing or omitting material facts about real estate is considered an unlawful practice.

The Act, however, offers an exemption from liability for a real estate licensee who can prove that

the licensee had no actual knowledge that information provided was false or deceptive;

a diligent effort was made to learn the truth, including the licensee’s visual inspection of the property; and

the broker or salesperson was relying on information provided by a home inspector or similar specialist, a government employee, or the seller’s property condition disclosure statement.

ANTITRUST LAWS

The real estate industry is subject to federal and state antitrust laws. The most common antitrust violations that can occur in the real estate business are price-fixing and allocation of customers or markets.

Illegal price-fixing occurs when brokers conspire to set prices for the services they perform (sales commissions, management rates), rather than letting those prices be established through competition in the open market.

Real estate licensees must disassociate themselves immediately from the slightest discussion of commission rates with any member of a competing firm. In the past a number of brokers and real estate boards have suffered from charges under antitrust laws.

Allocation of customers or markets would involve an agreement between brokers to divide their markets and refrain from competing with each other’s business. For example, allocations could take place on a geographic basis with brokers agreeing to specific territories within which they operate exclusively. Or the division could take place along other lines: for example, two brokers may agree that one handles only residential properties less than $250,000 in value and the other handles only residential properties greater than $250,000 in value. Any such arrangement is illegal.

Individual firms may, however, establish their own fee schedules and allocate sales territories between salespersons. Violations occur only when competing firms agree to act together in these matters.

The penalties for such acts are severe. Under the Sherman Antitrust Act, people who fix prices or allocate markets may be found guilty of a misdemeanor punishable by a maximum $1,000,000 fine and 10 years in prison. In a civil suit a person who has suffered a loss because of such activities may recover triple the value of the actual damages plus attorney’s fees and costs.

ETHICS, LIABILITY, AND DISCIPLINABLE OFFENSES

It is possible for a broker to incur liability even though acting in all honesty and with good will. Situations that may lead to professional liability fall under four main headings:

Breach of fiduciary duties

Failure to observe standard of care

Conflict of interest

Misrepresentation

Any of these can be a potentially serious infraction. Possible results include

loss of client and listing;

loss of customer and sale;

loss of commission;

civil lawsuit for damages;

criminal prosecution; and

suspension or loss of license.

In many of the following situations full disclosure in advance prevents liability. If, on the other hand, the problem is not immediately obvious, disclosure as soon as it is discovered may limit liability.

Disciplinable Offenses

An analysis of offenses for which licensees are usually disciplined includes the broker’s failure to supervise a salesperson, a salesperson acting as a broker, misuse of escrow funds, and the broker using the services of an unlicensed person.

Other offenses that recently brought fines or suspension or revocation of license include

racial steering,

discrimination,

violation of nonsolicitation orders,

failure to disclose licensee’s interest in a transaction,

failure to disclose dual compensation,

unauthorized practice of law,

failure to deliver copies of documents,

net listing,

inducing breach of another’s contract,

material misstatement on a license application,

deceptive and improper advertising,

improper information on stationery and business cards, and

personal offenses not necessarily related to real estate (fraud, failure to pay a judgment, conviction of a felony).

Brokers and salespersons were cited for breach of fiduciary duties (failure to explain the nature of exclusive-right-to-sell listing, failure to follow principal’s directions).

DEFENSE AGAINST CLAIMS OF LIABILITY

Staying alert to situations that might pose problems is a first defense. Disclaimers that “the information furnished is believed correct but not warranted” are of little value. They cannot cover spoken repetition of the material and they cannot acquit the broker of liability. The fact that the misleading material may have been furnished by the seller is also of little value as a defense.

The broker’s potential liability for undisclosed defects is somewhat lessened if the seller furnishes a written disclosure of property condition to the buyer (see Chapter 10) and if the buyer retains the service of a home inspector before the contract becomes binding.

Errors and omissions (E&O) insurance is the real estate industry’s equivalent of medical malpractice insurance. Subject to the limitations of a particular policy, it defends against many circumstances but does not cover fraud. It is carried by many brokers and some individual salespersons.

Dual Contracts

New Jersey specifically outlaws the use of dual contracts in a real estate sales transaction. Dual contracts, either oral or written, are two separate contracts concerning the same parcel of real estate, one stating the true purchase price and the other stating a larger amount as the purchase price. Such contracts are used to induce a lender to make a mortgage loan commitment for a larger amount based on the false, inflated purchase price quoted on the second contract.

The writing of such dual contracts is obviously a fraudulent act, and the license of a person found guilty of being a party to dual contracts could be suspended or revoked. Such action becomes a misdemeanor, punishable by fine and/or imprisonment of up to three years.

Ethics

Professional conduct involves much more than just complying with the law. In real estate, the state’s licensing laws (and federal laws as well) establish those activities that are illegal and therefore prohibited. However, merely complying with the letter of the law may not be enough; licensees may perform legally yet not ethically. Ethics refers to a system of moral principles, rules, and standards of conduct. The ethical system of a profession establishes conduct that goes beyond merely complying with the law.

These moral principles address two sides of a profession:

They establish standards for integrity and competence in dealing with consumers of an industry’s services.

They define a code of conduct for relations within the industry, among its professionals.

Most professions have codes of ethics for their members: the physician’s Hippocratic Oath, for instance, or the attorney’s Code of Professional Responsibility. A code of ethics is a written system of standards for ethical conduct. The code contains statements designed to advise, guide, and regulate job behavior. To be effective, a code of ethics must be specific by dictating rules that either prohibit or demand certain desirable behavior. Lofty statements of positive goals are not especially helpful. By including sanctions for violators, a code of ethics becomes more effective.

The National Association of REALTORS® (discussed later) adopted its Code of Ethics and Standards of Practice in 1913. All members of NAR are expected to subscribe to this code of conduct. The code has proved helpful, because it contains practical applications of business ethics. Other professional organizations in the real estate industry have codes of ethics as well, and many state commissions are required by law to establish codes or canons of ethical behavior for their states licensees.

PROFESSIONAL ORGANIZATIONS

Years ago real estate brokers realized the need for an organization to assist them in improving their business abilities and to educate the public to the value of qualified real estate brokers. The National Association of REALTORS® (NAR) was founded in 1908 to meet this need. This organization is made up of brokers and salespeople who are members of local boards/associations and state associations of REALTORS® that operate throughout the United States, and the professional activities of all REALTORS® active members of local boards that are affiliated with the national association are governed by the association’s Code of Ethics, which NAR adopted in 1913 and updates as needed. The term REALTORS® is a registered trademark. In 2004, NAR reported it had more than one million members as REALTORS® and REALTOR-ASSOCIATES®.

For more about NAR, you can visit their website at www.realtor.com. The Code of Ethics of the National Association of REALTORS® is reproduced in Appendix A. It has had a major impact on and has often served as a model for the licensing laws of many states, including New Jersey.

The National Association of Real Estate Brokers (NAREB), whose members are called Realtists, was founded in 1947 and is particularly active in the South. Its membership, generally composed of African-Americans, includes individual members as well as brokers who belong to state and local real estate boards affiliated with the organization. Members subscribe to a code of ethics that sets professional standards for all Realtists. The NAREB website is www.nareb.com.

New Jersey REALTORS®

The New Jersey REALTORS® (NJR), formerly the New Jersey Association of REALTORS® (NJAR), at www.njr.com, is the state branch of the NAR. Among other services, the NJR offers a variety of educational courses and programs to approximately 46,000 members, including the specific courses leading to the designation Graduate, REALTORS® Institute (GRI®). It also maintains many committees including a legislative study-action committee to advance the public’s social, economic, and vocational interest in real estate through legislative efforts. The state association provides a standard sales contract form that may be adapted to the needs of any member’s office, and agency and property-disclosure forms.

These are private trade associations. Licensed brokers and salespersons are not required by law to join.

Designations

As a mark of expertise in various fields, professional organizations award designations after required experience, study, and examinations. The National Association of REALTORS®, together with its institutes, societies, and councils, offers many designations. Among the better-known designations are

ABR (Accredited Buyers Representative), awarded through the NARs Real Estate Buyers Agent Council (REBAC);

CCIM (Certified Commercial Investment Member), awarded by the REALTORS® National Marketing Institute;

CRB (Certified Real Estate Broker), awarded by the REALTORS® National Marketing Institute;

CRS (Certified Residential Specialist), awarded by the REALTORS® National Marketing Institute;

Certified Property Manager (CPM), awarded by the Institute of Real Estate Management;

GRI® (Graduate, REALTOR® Institute);

SIOR (Society of Industrial and Office REALTOR®);

CRE (Counselor of Real Estate);

LTG (Leadership Training Graduate), awarded by the Women’s Council of REALTORS®;

DREI (Distinguished Real Estate Instructor), Real Estate Educators Association;

SREA (Senior Real Estate Analyst), Appraisal Institute; and

SRES (Seniors Real Estate Specialist), awarded by the NAR’s Seniors Advantage Real Estate Council.

SUMMARY

Real estate brokerage is the bringing together, for a fee or commission, of people who wish to buy, sell, exchange, or lease real estate. In New Jersey a real estate agent can act as a (1) seller’s agent, (2) buyer’s agent, (3) disclosed dual agent, (4) transaction broker, or (5) seller’s agent on properties on which the firm is acting as the seller’s agent and transaction broker on other properties. A transaction broker works with buyer, seller, or both without representing either one in an agency relationship.

Real estate brokerage is commonly governed by the law of agency. The real estate broker is the agent, hired by either a buyer or a seller of real estate to find or sell a particular parcel of real estate. The person who hires the broker is the principal or client. The principal and the agent have a fiduciary relationship under which the agent owes the principal the duties of care, obedience, accounting, loyalty, and disclosure.

Agents are required to disclose material information about a property, as well as other disclosures required by Megan’s Law and standard off-site condition notices.

Misrepresentation need not be intentional; unintentional or negligent misrepresentation is also possible. Ways to avoid misrepresentation include not stating opinions as facts and referring the questioner directly to expert sources. The best defense against claims arising from such situations is disclosure, either before the client has acted or as soon as the problem is discovered. Licensees may function as dual agents, but only after following strict rules governing disclosure of their role. Undisclosed dual agency is illegal.

New Jersey’s Consumer Fraud Act sets strict penalties for anyone giving false or misleading information about real estate, but sets some exemptions for licensees who can prove they were not aware of the deception, had tried diligently to ascertain the true picture, and were relying on information supplied by professionals, government employees, or sellers.

The broker’s compensation in a real estate sale generally takes the form of a commission, which is often (though not necessarily) a percentage of the real estate’s selling price. The broker is considered to have earned a commission when he or she procures a ready, willing, and able buyer for a seller or brings about a meeting of the minds. Most contracts of sale, however, provide that the commission only be paid at the closing of title.

Salespeople may assist brokers as either employees or independent contractors. The salesperson is the broker’s agent and usually the seller’s subagent (or, if specifically retained as such, the buyer’s subagent).

Many of the general operations of a real estate brokerage are regulated by the real estate license laws. In addition, state and federal antitrust laws prohibit brokers from conspiring to fix prices or allocate customers or markets.

Liability claims against brokers for damages caused to buyers or sellers may arise from breach of fiduciary duty, failure to observe standard of care, conflict of interest, or misrepresentation.

Professional organizations providing a code of ethics for their members include the National Association of REALTORS® (NAR), the National Association of Real Estate Brokers (Realtists), and state REALTOR® Associations. The New Jersey REALTORS® (NJR) offers a variety of educational courses, including a specific course leading to the designation of Graduate, REALTOR® Institute (GRI). Numerous other designations are available to REALTOR® members.

USEFUL WEBSITES

U.S. Department of Justice, Antitrust Division: www​.usdoj.gov/atr

National Association of REALTORS®: www.realtor.com

New Jersey REALTORS®: www.njr.com

National Association of Real Estate Brokers: www.nareb.com

National Association of Exclusive Buyer Agents: www.naeba.org

Real Estate Buyer’s Agent Council: www.rebac.net

REVIEW QUESTIONS ANSWER KEY

The legal relationship between a broker and seller is generally a(n)

special agency.

general agency.

ostensible agency.

universal agency.

The real estate broker can be hired as an agent through the document known as a

listing agreement.

finder’s agreement.

meeting of the minds.

procuring contract.

The statement “a broker must be employed to recover a commission for his or her services” means

the broker must work in a real estate office.

someone must have agreed to pay a commission to the broker for selling the property.

the broker must have asked the seller the price of the property and then found a ready, willing, and able buyer.

the broker must have a salesperson employed in the office.

The procuring cause of a sale is

always the person who first shows the property.

always the licensee who draws up the contract.

sometimes hard to determine.

whomever the buyer wants to receive the commission.

A listing may be terminated when either broker or principal

gets married.

goes bankrupt.

overfinances other property.

becomes 21 years of age.

When retained by the seller, the broker owes a prospective buyer

obedience to lawful instructions.

confidentiality about the buyer’s financial situation.

honest treatment.

first loyalty.

The salesperson who sincerely tries to represent both buyer and seller is practicing

fraud.

puffing.

dual agency.

general agency.

A seller who wishes to cancel a listing agreement in New Jersey

must cite a legally acceptable reason.

may not cancel without the agent’s consent.

may be held liable for money and time expended by the broker.

may not sell the property for six months after.

The buyer of residential property is entitled to find out about the presence of a convicted sex offender in the neighborhood

in the listing information for the property.

at the time the contract is signed.

after the sale of the property has closed.

only if he or she can demonstrate a material need to know.

Mollie’s father bought a house in 1940 for $4,500. She asks Bob Broker to list it and instructs him to see if he can get as much as $85,000 “because she’s heard houses have gone up in value.” Bob knows the property might bring $250,000. Bob should

take the listing as instructed, knowing he can produce a prompt, trouble-free sale for Mollie.

buy the house himself for the full $85,000, making sure his purchase contract reveals that he is a licensed broker.

buy the house only through his cousin, who has a different last name, to avoid a breach of fiduciary duty.

tell Mollie that he believes the house is worth much more.

An example of a latent defect is a

large crack in the dining room ceiling.

roof with warped shingles.

used-car lot next door.

malfunctioning septic system.

An independent contractor may be paid

a regular draw against earnings.

reimbursed car expenses.

commissions on sales.

two-week vacations each year.

Commissions usually are earned when

the buyer makes a purchase offer.

the seller accepts the buyer’s offer without conditions.

a new mortgage has been promised by the lender.

title to the property transfers.

Even if a proposed transaction does not go through, the broker sometimes may collect a commission where the

buyer turned out to be financially unable.

seller refused to do repairs required by the lender.

seller simply backed out.

lender did not appraise the house for the sales price.

A salesperson’s commission on a real estate transaction is

paid within ten days after the broker is paid for the transaction.

paid at the rate set by the New Jersey Real Estate Commission.

always paid in cash.

generally determined, by custom, by the broker with no input from the salesperson.

To be entitled to collect a commission on a real estate transaction, an agent must

be the procuring cause of the transaction.

charge no more than the local “going rate” of commission.

work a minimum number of hours.

sign the sales contract as a witness.

Henry lists his house with broker Larry. Henry offers a bonus commission of $500 to the agent who brings a good buyer before Thanksgiving. Sam, who is associated with the cooperating firm of Olive Olsen, effects the sale on November 1. Sam may collect that bonus from

Henry.

Larry.

Olive Olsen.

no one.

Eileen Brenner walks into the Rivera open house and realizes that the house is exactly what she’s been looking for. That evening, Tyrone, the salesperson who held the open house, calls Eileen and asks her if she wants to present an offer. Eileen says she wants to think it over. The next day, Eileen’s sister Helen, a real estate agent in another part of the state, presents an offer for her which the Riveras accept. Who was the procuring cause of the sale?

Tyrone, because he introduced her to the property and followed up.

Helen, because she drew up the contract.

Helen, because she’s been working with Eileen for months and Eileen wants her to get the commission.

Helen and Tyrone should split the commission because they both contributed to the sale.

Commission rates are set by

state law.

local custom.

the broker.

agreement between seller and broker.

At a booth in the neighborhood coffee shop, broker Larry Jones is seated with his friendly rival, Olive Olsen. Olive says, “Did you hear about that firm that’s charging a flat fee for selling property? Do you think they’ll make it?” Larry’s proper response is to

explain to Olive that flat fees are allowed by law, just as commissions are.

assure Olive that his commission rates are not going to change.

caution Olive about the dangers of discussing competing firms.

point out to Olive that it is a violation of federal antitrust law for competing brokers to discuss any aspect of commission rates.

The transaction broker represents

the seller.

the buyer.

the lending institution.

no one.

A Consumer Information Statement (CIS) is required for transactions involving

commercial property and vacant land.

one- to four-family dwellings.

farms and subdivisions.

all real estate.

A dual agent cannot provide advice on

available financing.

the right price to accept.

utility costs.

hidden defects.

Jenny purchases a lovely vintage home from an elderly woman who has lived there for many years. Valerie enters into a contract to have Boffo Builders construct a new home for her in the new Settling Pond development. If a hazardous waste landfill is discovered within a quarter-mile of either of these properties, what will be the result?

Both Jenny and Valerie will be entitled to a five-day right of rescission.

Neither Jenny nor Valerie will be entitled to cancel their contracts.

Jenny, but not Valerie, has 10 days in which to cancel.

Valerie, but not Jenny, has five days in which to cancel.

All of the following would be considered material information about a property in New Jersey, EXCEPT

sagging floor joists.

seasonal flooding.

the previous owner’s suicide.

inadequate septic tank.

The duty of loyalty forbids the seller’s broker to

mention the condition of the house in ads.

place a sign on the property.

suggest an offer under the listed price.

give information over the telephone.

When the buyer gives a seller’s broker information about possible financial problems in completing the purchase, the broker should

respect the confidence and let it go no further.

inform the seller immediately.

offer to lend the buyer extra funds needed.

ask for a written confirmation of the situation.

If the agent in the previous question is acting as a buyer’s broker, the most correct response for the broker is to

say nothing to the seller because of the duty of confidentiality to the principal.

explain to the buyer that not revealing the problem to the seller may constitute concealment of a material defect.

tell the seller, at the same time asking the seller not to reveal to the buyer that confidentiality was breached.

try to find another buyer for the property.

Negligent misrepresentation occurs when

the speaker knows the statement is false.

the speaker should know the statement is false.

the speaker is not expected to have knowledge in the matter under discussion.

no harm is done by the falsehood.

The term REALTOR® applies only to

any licensed broker.

any broker or salesperson.

members of a private organization.

graduates of the REALTOR® Institute.

New Jersey’s Consumer Fraud Act

does not apply to real estate.

holds licensees liable for any misrepresentation.

allows exemption from liability in some circumstances.

doesn’t cover omission of material facts.

[wake-up-and-read]

Chapter 2

Chapter 2: Commission Rules and Regulations

LEARNING OBJECTIVESWhen you have completed reading this chapter, you will be able to

identify the standards set by license law and commission rules regarding the brokerage business;

explain Commission regulations for broker business relationships and advertising; and

describe violations and penalties of the license law.

KEY TERMS

branch office

commingling

duplicate original

escrow account

guilty knowledge

letter of intent

probation

revocation

suspension

trust account

Waiver of Broker Cooperation

LICENSE LAW AND RULES

Both the license law and the Commission’s rules set standards for licensees. Most of the obligations fall on the broker, with the understanding that a broker is responsible for associated salespersons’ observance of the rules. A salesperson may not

accept any form of compensation except from his or her supervising broker;

maintain an escrow account or hold funds belonging to others; or

work for more than one New Jersey broker at a time.

PLACE OF BUSINESS

Main Office

Every broker who is a resident of New Jersey must maintain a place of business in the state. If the office is in the broker’s own home it must have a separate area with its own entrance visible from the street. The office can never be in the home of a broker’s associate.

The broker’s name and the words “Licensed Real Estate Broker” must be conspicuously displayed on the exterior. The license of the broker and those of any associates should be prominently displayed in the main office. A broker may not allow someone else to use the firm name.

The main office and the persons working in it must be under the full-time direct supervision of either the broker or a qualified broker-salesperson. Full-time means the supervising licensee is physically present at the office during usual business hours five days a week and is not otherwise employed.

Branch Office

Each branch office must be under the direct supervision of a broker or broker-salesperson and must have a duplicate license. Additionally, the names of all licensees and the branch office supervisor must be recorded with the Commission and prominently displayed in the branch office, along with the office license. No branch office can be in the home of a salesperson or broker-salesperson.

TRUST ACCOUNT (ESCROW ACCOUNT)

A broker must establish a separate, special trust account, also known as an escrow account, in an authorized financial institution in New Jersey, to be used for the deposit of all money belonging to other persons (earnest money deposits, rent collections, and the like). The name of the financial institution and the account number must be reported to the Commission both at license application and at the time of renewal.

There is no need for a separate account for each transaction, but careful books must be kept so it is always clear how much money belongs to each client or customer. The account must be clearly labeled so that it cannot be claimed by creditors in the event of a bankruptcy or by heirs at the broker’s death.

Brokers are required to deposit funds coming into their keeping “promptly,” which the Commission defines as within five business days of acceptance. Salespersons should immediately give any escrow monies they receive to their broker.

Brokers are specifically prohibited from commingling (mixing) their own funds with money in the trust account. In some circumstances, the broker may be authorized to collect a commission directly from money held in the escrow account. In that case, the business ledger should document the source of the authorization and the amount and source of the commission, and the money should be taken out promptly after authorization. Leaving such money in the account for more than five business days might result in commingling. The broker is, however, allowed to leave a nominal amount of his or her own money in the account to cover service charges and keep the account open.

Advance Fees

When a client places advance fees of more than $25 with a broker—to assist with advertising costs, for example—the broker must give the client an account of how the money is being spent within 90 days.

Cash Deposits or Withdrawals

The customer or client who makes a cash deposit must be given a written receipt; the broker keeps a copy of the receipt. In accordance with federal law, any cash deposit of $10,000 or more must be reported to the Internal Revenue Service.

Withdrawals from the trust account must be made payable to a specific person, never to “cash.”

Permanent Records

Every broker must keep records of trust account activity for at least six years.

REGULATION OF DOCUMENTS

Sales Contracts

Every person who signs a listing contract, sales contract, or lease should immediately receive a duplicate original of the document; that is, licensees must provide multiple original copies for the parties signatures. Any additions or changes to a document after the original signing should be initialed by all parties and a copy given to each party.

Commissions are negotiable between client and broker. No contract can contain anything indicating a prescribed fee schedule. The Commission requires the following statement be included in all listing contracts (or sales contracts if there is no listing contract on the property) for one- to four-family residences:

As seller you have the right to individually reach an agreement on any fee, commission, or other valuable consideration with any broker. No fee, commission, or other consideration has been fixed by any governmental authority or by any trade association or multiple listing service.

Licensees can prepare sales contracts only for one- to four-family homes and single building lots. The sale or rental of commercial or industrial properties or businesses is accomplished on a letter of intent. A letter of intent is generally a non binding document that references what the parties plan to do; note that some provisions could be binding.

The Commission requires that all sales contracts prepared by licensees contain an Attorney Review Clause, giving buyer and seller the right to consult an attorney, who may disapprove a contract within three business days after delivery of signed contracts to both parties. The specific language required is detailed in Chapter 11. A similar clause is required in residential leases, as covered in Chapter 12.

All written offers must be forwarded to sellers within 24 hours, and at the time of listing, owners of property must be furnished with a copy of the Attorney General’s Memorandum regarding the New Jersey Law Against Discrimination, as shown in Chapter 10.

The New Jersey Supreme Court has ruled that buyers and sellers of residential real estate may choose whether or not to incur the cost of hiring a lawyer. If they choose not to hire a lawyer, real estate brokers and title agents may provide certain assistance in the title closing process provided the broker gave a mandatory notice to the buyer and seller advising them of their right to hire a lawyer. This notice must be attached as a cover page to any contract of sale prepared by licensees. (See Figure 11.1.)

If a real estate broker is also a licensed insurance broker, mention of the buyer’s purchase of insurance from that broker, if included in a sales contract, must be confirmed separately in writing not less than five days before the actual closing of title.

Other Documents

The broker must keep copies of all unaccepted offers to purchase for six months from the date of the initial offer. All copies of contracts of sale and listing agreements must be kept for six years. Also, bills for brokerage services, records showing payment to salespersons and cooperating brokers, bank statements, canceled checks, and deposit slips from the broker’s business account must be kept for six years.

All records and files must be available for inspection at any time by the Commission, and they always remain the property of the broker. Salespersons may not remove anything from the broker’s files if they leave that broker.

BROKER BUSINESS RELATIONSHIPS

Any licensee involved in the sale of residential real estate containing one- to four-dwelling units, or the sale of vacant one-family lots or residential lease transactions for more than 125 days, is required to supply information on business relationships to buyers and sellers (or landlords and tenants) in accordance with 11:5-6.9 of the New Jersey Administrative Code (in Appendix B on page 458). In addition to disclosing the nature of the licensee’s relationship to all parties involved in any transaction (both verbally and in brokerage agreements, offers, contracts, or leases), the licensee must provide a copy of the Consumer Information Statement on New Jersey Real Estate Relationships, which is shown in Chapter 3.

Listing Broker and Seller/Principal

Brokers are bound to specific duties to their principal. Their obligation to put the principal’s interest first, however, still requires fair and honest dealing with other parties. Brokers—and all licensees, for that matter—are required to make reasonable efforts to ascertain all material information concerning the physical condition of every property for which they accept an agency or are retained to market as a transaction broker. They must also determine the financial qualifications of every person for whom they submit an offer to their client or principal. Reasonable effort includes inquiries to the seller (or the seller’s agent) about any physical condition that may affect the property. The property should also be visually inspected.

To give sellers the best service possible, the Commission expects brokers to cooperate with other firms that may want to show listed property. Any time a seller directs a broker not to cooperate, the licensee must have the seller sign a Waiver of Broker Cooperation form, which states:

WAIVER OF BROKER COOPERATION

I UNDERSTAND THAT COOPERATION AMONGST BROKERS PRODUCES WIDER EXPOSURE OF MY PROPERTY AND MAY RESULT IN IT BEING SOLD OR LEASED SOONER AND AT A HIGHER PRICE THAN WOULD BE THE CASE WERE MY BROKER NOT TO COOPERATE WITH OTHER BROKERS. I FURTHER UNDERSTAND THAT WHEN MY BROKER COOPERATES WITH OTHER BROKERS, I CAN STILL HAVE THE ARRANGEMENTS FOR THE SHOWING OF THE PROPERTY AND ALL NEGOTIATIONS WITH ME OR MY ATTORNEY MADE ONLY THROUGH MY LISTING BROKER’S OFFICE, SHOULD I SO DESIRE.

However, despite my awareness of these factors, I direct that this property is to be marketed only through the efforts of the listing broker. This listing is not to be published in any multiple listing service. I will only consider offers on this property which are obtained by the listing broker, and I will only allow showings of this property to be conducted by the listing broker or his or her duly authorized representatives. THE LISTING BROKER IS HEREBY DIRECTED NOT TO COOPERATE WITH ANY OTHER BROKER.

By signing below, the parties hereto confirm that no pressure or undue influence has been exerted upon the owners as to how this property is to be marketed by the listing broker.

The owner(s) further confirm receipt of a fully executed copy of the listing agreement on this property, and of this waiver of broker cooperation form.

Dated: ________ Owner: _____________________

Owner: ___________________________________

Listing Broker: ______________________________

By: Authorized Licensee or Broker: _______________

Broker and Buyer/Principal

More and more licensees in New Jersey are functioning as buyers’ brokers; in other words, they are being retained by buyers to help them find suitable properties. Again, these brokers and their associated salespersons are bound to specific duties to their principal. Their obligation to put the principals’ interest first, however, still requires fair and honest dealing with other parties.

Broker as Disclosed Dual Agent

Although an agent cannot give first loyalty to two or more principals in the same transaction, the New Jersey Real Estate Commission allows a broker to represent both parties in a transaction, provided that the broker obtains the parties’ written, informed consent to the dual agency.

Broker as Transaction Broker

The state has recognized that nowhere in the licensing laws is it mandated that licensees must act as agents when rendering real estate services. Licensees in New Jersey have the option of functioning as transaction brokers, without creating an agency relationship with any of the parties to a transaction (see Chapter 3 or Appendix B, 11:5-6.9, for the Commission’s definition and discussion of this term).

BROKER AND SALESPERSON

Before a salesperson can begin working for a sponsoring broker, a written Broker-Salesperson Independent Contractor Agreement must be drawn up that includes

the compensation rate paid the salesperson (straight salary and/or commission split, for example);

a broker promise to turn over monies due the salesperson within ten days after a commission is received or as soon thereafter as the check has cleared;

the rate of compensation to be paid the salesperson for transactions that close after the salesperson leaves that broker’s firm; and

a provision that any future changes to the contract will be binding only if in writing and signed by both parties.

A sample agreement is shown in Chapter 3.

Any commission due on a transaction is paid to the broker and disbursed in accordance with the agreement the salesperson and broker entered into at the time the salesperson joined the company. If a salesperson leaves a company, the broker must make a complete written account of all monies due the salesperson within 30 days of termination.

ADVERTISING

The New Jersey Real Estate Commission has regulations regarding any advertisement offering to sell, buy, exchange, or rent real property. They are intended to let the public know exactly with whom they are dealing. The regulations cover all media, including publications, broadcasts, stationery, business cards, e-mail, and Web pages.

Real estate listings today are reproduced on websites by local newspapers classified ad departments, individual salespersons and brokers, local and regional MLS sites, and on national sites like www.realtor.com.

All ads must indicate the broker’s business name, followed by a term such as REALTOR®, Realtist, real estate broker, or real estate agency. The licensee’s name must appear exactly as it is on the license with the exception of any middle name or initial, which need not be used. A nickname may be added.

An ad that includes a salesperson’s name must also include the name of the real estate company in larger type or more prominently. The salesperson’s full first and last names must be used. A nickname may also be included. An individual salesperson’s Web page must display the phone number of the brokerage office or clearly indicate a link to the brokerage’s Web page. If an advertisement includes a licensee’s home phone, it must be identified as such (“res.” or “home”) and the office phone number must be included and identified as such.

All ads must specify the property’s municipal location, specifically named in the ad or at the head of the column in which the ad appears. Such phrases as “in the vicinity of” are prohibited, unless the body of the ad also contains the exact municipal location.

If, in an ad, the broker refers to membership in a multiple listing service (MLS), the full name of that service must be spelled out. Exceptions include spot ads (20 lines or fewer, no wider than one column), For Sale signs, and business cards.

Any advertisement that refers to a home warranty must state whether inspection is required, if the warranty is mandatory, and whether the purchaser is responsible for the payment of fees in connection with the warranty. Any ad offering a rebate to the purchaser of residential property must disclose the buyer’s obligation to pay any applicable taxes and advise the purchaser to consult a tax professional.

An ad may not indiscriminately promise financing. All loan terms must contain the words “to a qualified buyer.” Any sums mentioned in terms of payments or financing must be qualified by the word “approximate” or “estimated.” If such a statement is not so qualified, the broker must have written proof of its validity and maintain this record for 12 months.

No advertising or sign may indicate that a property is “sold” until the sale has closed and title (ownership) has been transferred.

Any offer of a free item or service must be genuinely free and cannot be contingent upon any purchase or listing of property. A free offer cannot be linked to a lottery, contest, game, or drawing.

Advertising that offers free appraisals is also prohibited, although offering a comparative market analysis (CMA) is permissible (see Chapter 10).

The Commission regulations supplement the New Jersey Law Against Discrimination by specifying that no licensee may advertise or in any way express a discriminatory limitation (see Chapter 4).

Any advertisement that mentions a specific commission rate or amount must also state that “In New Jersey, commissions are negotiable.”

COMMISSION REBATES

To prevent fraud, license law has traditionally forbidden any sharing of commissions with unlicensed persons. In 2009, however, the Legislature passed an act allowing real estate brokers to provide a purchaser of real estate with a portion of the broker’s commission in the form of a rebate. It can be in the form of a credit or a check.

Restrictions and limitations apply to the rebate. It cannot be dependent on any lottery, contest, or game.

Only a broker may pay the rebate, and it can be paid only to the purchaser. The arrangement must be agreed upon at the start of the relationship and included, for example, in the original buyer-agency agreement. The purchaser must be advised to contact a tax professional about the income tax consequences of a rebate, and all parties to the transaction, including any mortgage lender, must be made aware of it.

PRICE-FIXING

Any agreement between competing offices to establish standard commission rates is forbidden not only by the federal government (see Chapter 3) but also by the Real Estate Commission. Any offer to share commissions with other firms must be made on the same terms to all who cooperate.

PROBATION, SUSPENSION, AND REVOCATION

The Commission may investigate complaints against the action of licensees or investigate on its own. It may

place a licensee on probation;

suspend a license (suspension); or

revoke the license completely (revocation).

In addition, fines for violations shall be not less than $250 nor more than $50,000. Fines are turned over to the state treasury.

Procedure

Before suspending or revoking a license, the Commission gives the licensee at least ten days’ advance notice of a hearing. The Commission’s ruling after a hearing can be appealed to the New Jersey Superior Court.

The Commission may order that money be paid to someone who has been wronged before a license is reinstated. It can also require a licensee to pass another written examination in cases where merited.

When a salesperson is disciplined, the broker’s license may or may not be affected, depending on whether the broker had guilty knowledge—in other words, knew what was going on and did not attempt to stop it. When brokers’ licenses are suspended or revoked, their salespersons’ licenses are suspended until the end of the current license period. During that time, salespersons are free to affiliate with another broker and can obtain a reissued license at no charge.

The Commission can promptly revoke the license of anyone convicted of certain crimes, among them forgery, burglary, robbery, and theft, and for an indefinite period of time. The Commission can also suspend a license for anyone awaiting trial for a number of serious crimes, including murder, kidnapping, robbery, criminal conspiracy, and so on.

Violations

The License Act specifically mentions the following offenses that are subject to disciplinary action:

Making false promises or substantial misrepresentation

Acting for more than one party in a transaction without the knowledge of all parties thereof

Pursuing a flagrant and continued course of misrepresentations or making of false promises

Failure to account for or pay over money belonging to others

Conduct demonstrating unworthiness, incompetence, dishonesty, or bad faith

Failing to provide a client with a copy of a contract at the time of signing, or failing to specify an expiration date in a listing

Using a lottery, contest, game, prize, or drawing to promote the sale of real estate

Being convicted of a crime of which the Commission does not have knowledge

Collecting a commission as a broker in a transaction while simultaneously representing either party in a different capacity for a consideration (for instance, acting as attorney and broker)

Using any trade name or insignia of a real estate organization while not being a member

Paying any compensation or commission to an unlicensed person except in some circumstances to a buyer

Any other conduct constituting fraud or dishonest dealing

As a salesperson or broker-salesperson, accepting any commission or valuable consideration from anyone except the employing broker

Procuring a real estate license through fraud or deceit

Commingling the licensee’s own money with that of clients and customers or failing to maintain and promptly deposit others’ money in a special trust account

Selling property in which the licensee has an interest without disclosing in the contract of sale that interest and the fact that the seller is a licensed real estate salesperson or broker

Buying property without disclosing in the contract of sale that the buyer is a licensed real estate salesperson or broker

Violating any of the rules regulating rental practices

Failing to notify the Commission within 30 days of conviction, indictment, or being charged with a crime, or of the suspension or revocation of any real estate license issued by another state, or of initiation of disciplinary proceedings

Violating any of the above or the administrative rules adopted by the Commission

If a licensee is guilty of a third violation of any of the above articles, the person may be considered a repeat offender and denied ever again holding a real estate license.

SUMMARY

Licensees are governed by the Real Estate License Act and also the rules of the Real Estate Commission.

Salespersons may not accept compensation from anyone but their supervising broker. They may not hold deposits or maintain trust accounts. A salesperson may work for only one New Jersey broker at a time.

Every resident broker must have a place of business in the state. A branch office requires a duplicate license and a broker-salesperson as supervisor. No office may be located in the home of a salesperson who is in the broker’s employ. This avoids the practice known as license lending, in which a broker permits his or her license to be used by another person or business entity without actually supervising the business.

Each broker maintains a special trust account, also known as an escrow account, for funds belonging to other persons. Brokers must deposit such funds within five business days of receipt. Mixing escrow funds with the broker’s own money is called commingling and is forbidden.

The broker must keep, for at least six years, copies of all financial records, listings, and contracts, as well as numerous other documents; unaccepted offers must be kept for six months. Every person signing a real estate document must immediately receive a duplicate original.The broker must pay salespersons any commissions due within ten days after the broker receives the fees. When a salesperson leaves, commissions are paid in accordance with the agreement signed by the salesperson and the broker, and the broker must make an account in writing within 30 days of termination of any funds still due the salesperson.Listing fees are negotiable between clients and brokers, and no contract can indicate that there is any set fee schedule. Every seller who lists real estate must receive a copy of the Attorney General’s Memorandum of the Law Against Discrimination.Licensees can prepare sales contracts only on one- to four-family dwellings and one-family lots, and every contract or lease prepared by a licensee must carry specific language notifying the tenants or buyers and sellers that they have three business days in which to seek attorney’s review of the contract. As a result of a New Jersey Supreme Court ruling in March 1995, all contracts prepared by licensees must have attached as the cover sheet the notice advising buyers and sellers of their right to hire an attorney.Although brokers owe special duties to their principals if they are functioning as agents, they must deal fairly with all parties to any transaction.Unless otherwise instructed by the client, brokers must cooperate with other firms to find buyers for a specific property. All written offers must be promptly transmitted to the seller.All advertising by brokers must clearly state that it is being placed by a real estate company. All ads for property must name the municipality in which the property is located. No ads can refer to financing without including the words “to a qualified buyer.” Rebate of part of the commission may be paid by a broker to a buyer, in the form of a credit or a check. The arrangement must be established at the start of the relationship, all parties, including mortgage lenders, must be aware of it, and the purchaser must be alerted to possible tax consequences.The Real Estate Commission must give ten days’ notice of a hearing if a violation is suspected. It can put licensees on probation, or subject their licenses to suspension or revocation. Fines of $250–50,000 are also possible.USEFUL WEBSITESNew Jersey State Government: www.state.nj.usNew Jersey Real Estate Commission: www.state.nj.us/dobi/remnu.shtmlNew Jersey State Legislature: www.njleg.state.nj.usNational Association of Exclusive Buyer Agents: www​.naeba.orgReal Estate Buyer’s Agent Council: www.rebac.net

REVIEW QUESTIONS ANSWER KEY

A licensed salesperson is allowed to

keep earnest money deposits in a special escrow account.

leave one broker and affiliate with another.

keep a license without a sponsoring broker.

work for two brokers if each is informed and consents.

Under some circumstances, a real estate office may be in the home of

a broker.

a salesperson.

a broker-salesperson.

no one.

Broker Waldo Rodriguez wants to open a branch office in a new shopping mall in the next town. The office can be supervised by

a salesperson with at least two years’ experience.

Broker Rodriguez by phone each day.

a friendly broker in the next town.

a broker-salesperson.

Salesperson Stan Clemenzio accepts an earnest money deposit and turns it over to his broker, Roberta Lee. Roberta must

open a separate bank account for the deposit.

keep it in the account used for Stan’s transactions.

promptly deposit it in the office’s business account and keep a careful record so that it won’t get confused with Roberta’s funds.

deposit it within five days in a trust account.

An escrow account may be opened in

any authorized New Jersey financial institution.

a New Jersey stockbroker’s office.

a Texas bank that offers high interest.

any of the above.

A broker must keep copies of

contracts for six years.

documents for seven years.

financial transactions only.

leases for at least one year after they expire.

Every person who signs a contract is entitled to receive a duplicate original. When are they entitled to receive it?

Immediately

Within three days

Within a week

Within ten days

Every sales contract prepared by a broker must contain a notice that

the broker’s commission rates do not exceed community standards.

the buyer may not purchase insurance from the same company that sold the property.

earnest money will be deposited in a trust account.

the buyer and seller may seek attorney review within three business days.

Even when the broker is the seller’s agent, buyers are entitled to

preferential treatment.

first loyalty.

fair dealing.

negotiated fees.

For a license law violation, the Real Estate Commission could fine a licensee as much as

$10,000.

$20,000.

$35,000.

$50,000.

The Commission will rule that someone could never again get a license after how many violations?

One

Two

Three

Four

Salesperson Joe Kenty is indicted for possession of a controlled substance with intent to sell and is out on bail until the trial. The Real Estate Commission may

revoke his license.

suspend his license.

fine him $1,000.

not take any action unless he is convicted.

The Real Estate Commission must give a licensee how much notice before a hearing is held on a possible violation?

No notice

One week

10 days

30 days

Sun City Realty holds a door-prize drawing at a weekend open house it runs. This practice

violates the Commission’s rules.

is acceptable because it is in the seller’s best interest.

is acceptable only if it is offered at every listed house.

can offer only prizes worth less than $25.

Donna White, a broker, is offering her mother’s house for sale and will charge no commission. Should she reveal that she is a licensed agent?

No, because she is acting in a private capacity.

Yes, but not until after the purchaser signs an offer.

No, because no fee will be paid.

Yes, as soon as she meets a prospective buyer.

Which statement about broker-run advertisements in newspapers is correct?

The ad must specify the complete address of the property.

If the broker does not use a qualifying word or words for attainable financing in an ad, he or she must keep a record of the validity of the financing for six months.

If a broker mentions being a member of an MLS in any ad he runs, the full name of the MLS must be spelled out with no exceptions.

Advertising offering free appraisals is prohibited, although CMAs are permitted.

The “reasonable effort” licensees are required to make to determine all material information about a property’s physical condition could normally include all of the following except

asking the seller about the property’s condition.

performing a visual inspection.

asking the seller’s agent about the property’s condition.

contracting with a professional to perform an in-depth inspection of the property prior to entering into any agency agreement with the seller.

A New Jersey licensee is permitted to represent both parties to a transaction if he or she obtains the

written consent of the seller and at least the informed, oral consent of the buyer.

informed, written consent of the seller, buyer, and any other agent involved.

consent, whether written or oral, of either party to the transaction.

permission of the New Jersey Real Estate Commission in accordance with the license law.

Any agreement between competing offices to establish standard commission rates is referred to as

the preliminary marketing contract.

price gouging.

illegal price-fixing.

legal industry practice under New Jersey law.

A salesperson working for Broker Betty Barrett was disciplined for pursuing a flagrant and continued course of misrepresentations, making false promises, and failing to pay over money belonging to others. In this case, Betty’s license

will automatically be suspended, because Betty is responsible for the acts of all salespersons in her office.

will not be suspended, because the salesperson, not Betty, was disciplined for wrongdoing.

will be suspended or revoked only if Betty knew about the salesperson’s activities and did nothing about it.

will be suspended, but the licenses of any other salespersons in her brokerage will not be affected.

Rebate of part of a commission may be paid to a

seller only.

buyer only.

home inspector.

seller or buyer.

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Other Documents

The broker must keep copies of all unaccepted offers to purchase for six months from the date of the initial offer. All copies of contracts of sale and listing agreements must be kept for six years. Also, bills for brokerage services, records showing payment to salespersons and cooperating brokers, bank statements, canceled checks, and deposit slips from the broker’s business account must be kept for six years.

All records and files must be available for inspection at any time by the Commission, and they always remain the property of the broker. Salespersons may not remove anything from the broker’s files if they leave that broker.

BROKER BUSINESS RELATIONSHIPS

Any licensee involved in the sale of residential real estate containing one- to four-dwelling units, or the sale of vacant one-family lots or residential lease transactions for more than 125 days, is required to supply information on business relationships to buyers and sellers (or landlords and tenants) in accordance with 11:5-6.9 of the New Jersey Administrative Code (in Appendix B on page 458). In addition to disclosing the nature of the licensee’s relationship to all parties involved in any transaction (both verbally and in brokerage agreements, offers, contracts, or leases), the licensee must provide a copy of the Consumer Information Statement on New Jersey Real Estate Relationships, which is shown in Chapter 3.

Listing Broker and Seller/Principal

Brokers are bound to specific duties to their principal. Their obligation to put the principal’s interest first, however, still requires fair and honest dealing with other parties. Brokers—and all licensees, for that matter—are required to make reasonable efforts to ascertain all material information concerning the physical condition of every property for which they accept an agency or are retained to market as a transaction broker. They must also determine the financial qualifications of every person for whom they submit an offer to their client or principal. Reasonable effort includes inquiries to the seller (or the seller’s agent) about any physical condition that may affect the property. The property should also be visually inspected.

To give sellers the best service possible, the Commission expects brokers to cooperate with other firms that may want to show listed property. Any time a seller directs a broker not to cooperate, the licensee must have the seller sign a Waiver of Broker Cooperation form, which states:

WAIVER OF BROKER COOPERATION

I UNDERSTAND THAT COOPERATION AMONGST BROKERS PRODUCES WIDER EXPOSURE OF MY PROPERTY AND MAY RESULT IN IT BEING SOLD OR LEASED SOONER AND AT A HIGHER PRICE THAN WOULD BE THE CASE WERE MY BROKER NOT TO COOPERATE WITH OTHER BROKERS. I FURTHER UNDERSTAND THAT WHEN MY BROKER COOPERATES WITH OTHER BROKERS, I CAN STILL HAVE THE ARRANGEMENTS FOR THE SHOWING OF THE PROPERTY AND ALL NEGOTIATIONS WITH ME OR MY ATTORNEY MADE ONLY THROUGH MY LISTING BROKER’S OFFICE, SHOULD I SO DESIRE.

However, despite my awareness of these factors, I direct that this property is to be marketed only through the efforts of the listing broker. This listing is not to be published in any multiple listing service. I will only consider offers on this property which are obtained by the listing broker, and I will only allow showings of this property to be conducted by the listing broker or his or her duly authorized representatives. THE LISTING BROKER IS HEREBY DIRECTED NOT TO COOPERATE WITH ANY OTHER BROKER.

By signing below, the parties hereto confirm that no pressure or undue influence has been exerted upon the owners as to how this property is to be marketed by the listing broker.

The owner(s) further confirm receipt of a fully executed copy of the listing agreement on this property, and of this waiver of broker cooperation form.

Dated: ________ Owner: _____________________

Owner: ___________________________________

Listing Broker: ______________________________

By: Authorized Licensee or Broker: _______________

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Lord, I’m thankful for my family. I am thankful even for the moments now when I compliment myself on qualities such as being useful in my job and being someone who has the brains or resources to start thinking about other creative ideas. I’m thankful that I can passively eat and not need to worry about other things right now. I am also going to lean more to you and less to sad moments of the past or even the bad dreams I have where there is a future but even though it is a happier melancholy it’s still sad. Something is missing. In these dreams there is an other girl. And I am suddenly important again. But the other girl is talked about with fondness. There is the loss of passion in relationships and life’s stress coming in the way. These dreams depress me. God, I do want an equally yoked relationship and you would think I would have learnt.

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It is even more important to stay true to purpose when the mood is more somber, when the clouds take over and the rain pours heavily and the trees shake.

This weekend I finished two books:

- the screwtape letters

- a moveable feast

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I know it is a silly thing to imagine but I feel emotional imagining them to me: “We decided to make you VP.” My expectation: to be a FT. Them- giving me more than the security I was seeking for. I know it’s a big wish considering where I am?

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Travel vision board:

https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.pinterest.com%2Fpin%2F727261039805084936%2F&psig=AOvVaw0jKaN-P8lNC51JnasYFIT6&ust=1586745338797000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCJicnJnt4egCFQAAAAAdAAAAABAO

lauterbrunnen Switzerland 

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4/10 week end...

It’s Friday. The end of another long, difficult week, at home. I am proud of our accomplishments. I wrote down all the ones into a list and sent it to my boss around 5:30pm. Honestly it is never ending! I have so many emails to sort out still. It’s a nightmare, lol. I am trying to be more empathetic and communicate so others know to share that too. We need a lot of it.

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Blog details/

Master executor

Procrastinator by heart

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It’s been harder to wake up lately and I’m just thankful I can get more sleep. My body is revving up for the period. I still am taking the time to keep the status sheets up to date. Honestly it’s been hard because I’m just so tired, and it’s emotional, physical, mental. I’ll need to do some stretching today and some meditation and prayer.

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I was quite energetic for days but the sleepy goblin is finally starting to hit. But rise above it and remember the key takeways from Frankl and continue to strive towards triumphs.

I’ll go get more coffee now.

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Went to bed last night not too late but having trouble getting out of bed this morning. Read intro of Musicophilia this morning though. :) I would love to be done with this reading by the weekend.

Now I’ll go get a cup of coffee. Update the status sheet. And reward is, more reading. On to the first chapter. Now, up up!

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today 4/6

work was good today too. i felt energized despite waking up sleepy. i find humor and expressing human needs to be energizing. i enjoy making friendships and connecting with people and aspects of being a human. i find it nice to simply improvise as i go without fear, but with confidence.

breakfast today was also great. zongzi and matcha latte :)

for lunch, spaghetti with the chilli meat sauce leftovers. so delish.

i also had some of the choco chip cookie and coffee. 

dinner was nice too. cooked cucumbers, warm rice, some pork and veggie. some bamboo. 

just remembering to stretch, breathe, walk around, smile, joke, it all makes the day brighter.

one wish: i do wish i can find my “soul mate” -- someone who will talk to me about the deeper things in life. someone who wants to build a life. and be able to work with combining our two realities together. i have yet to know what it’s like and i look forward to it.

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this weekend 4/4 - 4/5

Learned how to make outlines

Started learning ways of negotiation

Baked choco chip cookies - 2 batches. same batter but one I made fat cookies, and the other were more raw. remember to put on the grid thing. so delicious. used magnolia recipe. so chocolatey. :) 

Ate chilli + toasted potato bread (bro cooked)

Matcha dalgona!

Finished reading man’s search

Started listening to Becoming

Made a section in blog for books

Made a post on man’s search

btw, today i am happy. sitting by window. reading musicophilia, daydreaming and smelling the air and listening to the geese. i had dinner. i drank some tea afterwards, just enjoying the life outside and around me. i’m enjoying the humor around me. i’m enjoying learning about how i do have control and influence in my life and can influence for good of things.  

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His goal was to provoke people into realizing that they could and should exercise their capacity for choice to achieve their own goals. Writing about tragic optimism, he cautioned us that “the world is in a bad state, but everything will become still worse unless each of us does his best.” Frankl was once asked to express in one sentence the meaning of his own life. He wrote the response on paper and asked his students to guess what he had written. After some moments of quiet reɻection, a student surprised Frankl by saying, “The meaning of your life is to help others find the meaning of theirs.” “That was it, exactly,” Frankl said. “Those are the very words I had written.”

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The Meaning of Love

Love is the only way to grasp another human being in the innermost core of his personality. No one can become fully aware of the very essence of another human being unless he loves him. By his love he is enabled to see the essential traits and features in the beloved person; and even more, he sees that which is potential in him, which is not yet actualized but yet ought to be actualized. Furthermore, by his love, the loving person enables the beloved person to actualize these potentialities. By making him aware of what he can be and of what he should become, he makes these potentialities come true.

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According to logotherapy, we can discover this meaning in life in three dif- ferent ways: (1) by creating a work or doing a deed; (2) by experiencing something or encountering someone; and (3) by the attitude we take toward unavoidable suʃering. The ɹrst, the way of achievement or accomplishment, is quite obvious. The second and third need further elaboration. The second way of ɹnding a meaning in life is by experiencing something—such as goodness, truth and beauty—by experiencing nature and culture or, last but not least, by experiencing another human being in his very uniqueness—by loving him