Agency/License Law

QUESTION:   Broker’s agent is purchasing property.  Broker noticed the agent did not disclose that he was a licensed agent by checking the box on Line 480 of the Purchase and Sale Agreement.  Broker questions if they need to create an addendum to disclose that Buyer is also a licensee. 

RESPONSE:  Best practice would be to have all parties sign an addendum, or have the agent immediately and unequivocally notify Seller in writing that Buyer is also a real estate licensee.  Idaho Code states:

LICENSEES DEALING WITH THEIR OWN PROPERTY.

(1) Any actively licensed Idaho broker, sales associate, or legal business entity shall comply with this entire chapter when that licensee is buying, selling or otherwise acquiring or disposing of the licensee’s own interest in real property in a regulated real estate transaction.

(2)  A licensee shall disclose in writing to any buyer or seller no later than at the time of presentation of the purchase and sale agreement that the licensee holds an active Idaho real estate license, if the licensee directly, indirectly, or through a third party, sells or purchases an interest in real property for personal use or any other purpose; or acquires or intends to acquire any interest in real property or any option to purchase real property.

(3)  Each actively licensed person buying or selling real property or any interest therein, in a regulated real estate transaction, must conduct the transaction through the broker with whom he is licensed, whether or not the property is listed.

Idaho Code § 54-2055. Emphasis added. While there are certain parts of a contract that may allow a Seller to presume the Buyer is a licensed real estate agent, it is always best to make this fact known and not rely on presumptions.  It is for this reason the Idaho REALTOR® Form purchase and sale agreements contain a checkbox on the signature page.  If this box is not checked, it may leave a doubt in Seller’s mind as to Buyer’s legal status as a licensee.

QUESTION:   Broker represents Buyer who assigned the purchase and sale agreement to a subsequent Buyer.  Broker questions what forms need to be signed in an assignment situation and also questions if Subsequent Buyer should sign a Representation Agreement and blue brochure if they plan to be represented by the brokerage.

RESPONSE:  According to the facts presented to the Hotline, the contract in question was fully assignable.  Idaho law requires purchase and sale agreements to be in writing and this law would be applicable to any assignments, addendums, or amendments.  This is the reason that the Idaho REALTORS® provides the “Assignment of Buyer’s Interest” form (RE-29).  Brokers involved with transactions where Buyers are assigning their interest are encouraged to use the RE-29.

Regarding the Representation Agreement and the blue brochure, those agreements do not transfer from Original to Subsequent Buyer, so best practice would be to have the new Buyer execute a new Buyer’s Representation Agreement and Agency Disclosure Brochure in order to protect the brokerage’s commission, said agreement should address prior Buyer’s commission obligations.

            QUESTION: Broker questions if a Buyer is able to enter into multiple representation agreements with different brokerages if each agreement specifies a different address or location, etc.

RESPONSE: The Buyer Representation Agreement (RE-14) states:

Buyer ____________ retains _____________ … as exclusive Buyer Broker (hereinafter referred to as Broker), where the BUYER is represented by one Broker only for time herein set forth and for the express purpose of Representing BUYER in the purchase, lease, or optioning of real property referenced below. Further, BUYER agrees, warrants and acknowledges that BUYER has not and shall not enter into any buyer representation agreement with another broker in the state of Idaho as a broker for BUYER during the effective term of this agreement, unless otherwise agreed to in writing by BUYER and above-listed Broker. BUYER agrees to indemnify and hold the above-listed Broker harmless from any claim brought by any other broker or real estate salesperson for compensation claimed or owed during the effective term of this agreement. By appointing Broker as BUYER’S exclusive agent, BUYER agrees to conduct all negotiations for property through Broker, and to refer to Broker all inquiries received in any form from real estate brokers, salespersons, prospective sellers, or any other source, during the time this Buyer Representation Agreement is in effect. BUYER desires to purchase, lease, or option the real estate described below:

Residential Residential Income Commercial Vacant Land Custom Build Job
Other ___________________________________
Applicable City(s) _________________________________, Idaho;
Applicable County(s) ________________________________________
Other Description: (i.e., geographical area, price, etc.) ___________________  

The RE-14 is an exclusive right to represent; however, if Buyer and Brokerage fill in information that makes the RE-14 applicable to a specific city, county or address, Buyer would be able to enter into another RE-14 with a different brokerage for any properties that are not covered under the agreement with Brokerage 1. For example, Buyer and Brokerage 1 specifically list Ada County as the applicable county where Broker will help Buyer find and purchase a property, and no other check boxes are marked. Buyer could then sign a RE-14 with Brokerage 2 that only lists Gem County. This circumstance would not be considered interference with an existing representation agreement. The same would apply to the property type, ie. residential versus commercial.

However, if any broker or agent is approached by a Buyer who has an existing RE-14 with another brokerage, best practices would be to reach out to the other brokerage to make sure there is no issue with entering into an agreement with the same Buyer for a different address, location or type.

QUESTION:  Broker was retained by the personal representative of an estate and has listed the estate’s real property; a residential dwelling.  After being on market for several weeks, one of the family members related to the deceased is going to make an offer on the estate property.  The family member desires to use their father who is a real estate agent in California to represent them as the Selling Agent/Buyer’s brokerage.   Listing Broker inquired with the Legal Hotline if there is an exception to allow this type of representation.

RESPONSE:   Based on the facts and details conveyed to the Hotline, there does not appear to be an exception which would allow the California family member to represent the Buyers.  Idaho law states:

LICENSURE REQUIRED. No person shall engage in the business or act in the capacity of real estate broker or real estate salesperson in this state without an active Idaho real estate license therefor. Unless exempted from this chapter, any single act described within the definitions of “real estate broker” or “real estate salesperson” shall be sufficient to constitute “engaging in the business” within the meaning of this chapter. Any person who engages in the business or acts in the capacity of real estate broker or salesperson in this state, with or without an Idaho real estate license, has thereby submitted to the jurisdiction of the state of Idaho and to the administrative jurisdiction of the Idaho real estate commission and shall be subject to all penalties and remedies available under Idaho law for any violation of this chapter.

Idaho Code § 54-2002.

EXCEPTIONS TO LICENSURE — ACTIVE LICENSEES — TRANSACTIONS INVOLVING PERSONAL PROPERTY. 

(1) Exceptions to licensure. Except as otherwise stated below, an Idaho real estate license is not required for the following:

(a)  The purchase, option, exchange or sale of any interest in real property, or business opportunity for a person’s own account or use;
(b)  The acquisition, exchange or other disposition of any interest in real property or business opportunity by its owner or a regular employee of the owner, acting within the scope of his or her employment;
(c)  The sale, exchange, purchase or other disposition of any interest in real property or business opportunity by a duly authorized attorney in fact whose power of attorney is granted for the purpose of consummating a single transaction involving the conveyance of a single or undivided interest in a parcel of real property or in a business opportunity;
(d)  The acquisition or other disposition of any interest in real property or business opportunity by the following parties only if such acquisition or disposition is undertaken in the performance of their duties as:
(i)   A receiver, trustee in bankruptcy, legal guardian or conservator;
(ii)  An administrator, executor or personal representative of an estate;
(iii) Any person selling pursuant to the default provisions of a deed of trust, or any duly authorized agent thereof.
(e)  The acquisition or other disposition of any interest in real property or business opportunity by an attorney at law in connection with client representation, and if the attorney is not regularly engaged in the conduct or business of real estate broker or salesperson.

Idaho Code § 54-2003.
Idaho does not recognize cooperative associations in residential circumstances:
COOPERATIVE LICENSES. 
…
(8)  An out-of-state broker may cooperate with only one (1) Idaho broker and an Idaho broker may cooperate with only one (1) out-of-state broker per commercial real estate transaction. However, an out-of-state broker may obtain a cooperative license for more than one (1) commercial real estate transaction at a time. Idaho Code § 54-2017(8). (Emphasis added).

QUESTION: Seller executed a representation agreement that did not allow for limited dual agency representation. A circumstance arose where Seller wanted to take an offer from a Buyer also represented by listing brokerage.  Broker asked if Seller could change her mind on the utilization of limited dual agency.
            RESPONSE:   Yes. So long as all parties are properly informed on the issue of limited dual agency they can consent to allowing limited dual agency at any time during the representation.  Broker should clearly document that all parties have been properly advised and have agreed in writing to allow the limited dual agency. 

QUESTION:   Broker noticed that an offer they received on a client’s listing named a title company as the Responsible Broker.  Broker questions whether or not this is allowed.

RESPONSE:  No, only a licensed designated broker can be the responsible broker in a transaction.  Idaho license law defines responsible broker as:

“Responsible broker” means the designated broker in the regulated real estate transaction who is responsible for the accounting and transaction files for the transaction, in the manner described in section 54-2048, Idaho Code.

Idaho Code § 54-2004(44). Emphasis added.

A designated broker is defined as:

“Designated broker” means an individual who is licensed as a real estate broker in Idaho and who is designated by the brokerage company to be responsible for the supervision of the brokerage company and the activities of any associated licensees in accordance with this chapter.

Idaho Code § 54-2004(21).

            The responsible broker for the transaction has a long list of duties, therefore only designated brokers licensed by the Idaho Real Estate Commission can act as responsible broker.  The list of duties is outlined in Idaho Code § 54-2048:

RESPONSIBLE BROKER FOR THE TRANSACTION — DUTIES AND RECORDKEEPING. The “responsible broker,” as referred to in this section, shall be responsible to the commission for the transaction, transaction records, the funds and closing in accordance with the requirements of this chapter. The broker who lists and sells any real property shall be deemed the responsible broker in the transaction. In the case of a cooperative sale, the broker who holds entrusted funds in a real estate trust account while the transaction is pending, or who delivers or transfers the funds to the closing agency or any authorized party other than the cooperating broker in the transaction, shall be deemed the broker responsible for the transaction. The responsible broker shall:

         (1)  Ensure the correctness and delivery of detailed closing statements that accurately reflect all receipts and disbursements for their respective accounts to both the buyer and seller in a transaction, even if the closing is completed by a real estate escrow closing agent, title company or other authorized third party and regardless of the responsible broker’s agent or non-agent relationship to the buyer or seller.
         (2)  Show proof of delivery of the closing statement to the buyer and seller by their signatures on copies of such closing statements, which shall be retained in the broker’s transaction file. When signatures of the parties cannot be obtained, a copy of the closing statement transmittal letter, sent by certified mail, return receipt requested, or a written certification of delivery signed by an officer of the escrow closing agency, shall be retained in the broker’s transaction files.
         (3)  Create and maintain, for the retention period required in section 54-2049, Idaho Code, a transaction file containing the following documents, as applicable. For all pending, closed or fallen transactions, the original or a true and correct copy of:
                     (a)  Signed closing statements, if applicable;
                     (b)  Written and signed brokerage representation agreements, if any. A responsible broker who is representing both the seller and the buyer in a transaction shall retain properly executed brokerage representation agreements in the transaction file and, if appropriate to the transaction, a properly executed “consent to limited dual representation” statement. A responsible broker who has a signed brokerage representation agreement with only one (1) party to the transaction, either buyer or seller, must retain only that one (1) agreement in the transaction file;
                     (c)  All offers accepted, countered or rejected, which must each be retained in the manner required in section 54-2049, Idaho Code;
                     (d)   The original or a true and correct copy of all rejected offers must be retained in the files of the selling broker for the statutory records retention period in section 54-2049, Idaho Code.

QUESTION:   Broker questions if a real estate license is required to sell mobile and/or manufactured homes.

RESPONSE:   In Idaho, mobile/manufactured homes are typically considered personal property.  However, under Idaho law a manufactured home can become real property.  Idaho Code § 63-304 states in relevant part:

MANUFACTURED HOMES TO CONSTITUTE REAL PROPERTY. (1) A manufactured home may constitute real property if the running gear is removed and:

(a)  If the manufactured home becomes permanently affixed to a foundation:

(i)   On land which is owned or being purchased by the owner or purchaser of said manufactured home; or

(ii)  On land which is being leased by the owner or purchaser of the manufactured home if such home is being financed…

If a manufactured home owner has taken the necessary steps to convert the home to real property, then a real estate license would be necessary to sell the property on behalf of a Seller.  If the manufactured home is not affixed to a foundation it would not be considered real property, therefore a real estate license would not be required. 

Broker further questioned whether or not his agents need a dealer’s license to sell mobile homes.  Dealer law is outside the scope of the Legal Hotline, therefore the Hotline cannot provide a response to this question.  Broker should contact the agency that licenses mobile/manufactured home dealers in Idaho.

            QUESTION:   Broker questions if two different brokerages can co-represent the same Buyer and the best way to document such a representation.

            RESPONSE:  There is nothing in Idaho law that prevents two brokerages from representing the same client.  However, the Idaho REALTORS® Representation Forms (RE-14 and RE-16) are not specifically designed to provide for co-representation.  Best practices would be for a brokerage to have a specific co-representation contract that addresses all the material terms.  At a minimum, the parties can use the RE-16A to add the second brokerage.
            Line 31 of the RE-16A states:
The representation shall be a co-listing agreement with the following Brokerages ________________________ and ________________________, each Brokerage having the right to represent Buyer and/or Seller exclusive of all other Brokers. (Emphasis added)

QUESTION:   Broker questions if a Buyer’s agent is entitled to confirmation that an offer has been submitted to the Seller.
RESPONSE:   Yes, but only upon request to another REALTOR® member. A recent addition to the NAR Code of Ethics states:

When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. Upon the written request of a cooperating broker who submits an offer to the listing broker, the listing broker shall provide, as soon as practical, a written affirmation to the cooperating broker stating that the offer has been submitted to the seller/landlord, or a written notification that the seller/ landlord has waived the obligation to have the offer presented. REALTORS® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease. (Amended 1/20)

Standard of Practice 1-7, Code of Ethics and Standards of Practice of the National Association of REALTORS®. (Emphasis added).

If written request for proof that an offer was submitted to Seller is received, listing agent, as a REALTOR® member, is required to provide said confirmation or he or she could be at risk of violating the Code of Ethics. It is also important to note that Idaho law requires all offers to be submitted to the Seller up until the time of closing. It has not been established that a Seller can waive this statutory requirement as contemplated in the NAR Code of Ethics language set forth above.

QUESTION:   Agent represents Buyers. They have been trying to schedule a showing of a certain property but have not had a response from the listing agent.  Buyers and their agent drove by the property and agent left her business card.  Sellers contacted her directly and mentioned that the listing agent is nonresponsive, and they would like out of their contract.  Her Buyers still want to look at the property and she wonders what advice she could give Sellers.

RESPONSE:  Like real estate licensees, the Hotline cannot give advice to Buyers and Sellers.  Given the facts presented to the Hotline, Sellers have executed a RE-16 with another Brokerage.  The RE-16 is a legally binding contract between a seller and a brokerage.  Both Idaho law and the REALTOR® Code of Ethics have strict rules that prohibit interference with brokerage agreements.  The brokerage should take care not to expose itself to liability.  Best practices would be to not communicate directly with Sellers until Sellers can establish that they are no longer represented by another Brokerage.  

QUESTION:  Broker indicates that lenders frequently tell agents that they do not want to see a copy of the executed RE-10.  Broker questions the best way to proceed when this happens.

RESPONSE: In most circumstances, all agreements must be disclosed to the lender in order to avoid a “double contract” situation, which is prohibited by Idaho law. Idaho Code § 54-2054(5) enumerates this prohibition:

Double contracts prohibited. No licensed broker or salesperson shall use, propose the use of, agree to the use of, or knowingly permit the use of a double contract, as defined in section 54-2004, Idaho Code, in connection with any regulated real estate transaction. Such conduct by a licensee shall be deemed flagrant misconduct and dishonorable and dishonest dealing and shall subject the licensee to disciplinary action by the commission.
A double contract is defined as follows:
“Double contract” means two (2) or more written or unwritten contracts of sale, purchase and sale agreements, loan applications, or any other agreements, one (1) of which is not made known to the prospective loan underwriter or the loan guarantor, to enable the buyer to obtain a larger loan than the true sales price would allow, or to enable the buyer to qualify for a loan that he or she otherwise could not obtain. An agreement or loan application is not made known unless it is disclosed in writing to the prospective loan underwriter or loan guarantor.
I.C. § 54-2004(23).
If Buyer and Seller use the RE-10 to agree to repairs and/or a reduction of the purchase price, not providing said agreement to lender would typically fall under the definition of a double contract and thus be prohibited and/or fraudulent conduct.  Best practice is to always provide all documentation to lenders in order to avoid a double contract circumstance.  If the lender does not want to receive it, the Broker should always get that in writing as it will prove the lender knew about the RE-10, which will remove it from the definition of a double contract.