MISCELLANEOUS

QUESTION:   Brokerage contacted the hotline concerning an internal Brokerage policy where agents of the Brokerage learn of properties that are about to be listed on an MLS prior to them being listed. Broker questions whether or not this process violates the NAR “Clear Cooperation Policy.” Specifically, Brokerage is questioning what constitutes “public marketing.”

RESPONSE:   The National Association of Realtors implemented specific policy language for MLSs in 2020.  In summary the language states:

Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public. (Adopted 11/19)

Note: Exclusive listing information for required property types must be filed and distributed to other MLS Participants for cooperation under the Clear Cooperation Policy. This applies to listings filed under Section 1 and listings exempt from distribution under Section 1.3 of the NAR model MLS rules if it is being publicly marketed, and any other situation where the listing broker is publicly marketing an exclusive listing that is required to be filed with the service and is not currently available to other MLS Participants.
Further nuances regarding the policy can be found at the following URL:
https://www.nar.realtor/about-nar/policies/mls-clear-cooperation-policy

            The Idaho legal hotline cannot make determinations as to what context specifically falls within the definition of “public marketing” but strongly encourages brokerages to review all materials disseminated by NAR and encourages brokerages to contact NAR or their local MLS directly with any pertinent questions.
            In addition to the NAR Clear Cooperation Policy Brokerages are also advised to confirm business practices with the Idaho Real Estate Commission in that certain laws and rules that pertain to “pocket listings” can constitute a violation of the license law.
            While certain conduct may not constitute “public marketing” or create a “pocket listing” Brokerages are advised to avoid any practices that provide opportunities to their Brokerages that are not provided to all other real estate agents. In other words, simply advising other agents in your Brokerage that a listing may be coming soon could be permitted however taking further steps, like allowing agents to view properties, can create violations.
            Regardless of the above, it is best practice for Brokerages to always advise their clients as to precisely when and where the property information will be available and to whom. If Brokerages have concerns related to a specific business practice Brokerage should consult Brokerage’s legal counsel.

QUESTION:   Broker questions if specific performance is a remedy available to both Buyers and Sellers.

RESPONSE:   Technically, both buyers and sellers may bring an action for specific performance.  However, an action for specific performance will only be successful in an instance where the buyer or seller can show the uniqueness of the property and that other remedies would be inadequate.  For example, a seller might be entitled to specific performance if he developed real property in compliance with a buyer’s specific directions, and then buyer failed to perform under the contract.  Specific performance cases on the seller side are difficult to prevail upon, as courts will generally look to contractual damages first. 

The Idaho Supreme Court has stated that specific performance is an extraordinary remedy that can provide relief when legal remedies are inadequate. Fullerton v. Griswold, 142 Idaho 820, 823 (2006).  “The inadequacy of remedies at law is presumed in an action for breach of a real estate purchase and sale agreement due to the uniqueness of land.”  In addition, the Idaho Supreme Court has also stated, “the remedy [of specific performance] is equally available to both vendors and purchasers, and additionally, the appropriateness of specific performance as relief in a particular case lies within the discretion of the trial court.” Perron v. Hale, 108 Idaho 578, 582 (1985).     

Like Brokers, the Legal Hotline does not provide legal advice to Buyers or Sellers, nor is it intended to be used as a resolution for disputes between Buyers and Sellers.  Brokerage should advise its clients and customers to seek legal counsel if they have questions concerning their rights or contract interpretation.

QUESTION:   Broker questions if a Buyer’s agent is entitled to confirmation that an offer has been submitted to the Seller and if Seller can be forced to respond to an offer.

RESPONSE: Buyer is entitled to receive confirmation that his or her offer was submitted, 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.

            However, neither Idaho real estate license law nor the REALTOR® Code of Ethics apply to Sellers and thus there is no way to force a Seller to respond to an offer.

            Broker also had questions about FHA violations on behalf of this client. The Legal Hotline cannot provide legal advice to Buyers or Sellers, Broker should advise his client to seek independent legal counsel to advise him or her of their rights.

QUESTION:  Broker has agents who utilize transaction coordinators that are employed outside of the brokerage, and many times are employed with another brokerage. Broker questions if there is exposure to liability in using these individuals.

RESPONSE:   Throughout the Idaho Real Estate License Law, specifically Chapter 20 Title 54 of the Idaho Code it makes numerous references to a brokerage and licensee obligations to maintain confidential client information. Any time that information is shared with an individual outside the brokerage there is exposure to liability. That risk becomes substantially higher when the third-party receiving the confidential client information works for another brokerage. This is because brokerages frequently find themselves in conflicting and competing circumstances in relation to regulated real estate transactions.

In the event brokerages wish to utilize a third-party individual, a broker should employ the use of robust legal agreements ensure the third-party individual maintains client confidences and appropriately assists brokerage in carrying out its other statutory obligations.  Additional legal contracts can be created to have brokerage’s clients authorize the use of these third-party individuals. However, it is important to note that although these types of legal contracts can limit liability, it is virtually impossible to eliminate risk altogether.

In addition, a broker may wish to review the Idaho Real Estate Commission Guideline No. 17, posted on the Idaho Real Estate Commission website which provides additional guidance in the use of unlicensed assistants and office staff.

QUESTION:  Broker questions if recording the deed is necessary to legally transfer real property.

RESPONSE:  No, there is nothing in Idaho law that requires a deed to be recorded with the county in order to transfer property. 

            The Idaho Supreme Court has weighed in on what must take place in order for the transfer of real property to be effective:

Before a deed can operate as a valid transfer of title, there must be a delivery of the instrument and it must be effected during the life of the grantor.

Crenshaw v. Crenshaw, 68 Idaho 470, 475 (1948).

According to Bowers v. Cottrell, 15 Idaho 221, 228–29, 96 P. 936 (1908), “delivery includes surrender and acceptance, and both are necessary to its completion.” Also, “delivery must be the result of a contract, the meeting of two minds, the accord of two wills. The grantor must be willing and agree to deliver, and the grantee must be willing and consent to receive.” Id. Further, “it is essential to the delivery of a deed that there be a giving of the deed by grantor and a receiving of the deed by the grantee, with a mutual intent to pass title from the one to the other.” Crenshaw v. Crenshaw, 68 Idaho 470, 475, 199 P.2d 264, 267 (1948). “The mere placing of a deed in the hands of the grantee does not necessarily constitute a delivery. The question is one of intention: whether the deed was then intended by the parties to take effect according to its terms.” Id. In Flynn v. Flynn, 17 Idaho 147, 160, 104 P. 1030, 1034, this Court said: “It is held that the real test of the delivery of a deed is this: Did the grantor by his acts or words, or both, intend to divest himself of title? If so, the deed is delivered.”

Est. of Skvorak v. Sec. Union Title Ins. Co., 140 Idaho 16, 21 (2004).

It is important not to confuse the legal transfer of property with the notice of the transfer.  Recording a deed gives the world notice of the transfer but is not required for legal transfer.

            QUESTION:   Broker questions if a Buyer can agree to pay the difference in price in the event of a low appraisal when Buyer is using a VA loan.

            RESPONSE:   No.  The pertinent part of the RE-21, Section 3 Lines 50-53, states:

FHA / VA: If applicable, it is expressly agreed that notwithstanding any other provisions of this contract, BUYER shall not be obligated to complete the purchase of the PROPERTY described herein or to incur any penalty or forfeiture of Earnest Money deposits or otherwise unless BUYER has been given in accordance with HUD/FHA or VA requirements a written statement by the Federal Housing Commissioner, Veterans Administration or a Direct Endorsement lender setting forth the appraised value of the PROPERTY of not less than the sales price as stated in the contract.

            Called the “amendatory clause,” the above language is mandated by the Federal Housing Authority on all Purchase and Sale Agreements where the purchase is financed by a FHA or VA loan.  The language is required by federal statute and rule and the parties cannot contract around federal mandates.  Lenders are required to look for the clause as part of the application process and can get penalized by the Federal Government if the lender allows the use of a Purchase and Sale Agreement that does not contain the clause.  If Buyer is using a VA loan and the property appraises below the stated contract price, Buyer is not obligated to complete the purchase of the property.  REALTORS® with Buyers who intend to get a FHA or VA loan should also ensure the clause is not removed or amended. 

 Broker may wish to advise client to seek legal counsel in this matter if a client has questions or concerns about the terms or applicability of the federally mandated amendatory clause.

QUESTION:   Broker was representing a client in a transaction. After closing, it was discovered that Seller removed an expensive gate from the property because Seller believes the gate is personal property.  Broker questions whether or not a gate would be considered an attached fixture or personal property.

RESPONSE:  Typically, in a real estate transaction any “fixtures” relating to the property are sold with the property. A “fixture” is a legal term and is typically defined as any item that cannot be removed or separated from the real property without damaging the property. The purchase sale contract states:

5. ITEMS INCLUDED & EXCLUDED IN THIS SALE: All existing fixtures and fittings that are attached to the PROPERTY are INCLUDED IN THE PURCHASE PRICE (unless excluded below) and shall be transferred free of liens and in as-is condition. These include, but are not limited to, all seller-owned attached floor coverings, television wall mounts, satellite dish, attached plumbing, bathroom and lighting fixtures, window screens, screen doors, storm doors, storm windows, window coverings, garage door opener(s) and transmitter(s), exterior trees, plants or shrubbery, water heating apparatus and fixtures, attached fireplace equipment, awnings, ventilating, cooling and heating systems, all ranges, ovens, built-in dishwashers, fuel tanks and irrigation fixtures and equipment, that are now on or used in connection with the PROPERTY and shall be included in the sale unless otherwise provided herein. BUYER should satisfy himself/herself that the condition of the included items is acceptable. The terms stated in this section shall control over any oral statements, prior written communications and/or prior publications including but not limited to MLS listings and advertisements. Personal property described in a property disclosure report shall not be inferred as to be included unless specifically set forth herein.  It is agreed that any item included in this section is of nominal value less than $100.

The Legal Hotline does not provide legal advice to Buyers or Sellers nor does it make legal determinations as to whether or not any particular item is a fixture or if it was personal property conveyed with the transaction. All of those determinations are very fact specific and need to be determined on case-by-case basis.  Broker should advise client to seek independent legal counsel to advise them of their legal rights.

QUESTION:   Broker represents Seller. Seller typically holds real estate in a corporation or a limited liability company. Broker questions if it is legally binding for a contract to be signed in the name of the company or corporation rather than an individual officer’s name.

RESPONSE:   Best practices would include a signature line stating an officer’s name, title, and the name of the legal entity for which the officer is signing. However, the signature on a contract is to memorialize a meeting of the minds and any mark which conveys a party’s intent to be bound will probably be legally interpreted as such. Broker may wish to confirm with IREC precisely what is required from a regulatory standpoint.

QUESTION:   Broker is involved with a transaction where parties have agreed to a change in a contract. The parties initialed next to the change however failed to provide either dates or times next to said initials. Broker questions if dates and times are necessary.  

RESPONSE: When a contract is being modified and the parties are initialing modifications, they are signifying their intent to be bound by the modifications. Legally any mark would probably suffice to document a meeting of the minds between the parties. However, given that modifications typically occur after a contract is signed or printed, the date and time of the parties agreement to the change can become an issue if challenged. Therefore, best practice is to always obtain a date, and if possible, a time when all parties executed a document, or initialed for a change.

QUESTION:   Broker questions if December 24, 2020 would be considered a legal holiday under the Idaho REALTOR® Forms given that the President has declared the day a paid day off for federal employees.

RESPONSE:   The answer to this question is complex because the President did not specifically use the term “holiday.”  Nevertheless, the 24^th of December, this year only, is most likely considered a federal holiday and thus not a business day under the IR Forms.  The IR contracts state that a business day “shall not include any Saturday or Sunday, nor shall a business day include any legal holiday recognized by the state of Idaho…”  Idaho codifies its recognized legal holidays in Idaho Code §73-108 which states:

HOLIDAYS ENUMERATED. Holidays, within the meaning of these compiled laws, are:
Every Sunday;
January 1 (New Year’s Day);
Third Monday in January (Martin Luther King, Jr.-Idaho Human Rights Day);
Third Monday in February (Washington’s Birthday);
Last Monday in May (Memorial Day);
July 4 (Independence Day);
First Monday in September (Labor Day);
Second Monday in October (Columbus Day);
November 11 (Veterans Day);
Fourth Thursday in November (Thanksgiving Day);
December 25 (Christmas);
Every day appointed by the President of the United States, or by the governor of this state, for a public fast, thanksgiving, or holiday.

Any legal holiday that falls on Saturday, the preceding Friday shall be a holiday and any legal holiday enumerated herein other than Sunday that falls on Sunday, the following Monday shall be a holiday. (Emphasis added)

            The President’s executive order makes it clear that December 24, 2020 is a federal paid day off; however, an ambiguity exists in that the executive order entered on December 11, 2020 states in part that “December 24, 2020, shall be considered as falling within the scope of Executive Order 11582 of February 11, 1971.”  That particular 1971 executive order states “(a) Holiday means the first day of January… the twenty-fifth day of December, or any other calendar day designated as a holiday by Federal statute or Executive order.”  This answer turns on did President Trump “designate” the 24^th as a holiday if his executive order never actually uses the word holiday.

            Without the benefit of a legal precedence, it is difficult to predict how a legal challenge on this issue would be resolved.  Due to the lack of a black and white court guidance on this matter, best practices would be to conduct transactions in a manner as if December 24 were in fact a business day.