Unlawful Conduct in Sale, Lease and Exchange Transactions (continued) Unlawful Conduct in Sale, Lease and Exchange Transactions (continued)Since the real estate licensee is presumed to have superior knowledge, his/her statements are more likely to be construed as a statement of fact. However, the agent may offer his opinion, such as "This is the best buy in town." The determining factor is: Would a reasonable person have relied on the statement? [Pacesetter Homes Inc. v. Brodkin (1970) 5 C.A. 3d 206]—Mere statements of opinion about probable potential income from property usually do not constitute fraud.] In the above example, the broker was not stating an "opinion." It was determined that he acted in a negligent manner.
Representing to an owner of real property when seeking a listing that the licensee has obtained a bona fide written offer to purchase the property, unless at the time of the representation the licensee has possession of a bona fide written offer to purchase is considered puffing.
How many times have you heard of an agent contacting a property owner and, in an attempt to secure a listing, tell the owner that he or she has a "buyer for their property?"The question has to be asked, "Do they or don't they have buyers?" If they do, are they firm buyers? Or, are the agent's buyers nothing more than a casual statement made by someone who would only be interested if the price is right?
This regulation was created to prevent such activities by penalizing the agent who claims to have buyers, usually at inflated prices, in order to get a listing without actually having a bona fide written offer to purchase.
Eager for a listing, salesman Brown tells Mr. and Mrs. Jones that he has buyers looking for a house just like theirs and ready to make an offer, although such buyers do not exist. Misrepresenting the market value of the property, the agent does not quibble with the owner over terms, price, etc., and sets them so high the owners cannot refuse to list and gets a 90-day exclusive right to sell, freezing out all competition.
In this example, the owners, expecting a quick sale, have started looking for a new home to purchase. Their offer on the new home is not made contingent upon the sale of their old home as the salesman told them that he had a buyer.
A few weeks pass by...
The seller, not having heard from the listing salesman, called him to find out what's going on. Now is the time for the salesman to break the bad news that his buyers won't pay the excessive price at which the property was listed. It is then that the agent begins to work on the sellers' ever increasing concern of not selling their home. Suddenly, the terms are not suitable and there no longer seems to be anyone capable of paying cash to the loan; maybe the owners should sell on a contract of sale because interest rates and points are so high; or, maybe the agent will be willing to purchase the property if the sellers will substantially lower their sales price to accommodate the licensee. The pressures become enormous upon the seller who may forfeit his deposit on the new house if his old house does not sell quickly. Thus, the agent is able to wear down the sellers who often relist their property at the market value indicated for the property in the first place. This is the property that they may never have intended to sell and would not had it not been for the actions of salesman Brown.
Such a technique is unlawful and unquestionably damages the entire real estate industry. Sooner or later the Department of Real Estate will be called upon to investigate such activities. Sooner or later a licensee engaging in such dishonest dealings will be disciplined for this conduct.
Stating or implying to an owner of real property during listing negotiations that the licensee is precluded by law, by regulation, or by the rules of any organization, other than the broker firm seeking the listing, from charging less than the commission or fee quoted to the owner by the licensee.
Back when real estate boards had suggested commission schedules, the schedules were intended to be voluntary, nonmandatory and unenforceable. They were designed to aid and inform the public, judges, attorneys and bankers of prevailing levels of fees and commissions in the marketplace "to prevent gouging." Yet, from time to time, these schedules, intended to protect the public, were abused and misused. Thus, a salesperson would, on occasion, respond to a request by a client for a lower commission rate with the words: "Gee, I would like to take it for 5%, but my board won't let me." Such a response was a lie then and is a lie now. But, now it is also a violation of Section 10147.5 of the Business and Professions Code (see below). In May 1980 Governor Jerry Brown signed into law as an emergency measure Senate Bill 1958, clarifying and amending the measure which concerned the negotiability of real estate commissions and the notice requirement for any printed or form real estate agreement.
The amended Section 10147.5 is now operative. It reads:
a) Any printed or form agreement which initially establishes, or is intended to establish, or alters the terms of any agreement which previously established a right to compensation to be paid to a real estate licensee for the sale of residential real property containing not more than four (4) residential units, or the sale of a mobile home, shall contain the following statement in not less than 10-point boldface type immediately preceding any provision of such agreement relating to compensation of the licensee:
Notice: The amount or rate of real estate commissions is not fixed by law. They are set by each broker individuall and may be negociable between the seller and broker.
Comment: This alerts the seller that he has the right to negotiate the commission. It would be improper to print the entire agreement in 10-point bold type in an effort to conceal the disclosure that commissions are negotiable.
b) The amount or rate of compensation shall not be printed in any such agreement.
Comment: When the rate is printed in the agreement the seller might be led to believe that it cannot be changed.
c) Nothing in this section shall affect the validity of a transfer of title to real property.
Comment: This means that a contract between the seller and buyer is not affected by a violation of Section 10147.5. The only effect is to deny the broker a right to collect a commission and possible loss of license.
d) As used in this section, "Alters the terms of any agreement which previously established a right of compensation," means an increase in the rate of compensation, or the amount of compensation if initially established as a flat fee, from the agreement which previously established a right of compensation.
Comment: It appears permissible to lower the rate or amount of commission without inserting such a statement into the agreement.
It should also be noted that a broker may establish, as a normal business or office practice, any commission schedule he or she wishes. However, this business privilege may not be used as a method of discriminating in a manner that would otherwise be considered unlawful.
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